I received a couple of emails in reference to yesterday’s post, In it for more than the carry. Some commented that a $100m fund is a micro fund. Some commented that they received a bigger percentage of carry in their first few years. And, some suggested there’s nothing wrong with entering private equity with carry at front of mind.
Those comments are dually agreed and noted. However, when discussing the average scenario, you have to draw a line somewhere and stick to it. Upon reflection, I’d say the average fund that many of us are managing is in the range of $50-500m. While a $1b fund is not necessarily mega, I do think it is a large fund. Maybe I should have used $200m instead in my example (100 is always such a nice round number to work with).
On the topic of percentage of carry (carried interest), many first year private equiteers don’t even get carry. And, you’ll really be surprised to see how much carry is transferred outside of the investment team and/or to the founders. The founders of a fund are just as diligent with negotiating carry (carried interest) as they are with negotiating investee deals; don’t for a minute think they’ll become generous just for your sake.
As for the last point, maybe I was being a little disingenuous with claiming that real private equiteers make carry (carried interest) their last priority; it’s simply not true. I guess the message I was looking to convey was carry could actually end up being a lot less in real terms than fledgling private equiteers expect. They often dream of numbers and conveniently exclude management fees, external entitlements and founder avarice. So, I guess the real message is to learn to love the job and the money will follow.