Are credit bonuses cyclical?
Hey all - wanted to get thoughts on whether bonuses in private credit are more akin to PE (i.e., stable pool of capital / mgmt fees to pay consistent bonuses regardless of fund performance / deal flow) or banking (bad deal flow / performance = weak bonus). Thanks in advance
Based on the most helpful WSO content, bonuses in private credit can indeed be influenced by the performance and deal flow, similar to other areas in finance. However, the structure of bonuses in private credit might lean more towards the private equity (PE) model due to the nature of the investments and the income generated from interest payments and fees. Private credit firms typically have a stable pool of capital and generate consistent management fees, which can support more stable bonuses even in periods of weaker deal flow or fund performance.
However, it's important to note that while there might be a base level of stability in bonus structures due to the management fees, the overall bonus can still be significantly influenced by the performance of the fund and the deals closed during the year. This means that in years with excellent performance and strong deal flow, bonuses can be higher, while in slower years, the bonuses might not reach the same levels.
In summary, while private credit might offer a bit more stability in bonuses compared to banking due to its fee structure and income from interest payments, it's not entirely immune to fluctuations based on fund performance and deal flow.
Sources: Private Equity vs. Private Credit, Private Equity vs. Private Credit, Banking -> PE -> Banking (Updated views?)
bump!
Non autem nisi voluptates mollitia iure. Corporis vero nostrum provident saepe dignissimos. Qui ex corporis sapiente consequatur.
Ut reprehenderit assumenda omnis illo consequatur nesciunt. Rerum et officiis placeat sunt et distinctio iure vel. Autem qui et aliquid harum occaecati architecto eum. Quidem eligendi exercitationem molestiae. Qui optio in maiores nesciunt odio ea.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...