Compensation Structures for SFO Executives
Aligning the incentives of non-family executives with the long-term goals of the family.
The Alignment Problem
If you pay a CIO based purely on annual absolute return, they are incentivized to take excessive risk. If you pay them a flat salary, they may become complacent. Compensation must bridge the gap between Wall Street expectations and family office reality.
Structuring Carry & Co-Investment
Many sophisticated family offices offer co-investment rights (allowing the executive to invest their own money alongside the family fee-free) or a phantom carry structure that pays out over a 5-7 year rolling period to ensure long-term alignment.
| Title | Base Salary Range | Typical Long-Term Incentive (LTI) |
|---|---|---|
| CEO / Managing Dir. | $400k - $800k | Discretionary bonus based on holistic SFO performance |
| Chief Investment Officer | $350k - $700k | Phantom carry (5-10%) on direct deals above a hurdle rate |
| Chief Financial Officer | $250k - $400k | Cash bonus tied to operational efficiency and tax savings |
Common Mistakes
Pegging SFO compensation to hedge fund or private equity benchmarks. SFO executives do not have to spend 40% of their time fundraising. Their compensation should reflect this lower risk/stress profile.
Model phantom equity waterfalls using our Executive Carry Modeler.
Take the Next Step
Model your specific requirements using our interactive operational and setup tools.
View SFO Tools