Tackling next-generation compensation

With most managers employing European waterfalls, the challenge has been to retain younger employees while getting investor buy-in.

Even for an industry heavyweight that has just raised one of the largest-ever private real estate funds, incentivizing and retaining mid-level employees is still a key consideration.

Brookfield Asset Management, which captured $15 billion for Brookfield Strategic Real Estate Partners III in late January, plans to award performance-based compensation from the vehicle to investment professionals at the vice-president level and above, subject to a five-year vesting period, according to a September memorandum from private markets rm StepStoneGroup.

“This mixed carried interest program, which includes incentives based on fund performance and options on Brookfield’s stock is consistent across the firm’s verticals and keeps mid-level investment professionals motivated by the performance of the fund,” Steve Novick, partner at StepStone Real Estate, wrote in the memorandum.

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