Headcount from the pacing plan, the manager funnel and the monitoring book: why ticket size and re-up mix move the answer more than the budget.
Size an LP's private equity team from hours, not from assets: the commitments the pacing plan requires, the manager funnel behind each new relationship, and the monitoring of every fund already in the portfolio, divided by the productive hours of one professional. An illustrative programme committing 600 million a year in 50 million tickets needs 7.3 investment professionals at steady state, and only 2.5 of them are selecting managers. Monitoring the 120 funds already committed takes 3.6, and the remaining 1.2 is portfolio management, reporting and committee overhead.
Worked in full in The Private Markets Limited Partner by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Investment committees usually set headcount by comparison with peers or by a rule of thumb about assets per head. Neither survives a change in strategy. Halve the average ticket and the workload doubles while the assets stay the same; add new managers in place of re-ups and the funnel triples. The calculation below makes those trade-offs explicit, and it is the one to bring when the pacing plan and the staffing budget are approved separately.
| Input | Value |
|---|---|
| Annual commitments from the pacing plan | 600 million |
| Average commitment per fund | 50 million |
| Re-ups among the year's 12 commitments | 7 |
| Funnel for new managers: screened to first meeting / to second meeting / to full due diligence / to commitment | 40% / 25% / 33% / 50% |
| Hours: screen a PPM / first meeting / second meeting | 2 / 4 / 16 |
| Hours: full due diligence on a new manager / re-up due diligence | 180 / 60 |
| Hours a year to monitor one fund (reports, AGM, LPAC, consents) | 45 |
| Years a fund is actively monitored | 10 |
| Portfolio management, reporting and committee overhead, on top | 20% |
| Productive hours per professional a year | 1,500 |
Step 1, commitments. 600 ÷ 50 = 12 funds a year: 7 re-ups and 5 new managers.
Step 2, the funnel, worked backwards. 5 new commitments at 50% conversion need 10 full due diligences; at one in three, 30 second meetings; at 25%, 120 first meetings; at 40%, 300 screened offerings. One new manager costs 60 screens: an overall conversion of 1.7 per cent.
Step 3, selection hours. 300 × 2 + 120 × 4 + 30 × 16 + 10 × 180 + 7 × 60 = 600 + 480 + 480 + 1,800 + 420 = 3,780.
Step 4, monitoring hours. At steady state the portfolio holds 12 × 10 = 120 active funds: 120 × 45 = 5,400.
Step 5, overhead and total. (3,780 + 5,400) × 1.20 = 9,180 + 1,836 = 11,016 hours.
Step 6, headcount. 11,016 ÷ 1,500 = 7.3 professionals.
In Excel: =((Screens*2+First*4+Second*16+Full*180+Reups*60)+Commitments*Life*45)*(1+Overhead)/1500.
| Activity | Hours | Share |
|---|---|---|
| Screening 300 offerings | 600 | 5.4% |
| 120 first meetings | 480 | 4.4% |
| 30 second meetings | 480 | 4.4% |
| 10 full due diligences | 1,800 | 16.3% |
| 7 re-up due diligences | 420 | 3.8% |
| Monitoring 120 funds | 5,400 | 49.0% |
| Overhead | 1,836 | 16.7% |
| Total | 11,016 | 100.0% |
Manager selection, the work the team is hired for and interviewed on, is 34 per cent of the hours. Monitoring is 49 per cent. In a year with no portfolio to monitor, the same selection work with its overhead needs 3.0 people; the rest arrive with the portfolio, 540 more hours of monitoring with every year's twelve new funds, which is why a team that was adequately staffed at launch finds itself short in year six without having changed its pace.
| Case | Funds a year | New managers | Active funds | Hours | Professionals |
|---|---|---|---|---|---|
| Base: 600 a year, 50 tickets | 12 | 5 | 120 | 11,016 | 7.3 |
| Tickets of 25 | 24 | 10 | 240 | 22,032 | 14.7 |
| Tickets of 100 | 6 | 2 | 60 | 5,141 | 3.4 |
| 300 a year, 50 tickets | 6 | 2 | 60 | 5,141 | 3.4 |
| Only 3 re-ups a year | 12 | 9 | 120 | 13,954 | 9.3 |
| 1,200 a year, 50 tickets | 24 | 10 | 240 | 22,032 | 14.7 |
Two lines are worth reading together. Doubling the budget with the same ticket size doubles the team; keeping the budget and halving the ticket does exactly the same. The workload follows the number of relationships, not the money. And replacing four re-ups with four new managers adds two people, because each new relationship carries its share of the funnel, 60 screens, 24 first meetings, 6 second meetings and two full due diligences, 672 hours in all, where a re-up costs 60. A programme that decides to rotate its manager roster is also deciding to hire.
The ticket size is usually set by diversification and concentration limits; how much an LP should commit to a single fund works that side. This calculation adds the cost of the answer.
Sizing the team on new commitments alone. A plan that says "twelve funds a year, two per person" staffs six and leaves the 120-fund monitoring book to whoever has time, which in practice means quarterly reports read late, LPAC consents signed without analysis and re-up decisions taken on a manager's own narrative. The opposite mistake is benchmarking on assets per head: here each professional covers 82 million of annual commitments, a figure that tells you nothing once the ticket size or the re-up mix moves. Count relationships and hours, then check the result against the peers.
The pacing and portfolio construction figures that feed the first step are in the free workbook for this case.
It depends on the mix of selection and monitoring rather than on assets. In the illustrative programme, 7.3 professionals carry 12 new commitments a year and 120 active funds, about 16 funds each, with monitoring at 45 hours per fund a year taking 49 per cent of all hours. Fewer re-ups lower it, because each new manager brings its own screening and due diligence; smaller tickets alone do not, they add funds and people in proportion.
With illustrative conversion rates of 40 per cent from screen to first meeting, 25 per cent to a second meeting, one in three to full due diligence and 50 per cent to commitment, it screens 60 offerings per new manager, an overall conversion of 1.7 per cent. Five new managers a year mean 300 screens, 120 first meetings, 30 second meetings and 10 full due diligences.
Only if it means more relationships. In the illustrative model doubling commitments from 600 to 1,200 million at the same 50 million ticket doubles the team from 7.3 to 14.7, but so does keeping 600 million and halving the ticket to 25 million. Raising the ticket to 100 million cuts the need to 3.4 professionals.
This article is one calculation from The Private Markets Limited Partner. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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