In a smaller fund, it’s quite possible to make nothing or close to it for many, many years until your investments (or “carry” in them) become liquid.
Imagine a $30m seed fund (not tiny), with 2 equal partners, and a 5% “capital commit” (i.e., the partners have to put in 5% of the money) and 2% “fees” per year. Add in 1 support staff at say $80k a year including taxes and benefits, and an office at $8k a month or $100k a year.
- So each year in fees, the fund gets $30m x .02 = $600,000 to spend on salaries, administration, travel, etc.
- After staff expenses, that’s $520,000.
- After rent, that’s $420,000
- After travel, entertainment, legal, tax, finance, etc. let’s call it $300,000 left.
- So each partner might seemingly get a $150k salary. Maybe.
- But now, let’s remember that 5% capital commit, over 10 years. That’s $1.5m total or $750k each, over 10 years. Or $75k a year.
- So that $150k salary after taxes is at best, $100k in California. And then they have to put in $75k of after tax dollars as part of their capital contribution to the fund.
- Leaving a net (after taxes and capital contributions) salary of $25k a year per partner on a $30m fund! Living the high life in Silicon Valley, for sure.
Now imagine if the fund was smaller 😉
The bigger the fund, the more the math changes. And as you manage multiple funds (say 3 active ones at a time), the fees and carry do stack up.
A Managing General Partner in 3 funds of $150m+ each might make $1m in salary + carry each year. A more junior partner in the same funds might make $300k a year. A non-partner would make a lot less.
But as you can see — it varies a lot.