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Is private equity pay really rising?

A salary survey from US private equity headhunter Glocap Search LLC sounds a favourable note for anyone working in private equity or contemplating leaving investment banking for a new life on the buyside.

While investment banking bonuses are unquestionably falling, Glocap’s ‘indepth analysis of 2008/09 compensation at US-based private equity funds,’ suggests PE pay is actually increasing.

Bonuses at the largest venture funds (those with $2bn or more under management) are apparently up 6% on last year.

Cash comp (ie. salaries plus bonuses) for senior associates (AKA graduating MBAs) is said to be up 4% to $435k (265k). Bonuses for vice presidents are up 8%. And cash comp for principals is up 4% to $885k.

Glocap says the impetus for the wage inflation is the almost extinct phenomenon of ‘competition for top talent’, but notes that after years of ever-accelerating PE pay increases, single digit rises feel “like the industry has taken its foot off the gas.”

Unfortunately, UK private equity recruiters cast aspersions on whether Glocap’s figures have any relevance this side of the Atlantic. “There hasn’t been any noticeable increase here,” says Katherine Howe at recruiters KHG Partners.

“Pay in private equity is so wide-ranging that it’s impossible to be formulaic about it,” says Abid Hussein, head of the financial services team at recruiters EM Group. “At present it’s more lucrative to be a junior analyst or associate in a private equity fund than an investment bank. But are private equity bonuses going to be up this year compared to 2006 or 2007? I doubt it.”

Comments (11)

Comments
  1. who wants to be working for a PE now?…

  2. There is no debt available for buyouts. The value of currently held stakes is going down together with companies’ profit and market appetite, PE associate and analysts spend the most of their time in renegotiating financing with banks because all investments are going into default… but the salary is increasing! Yeah! Congratulation Sarah! This is journalism!

  3. M&A – if you read the article you will notice that it is skeptical in tone.

    Sarah, Editor, eFinancialCareers Reply
     
  4. Guys, often i do not agree with Sarah, but this time she got it quiote right

    being in the industry since a couple of years, private equity is actually really not that bad… if your mandate is somewhat flexible.. yes, if you run a public equity long book you have issues.. in US financial we have issue, but other areas are going strong.. strategies such as commodities still hold up, green fields steel, cement etc are good and frontier market assets are still doing well..

    profile of deals has changed and geographic footprint.. UK is dead as the debt excess was the largest here, economy going south, RE bublle bursting… Europe is so so.. ME is going well, asia is fine, africa difficult, small as always but increasingly active.

    The figures for cash seem right on the higher end, recognizing the stabndard deviation is huge.. as most is in the carry for mid and senior levels..

    hanging in there Reply
     
  5. Sorry Sarah, I apologize and I agree with your scepticism

  6. There is more in PE than debt financed buy-outs…I know from quite a few (large) distressed PE funds who are doing really good at the moment that salaries are going to be up this year (cash comp. and bonus)
    most of them are really confident for the near future, there will be loads of cheap targets with a lot of potential…of course you need industrial managers for this kind of work an not only ex-i-bankers who can do financial engineering…

    there is some truth in this article

    the one who knows Reply
     
  7. M&A – thank you, I agree with your apology (and your scepticism).

    Sarah, Editor, eFinancialCareers Reply
     
  8. dear hanging in there – thank you for your feedback on PE outlook. You did mention “small (PE space) as always but increasingly active”. Just to clarify, are you referring to the lower to mid-market PE space? If so, do you think, that’s the area with the best chances of growth/expansion in 2009? Could you please name a few players in that space?

  9. Bonuses at PE firms will be cut + payout as a result of realisation of investments will be down, so overall….outlook not so rosy. Having said that, investements carried out in a dowturn situation typically turn out to be the most profitable – as long as you don’t get burnt.

  10. @ cevahir: “small, but increasingly active…” was concerning gepgraphies – which as less affected – by the crunch. The value proposition is different n does not rely on leverage – as you got different growth n valuation etc.. Africa is very small from a PE perspective, deals are smaller than in mature markets, since businesses are smaller.. it it difficult? yes, and slow and risky. Is it the lower end? factoring the risk in, not really. It is more of a nice for people/funds that have an angle and appetite..

    Players? intransparent and opportinistic. SWFs, Actis, Eastgate, Ochs, Renaissance and various hedge funds..

    good luck.. and yes some PE shops do well, it is all about allocation these days.. and.. the best deals areone in the downturn look at exits from deal done in 2001 to 2003..

    hanging in there Reply
     
  11. my experience with pe/ hedge funds is that you can rely on salary but not on bonus- they are pretty sharp operators pretty close to the edge of legality

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