What pandemic? When the world first went down the COVID-19 wormhole in March there were suggestions that private equity funds would struggle to exit investments as planned and that the industry could encounter a cash squeeze as portfolio companies needed help and investors ran scared. Four months later, the nightmare has vanished. Suddenly it's a great(ish) year.
Carlyle Group is the posterchild for the transformation. The fund group reported its second quarter results today and they reveal that the compensation bill at Carlyle rose 24% in the first half versus 2019, to $685m.
Given that Carlyle only employs around 1,800 people, this implies generous average compensation per head of around $380k for just six months. Needless to say the average isn't that representative and pay will be heavily skewed towards partners and principals.
Carlyle's generosity is mostly thanks to 'realized performance revenues related compensation' - AKA carried interest paid to senior staff after investments have been exited successfully. In the first half of this year, carried interest rose 223% to $205m. By comparison, other elements of Carlyle's compensation (salaries, cash bonuses and equity) either remained stable or fell.
If a career at Carlyle sounds generous, it clearly is - for the moment. The future, however, is less clear. While 'realized' carried interest rose this year, unrealized carried interest on investments yet to be exited is still down by around two thirds after Carlyle booked a huge negative number in the first quarter.
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