A lot of people go to Wall Street dreaming of big salaries. But today, the real money is in distributions.

Private equity firms’ standard compensation structure, which offers executives a special equity stake entitling them to a piece of the profits in their firm’s investments, has vaulted a handful of private equity kingpins to billionaire status. When there are substantial profits to be split, these stakeholders can take home tens of millions or much more in these profits, called distributions.

This has allowed some of L.A.’s biggest private equity executives to reel in huge paydays, without the notoriety that usually comes with them. And because it’s a practice limited to private equity, the industry’s compensation structure could prove to be a valuable recruiting tool.

Case in point: Antony Ressler, billionaire co-founder of Century City private equity and debt giant Ares Management and now part-owner of pro basketball’s Atlanta Hawks, does not appear on the Business Journal’s list of highest-paid executives despite taking home a nine-figure check last year.

Ressler isn’t on the list because his 2014 compensation, as reported to the Securities and Exchange Commission, totaled just $4.3 million – nothing to sneeze at, certainly, but a figure that pales in comparison with the $66 million taken home last year by this year’s top-paid chief executive: Jon Feltheimer of Santa Monica studio Lions Gate Entertainment Corp.

In fact, Ressler’s compensation falls short of the $5.6 million taken home last year by Dave Hirz, chief executive of Commerce grocery chain Smart & Final Stores Inc. – an Ares portfolio company.

But through his ownership stake in Ares’ funds, Ressler last year took home a whopping $113 million in distribution payments – and that’s on top of the $123 million he took home a year earlier.

If the compensation versus distribution distinction seems semantic, it’s not. Chris Chen, senior counsel at Century City law firm Sklar Kirsh, which works with several private equity clients, said there are big differences – and advantages – to this method of paying top private equity execs.

For starters, Ressler’s relatively small compensation package helps keep him out of the endless pipeline of stories demonizing exorbitant executive pay.

“If you’re an equity owner and you’re just receiving distributions, that’s not headline news,” Chen said.

Even better – for Ressler, at least – is that these distributions are treated as returns on equity and taxed as capital gains, which are taxed at a lower rate than ordinary income, such as salaries.

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