Salary and bonus payments are a jealously guarded secret within private equity, where the rapid profusion of fund launches is fuelling demand for experienced staff, particularly senior executives.
A rare insight into the envy-inducing rewards paid by private equity companies was provided by Heidrick & Struggles, a Chicago-based executive search company.
More than half of respondents (56 per cent) in a survey of 895 private equity professionals based in North America reported an increase in base salary in 2019. More than three-quarters of the respondents (77 per cent) indicated that their bonus increased in 2018, the latest year for which data are available.
“The advent of larger funds and new strategies is creating increased competition for talent, particularly at the partner and managing director level,” said Jonathan Goldstein, regional managing partner at Heidrick & Struggles.
Performance-based payments, known as carry in the industry jargon, of between $112.5m and $120m were collected by 10 managing partners at firms running assets between $2bn and $10bn. Managing partners are often co-founders of private equity companies and can earn large carry payments even at smaller firms.
Eighteen managing partners at firms with between $1bn and $2bn in assets pocketed an average of $53.4m in carry. Even the smallest firms, those with assets of less than $500m, paid an average of $20.8m to seven managing partners.
For the first time, Heidrick & Struggles asked respondents whether they thought their level of pay was fair. Close to two-thirds of the staff employed as associates or senior associates felt underpaid.
About half of the vice-presidents, principals and managing directors also felt underpaid, while almost a third (32 per cent) of managing partners felt they were not paid enough for their efforts. This suggests further inflation in pay packages across the private equity industry is expected.
Source: Financial Times
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