Here’s how we suggest people carve up ownership in the management of a syndicate (and seems to be consistent with what we see our clients doing). As a default, this would apply to allocation of Manager’s fees and to Class B (profit) Distributions, although sometimes certain fees could be specially allocated according to who is performing certain tasks, like the asset management fee, loan guarantor fees, etc.
In general, management ownership seems to be carved up like this:
- 50% is retained by the people who are conducting the due diligence and overseeing the deal long-term. They’re in it for the long haul and need the bulk of the compensation to keep them engaged in overseeing the deal.
- 20-25% is allocated to loan guarantors, which could include the people in #1 if they are also guaranteeing the loan but could have to be paid to others.
- 25% is allocated to people who raise the money, but this is a little tricky, because technically, they need to be compensated not based on the amount they raise, but on the role they have in management other than raising money. Again, this could include the people in #1 if they are also raising money. Bottom line, all capital raisers must have another role that determines their compensation.
- No more than 5% could be allocated to bird dogs if they aren’t also participating in one of the other tasks, but their allocation would have to be carved out of one of the other areas.
