2009: The year of no carry

Carry was a scarce commodity in 2009: just 24 percent of respondents to a recent PEI Research survey reported that their firm paid out carry last year. 

The news isn’t surprising, given the scarcity of exits last year. 

The Annual Private Equity International CFOs and COOs Compensation Survey analysed characteristics of those who said their firm didn’t pay out carry last year, but it doesn’t appear the pain is confined to firms managing any particular vintage years. About 26 percent of respondents are investing from a 2007 fund, 28 percent are investing from a 2008 fund, and 29 percent are investing out of a 2009 fund. The remainder said they were investing from funds closed in 2006 or earlier.

The lack of carry didn’t have a strong correlation with firm staff reductions either. Of those firms that didn’t pay carry in 2009, 61 percent said there were no reductions in headcount last year.

Previous similar surveys from PEI certainly show declining performance fees at firms over the past three years. In a 2008 survey, when asked to rank the past year in terms of carry generation, 25 percent said that 2007 was their best year ever. Just 5 percent said 2008 was their best year ever. 

The survey respondents included CFOs, COOs, comptrollers, tax directors and general counsels at private equity firms primarily in the US. Of the respondents, 45 percent work at buyout firms, 22 percent work at venture capital firms, 12 percent work at fund of funds managers, 5 percent work at multi-strategy managers, and 1 percent work at mezzanine debt providers.

The full results of the survey will be presented at The Private Equity International CFOs and COOs Forum in New York, on January 21 and 22. The results will also be analysed in the February issue of the PEM Monthly, which is a monthly publication for subscribers of Private Equity Manager.