Do private equity portfolio operations teams earn carried interest?

Portfolio operations positions are popular among private equity firms that prioritize value creation in their investments. With this rising demand, compensation has also grown significantly.

It’s now common practice to include carried interest in a portfolio operations professional’s compensation package, at least at the vice president level and above.

Our 2024 Private Equity Portfolio Operations Compensation Study reveals this and other key data on private equity compensation. Keep reading to learn our top takeaways.

Carried interest is becoming more common.

Portfolio operations professionals, even at the associate level, are beginning to receive carried interest as part of their compensation packages.

We believe this trend stems from growing demand for portfolio operations professionals across the board. The private equity playbook has shifted away from financial engineering as its main return generator and now favors operational improvement, which these positions directly influence.

While fewer than 10% of associate-level respondents received carried interest, we believe this number will rise in the coming years. Conversely, 49% of vice president-level and 82% of managing director-level respondents received carried interest at the time of our survey.

Firms favor consulting experience, especially from one of the Big Three.

Associate-level professionals tend to join portfolio operations teams with strategy consulting as their primary experience. More senior roles tend to join with a combination of strategy consulting and P&L ownership, CxO or private equity experience.

The common trajectory for ideal portfolio operations candidates is to gain the strategic toolkit from a top-tier management consulting firm, spend time in a private equity firm or portfolio and then join a portfolio operations team to focus on value creation.

Former investment bankers can also do well on portfolio operations teams, but most firms want someone who has been dedicated to value creation in a strategic capacity either via consulting or in a post-consulting industry position, preferably in or adjacent to private equity.

Most portfolio operations professionals are generalists.

Over 60% of the respondents we studied were self-declared “generalists,” and these individuals earned ~14% more than specialists. Industry and functional specialists earned ~12% and ~15% less than generalists, respectively.

While generalists still dominate this talent market, there are a few key functional spikes emerging, which we believe indicate how private equity firms are honing their investment strategies. Talent specialists were the largest functional niche, followed by commercial / go-to-market, digital, procurement / supply chain and finance (office of the CEO).

Other interesting takeaways:

• We received data from individuals in 24 states and Washington, D.C.

• Most portfolio operations professionals were based in New York City, and nearly all were stationed near a major airport.

• We received data from individuals in a variety of fund sizes, from $0-$100M to $10B+.

• 57% of our survey respondents had an MBA degree and 5.7% had military experience.

Click here to download the full 2024 Private Equity Portfolio Operations Compensation Study.