What is "Street" MM PE Compensation for Associate 1 & 2 and Senior Assoc. (3rd year)

twentyone's picture
Rank: Baboon | 105

Seems like street for MM Associate 1 is 110-125k with 100% target (i.e. 220-250k all-in) for $500-3bn funds. Haven't seen much talk about what the standard raise is for the 2nd year, and then what the Senior Associate offers look like for the third year.

Comments (31)

May 5, 2019

Curious as well

May 6, 2019

    • 3
    • 2
May 6, 2019

GoBuyside is so inaccurate - they make you fill in salary and bonus numbers on all interview reviews. So 90% of the data is obviously a complete guess / punching in some random number

    • 2
May 8, 2019

I would say this is generally accurate.

Edit: Not sure why I was hit with monkey shit, I know people at basically every fund size above and their pay is basically in line with what this table suggests?

    • 1
    • 1
May 6, 2019

Yeah, I'm looking for actual anecdotal figures from people that work at brand name MM shops in Tier 1 cities.

I assume bump after year one is only 10k on base (i.e 20k all-in). More curious about the bump at year 3 and if that is more significant. MM PE comp significantly trails IBD by that level if not, given a 3rd year PE associate would be an IBD associate 2 or 3 i.e 300-400k all-in.

    • 2
Learn More

9 LBO Modeling Tests, 10+ hours of PE Cases and 2,447+ interview insights across 203 private equity funds. The WSO Private Equity Interview Prep Course has everything you'll ever need to break into the competitive PE industry. Learn more.

May 6, 2019

200-250 at MM / UMM firms in my experience for year 1 PE associate seems like a fair range from conversations w/ headhunters. Based on the two actual offers I received for a tier 1 city:

  1. 100 base, 150 target bonus, 0.1% carry
  2. 135 base, 75% target bonus (~100k)
    • 1
May 6, 2019

Helpful color - any color on expected annual raises?

May 6, 2019

Wow - did not think that any associates received meaningful carry; that first offer is very compelling economically. Do you mind sharing the vesting period / rough size of fund?

May 6, 2019

How does carry usually work? From my understanding the PE firm extend a line of credit to you to invest in the fund? What does the percent in co-investment and carry mean?

    • 1
    • 1
May 6, 2019

The numbers in the diagram represent the percentage of survey respondents that reported receiving the option to co-invest or earn a sliver in the carry pool.

In terms of how it works... I'd imagine that you would see a fair bit of variability in how the carry compensation mechanism is structured across the space. Particularly for entry-level hires who, in most cases, are only expected to stick around with high confidence for 2-3 years. My fund does not offer carry to Associates but I'd imagine you would typically get a very, very small portion of the carry pool in the firm's most recent vintage fund (assuming that is the vehicle from which the firm will be deploying significant capital from over the respective Associate's expected tenure) via the fund-specific SPV. As an Associate, I would typically not expect firms to make you contribute capital as it relates to the carried interest structure as that could create unecessary compexities pertaining to the fund's LLC agreement. With that said, it is a different ball game when it comes to co-invest rights.

    • 1
May 8, 2019
Bill Stern @ Axe Cap:

How does carry usually work? From my understanding the PE firm extend a line of credit to you to invest in the fund? What does the percent in co-investment and carry mean?

Heres a simplified breakdown on carry. Let's say you are at a major fund and have 0.25% carry in a specific 7 billion dollar fund iteration. Assume they get 2x on the $7B, and get 20% of the $7B generated profit or $1.4B. Then take .25% of the $1.4B and you are at $3.5 million in carry for that fund. You could be getting carry in multiple funds so it adds up.

Yes if you are investing alongside you can usually get the benefit of a credit facility that levers your commitment so that when a capital call occurs, a portion of that call is covered by your credit facility and the rest you come out of pocket on cash.

    • 1
May 7, 2019

This has been answered a lot and MM PE associate is the easiest data point to get. OP, your range is essentially correct.

I worked at two brand name firms. Associate comp was:
$120k base / 80% - 110% bonus + Co-Invest
$120k base / $110k bonus + NO co-invest

    • 1
May 7, 2019

What about 2nd and 3rd year increases? 1st year comp has been answered a lot and is readily available, as you pointed out.

Most Helpful
May 7, 2019

This varies a lot more than IB, not only between city tiers but even within the city itself, fund performance, specific niche, etc. We are top quartile and have been for over 15 years in what most would deem a tier 2 city. I started as Associate 1 and spent 3 years before VP promote. 1st year - $100k Base $100k Bonus, 2nd year $100k Base $130K Bonus, 3rd year $120k Base $160k Bonus. All cash, doesn't include carry.

    • 4
May 7, 2019

30k all-in raises for year 2 and then 50k for year 3. That is a helpful datapoint.

May 7, 2019

Anectodal, and probably too large to truly be considered MM, but this is a data-point from an industry focused PE firm (last fund $5 Bn+). They are basically solving for ~$260k all-in / year over a two year span, while weighing it much more significantly to the back end so that Associates stick around for the full 2 years.

Year 1 Associate: $115k - target 100% bonus
Year 2 Associate: $115k - target 150% bonus

Generally speaking, and based on what I've gathered from friends and colleagues, a $20-$40k bump (all-in) seems to be typical between year 1 and 2.

    • 1
May 7, 2019

When people quote a target bonus, how often does that actually turn out to be true (assuming you perform decent)? Is it common among branded MM's to regularly give out bonuses significantly below their target bonus that they mentioned during the interview process?

May 7, 2019

It's entirely firm and performance dependent. E.g. I've beat my target range every year, but I also blew it out of the water. That plus a fair MD make for pretty decent comp. If worked for a stingy bastard he might've hit the top of my range and no more.

If it's lower. Take it as a message to get out. You'll need to do some self reflecting on whether that's your fault or not. But they're sending a message to you to leave.

May 8, 2019

How much above your target did you get? 110% vs 100% or what?

May 8, 2019

Is getting a target bonus range or guidance common before starting your job from IB? Just wondering as I'll be joining a top firm but never got a sense of what I'll be getting.

May 8, 2019

Yes, pretty much everyone I know got a target % in their offer letter or at least verbally.

May 8, 2019

This is kind of off topic but not really. What incentive do IB's and PE firms have to give you a decent bonus if they know that you're going to leave?

For example, if you go through on-cycle in your first year in IB and get an offer to move to PE after your 2 years, why would your current IB give you a good year end bonus at the end of your 1st and second year? Is it just out of the goodness of their heart or to not have a reputation for skimping kids or is it actually common for IB's to give even top performing analysts shit bonuses because they know they are leaving?

Similarly, if you're in a 2 and out program for PE and they know you have to go to business school after your 2nd year, what incentive to they have to give you a good end of second year bonus right before you leave the firm?

May 8, 2019

Word would spread quickly if a bank was giving out shit bonuses to their top analysts that leave

May 8, 2019

If I had to guess its less about word getting out as most banks would just do this if it made sense and it would be the new normal in the market.

Rather, its a better business decision to pay the analysts. Without the carrot of the bonus analysts would just quit when they received offers and/or kinda throw in the towel in terms of output. 2nd years are way more valuable to banks than first years. This avoids productivity gaps. Also, while to a lesser extent, I'm sure there is a component of wanting to keep potential decision makers on hiring said banks happy to potentially get future business down the road.

    • 1
May 8, 2019

Going into my second year at a fund between $500mm and $1bn in fund size. Tier 1 city, not NYC.

Base is $100k, bonus is ~100% of base. No co-invest opportunity.

    • 1
May 8, 2019

Lots of good info in here, in general, I think the actuality of PE Associate 1 - PE Associate 3 comp really varies based on location, fund size, carry/co-invest rights, and year of experience.

In general ~$200-250k all-in seems to be the starting point with ~10-20% total comp increases for each year.

My experience from working in PE for a few years is that unless you're at a MF, it's rare to see too many associates getting to the 400-500k payouts that were reported in the past at the Apollo's of the world. If you have a good team and they're offering somewhere in the 250k +/- 20% range, that's probably pretty fair.

Could be lower in a smaller fund in a low COL city or maybe even a little above that at a MM to UMM fund in a Tier 1 city. I haven't heard of too many Associates getting above 300k consistently unless they're at the big shops.

    • 2
May 9, 2019
Comment
May 10, 2019