{"id":279591,"date":"2024-04-28T16:03:00","date_gmt":"2024-04-28T23:03:00","guid":{"rendered":"https:\/\/jthelander.com\/?p=279591"},"modified":"2024-04-28T16:03:00","modified_gmt":"2024-04-28T23:03:00","slug":"cvc-unit-structure-long-term-incentives-compensation","status":"publish","type":"post","link":"https:\/\/brightturn.io\/?p=279591","title":{"rendered":"How CVC Unit Structure Impacts Long Term Incentives"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Welcome back to the April edition of our Thelander Digest. Last month, we dug into how CVCs can incentivize existing and prospective employees. This month, we&#8217;re going to look at how long term incentives are impacted by CVC unit structures. For context, not off balance sheet CVC units invest directly from the parent company&#8217;s balance sheet whereas a separate legal entity invests from a standalone, separate fund.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>CVC Units that are&nbsp;<strong>not off balance sheet<\/strong>&nbsp;tend to only offer corporate stock, including options, performance awards and RSUs, as an additional incentive.<\/li>\n\n\n\n<li>In 2024, 66% of CVC units that are&nbsp;<strong>not off balance sheet&nbsp;<\/strong>offer corporate stock in addition to base pay and cash bonus as an additional incentive to perform well and stay with the firm.&nbsp;<\/li>\n\n\n\n<li>Instead of corporate stock, some&nbsp;<strong>not off balance sheet<\/strong>&nbsp;CVC units offer some form of carry, including carried interest or shadow\/phantom\/synthetic carry. The percentage of not off balance CVC units who only offer some form of carry decreased by 10% from the four-year high of 32% in 2022.<\/li>\n\n\n\n<li>At the same time, the percentage of those who offer both corporate stock and some form of carry slightly YoY.&nbsp;<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image img-border\"><img decoding=\"async\" src=\"https:\/\/jthelander.com\/wp-content\/uploads\/abc976b8-c536-aa1c-19d0-16bfa7d2a992.png\" alt=\"What are the other incentives in addition to base pay and cash bonus?\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>More than half (52%) of CVC Units that are off balance sheet or are a separate legal entities offer some form of carry only.&nbsp;<\/strong><br>The percentage of off balance CVC units offering both corporate stock and some form of carry has also grown since 2021, despite decreasing this year after peaking in 2023.<\/p>\n\n\n\n<figure class=\"wp-block-image img-border\"><img decoding=\"async\" src=\"https:\/\/jthelander.com\/wp-content\/uploads\/cca7f223-848d-abfb-c4b8-53818c9a19df.png\" alt=\"What are the other incentives in addition to base pay and cash bonus?\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>To understand how this translates into compensation &#8211; we we looked at the compensation levers for senior investment professionals (SIPs).&nbsp;<\/strong>Overall, SIPs are more likely to be eligible for additional incentives at CVC units that are off balance sheet or are separate legal entities.&nbsp;For example:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>72% of SIPs at off balance sheet CVCs are eligible for additional incentives beyond cash bonus, compared to 58% of SIPS at not off balance sheet CVCs.&nbsp;<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image img-border\"><img decoding=\"async\" src=\"https:\/\/jthelander.com\/wp-content\/uploads\/534e8470-eb9c-6bed-04e6-831523c7a957.png\" alt=\"What % of Senior Investment Professionals are eligible for additional incentives beyond cash bonus?\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Median total cash also tends to be higher for SIPs at off balance sheet CVC units than those at not off balance sheet firms.&nbsp;<\/strong><br>Although, that could be reversing.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Median total cash for SIPs at off balance sheet CVC units has decreased slightly&nbsp;since 2021, falling from $277,500 in 2021 to $272,277 in 2024.<\/li>\n\n\n\n<li>At the same time, the median total cash increased at not off balance sheet CVCs from $248,500 in 2021 to $262,500 in 2024.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>In most cases, SIPs at not off balance sheet CVCs make up for their compensation in corporate stock.&nbsp;<\/strong><br>The median cash value of corporate shares has been consistently higher for SIPs at not off balance sheet CVC units, totaling $70,000, compared to $40,000 at off balance sheet CVCs.<\/p>\n\n\n\n<figure class=\"wp-block-image img-border\"><img decoding=\"async\" src=\"https:\/\/jthelander.com\/wp-content\/uploads\/47eeb3a5-a8f8-5721-7d06-10d7d8b2138d.png\" alt=\"Senior Investment Professional Median Cash Value of Corporate Shares\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Overall, the firm structure impacts the compensation and what long term incentives are utilized.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Thelander Digest is powered by the no-cost&nbsp;<a href=\"https:\/\/survey.jthelander.com\/surveys\/3\/\" target=\"_blank\" rel=\"noreferrer noopener\">Thelander CVC&nbsp;Compensation Survey<\/a>. We invite you to participate and secure&nbsp;<strong>free access<\/strong>&nbsp;to a subset of the results on our platform. All data is published in aggregate only with&nbsp;<strong>no individual names or firm names reported.<\/strong>&nbsp;If you have any questions or would like to speak to team Thelander, you can&nbsp;<a href=\"mailto:info@jthelander.com\" target=\"_blank\" rel=\"noreferrer noopener\">email<\/a>&nbsp;or call us: +1.305.793.8605<\/p>\n\n\n\n<p class=\"has-text-align-center btn-post wp-block-paragraph\"><a href=\"https:\/\/survey.jthelander.com\/surveys\/3\/\" target=\"_blank\" rel=\"noreferrer noopener\">Start the Survey Now<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Welcome back to the April edition of our Thelander Digest. Last month, we dug into how CVCs can incentivize existing and prospective employees. This month, we&#8217;re going to look at how long term incentives are impacted by CVC unit structures. For context, not off balance sheet CVC units invest directly from the parent company&#8217;s balance [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[6,3],"class_list":["post-279591","post","type-post","status-publish","format-standard","hentry","category-newsletter","tag-cvc","tag-newsletter"],"_links":{"self":[{"href":"https:\/\/brightturn.io\/index.php?rest_route=\/wp\/v2\/posts\/279591","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/brightturn.io\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/brightturn.io\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/brightturn.io\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/brightturn.io\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=279591"}],"version-history":[{"count":0,"href":"https:\/\/brightturn.io\/index.php?rest_route=\/wp\/v2\/posts\/279591\/revisions"}],"wp:attachment":[{"href":"https:\/\/brightturn.io\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=279591"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/brightturn.io\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=279591"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/brightturn.io\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=279591"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}