I have been negotiating an offer with a PE firm to come on as a VP. I actually have worked for this same firm before, left for a few years, and now they have roped me back in. They are currently in the process of raising their second fund (sub $500mm target) and since it is still small, my comp is likely at the low end of the PE VP spectrum.
Question I have to you is, do VPs typically receive carried interest in the firm and if so how much? Given the high level of risk around the fundraising, I would think this could be something I can push for to make up for the slightly lower than average salary.
VP Private Equity
Certified user @TheBigBambino weighs in on carry in a private equity firm at the vice president level.
Yes - virtually all VPs have carry. Typically if you took the carry and split into a 100 point scale you will get 1% - 2%. It is possible it vests as well (i.e. - over 5 years for instance)
Given your fund size, you may even be able to ask for more then that, especially if there aren't many VP/Principals/MDs already there.
In all seriousness, I would be extremely hesitant of working at a firm that doesn't include it's VPs carry participation.
One way to figure out how much to ask for is doing a method one of the users above did by allocating a annual dollar amount.
For example, at a $1B fund, a VP should expect about $750k - $1.25M in annualized compensation based on fund performance. For example
Based + bonus $375k
Fund size: $1B
Total Fund carry = $200M
VP Carry participation = 1.5%
VP Carry payout $3M
Average hold period: 5 years
Annualized Carry Payout = $600k
Annualized total compensation - $975k
Given the number of variables above, I've see people do the calculation a number of ways. I choose a 5 year period as that's the active average hold period of a deal and a decent firm should raise a new fund at least every 5 years.
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