Does Asset-Based Finance Get Carry?

Based on the most helpful WSO content, asset-based finance (ABF) groups at major platforms like BX, Apollo, KKR, and Ares often operate differently from traditional private equity structures. Here's what you need to know:

1. Carry Structure in ABF:

   • Many ABF strategies are tied to perpetual or insurance-funded vehicles, where the firm earns an incentive or origination spread rather than the classic GP carry with a hurdle. This means that traditional carry pools may not exist in the same way as in closed-end funds.
   • Compensation in these setups often leans more towards cash compensation and "incentive comp" tied to net investment income (NII) rather than a carry structure.

2. Associates and Carry:

   • Associates in ABF teams typically do not receive carry or profit interest. Carry allocations generally start at higher levels, such as senior associates or principals, depending on the firm and structure.
   • The presence of carry or profit interest may depend on whether the strategy is a closed-end ABF fund (more likely to have a carry pool) versus feeding an insurance balance sheet or perpetual vehicle (less likely to have traditional carry).

3. Flat Team Structures:

   • For teams with flat structures (e.g., associate → principal, no VP), the economics often kick in at the principal level or higher. Associates and junior professionals are more likely to receive cash compensation and performance-based bonuses rather than carry.

In summary, carry in ABF groups is less common at the associate level and is highly dependent on the fund structure (closed-end vs. perpetual/insurance vehicles). Compensation is more likely to include cash and incentive-based components tied to NII rather than traditional carry pools.

Sources: Carried interest for Associates / Senior Associates?, REIT Compensation at the Analyst level?, Data: Average Private Equity Compensation and Carry from Associate to Managing Partner