Private equity funds are paying hefty sign-on bonuses to lure junior staff from investment banks.
A study conducted by financial services recruitment firm Badenoch & Clark suggests private equity funds based in London are offering sign-on bonuses of between 15,000 and 20,000 to junior staff joining from banks.
Krista Parker, head of the private equity team at Badenoch & Clark, says the use of sweeteners to entice juniors reflects the competitive recruitment environment, with many banks also seeking to recruit and retain analysts. She says, "Analysts are the most valuable commodity in the market. Private equity groups need to compete with hedge funds and investment banks, who offer higher cash compensation."
As well as a signing on bonus, the study found investment analysts working for private equity funds typically earn 50,000 to 60,000 in basic pay, plus a 30,000 to 50,000 end-of-year bonus. Although base salaries at investment banks are similar, Parker says banks typically pay juniors bonuses of 100% or more.
At senior levels, private equity staff typically supplement their pay with carried interest derived from profits made on successful investments. However, this is rarely offered to investment analysts.
Parker says signing on bonuses are now commonplace for juniors moving into private equity roles. Other recruiters doubt that call, however. Guy Townsend, managing director of Walker Hamill, a London-based search firm specialising in private equity appointments, says he has yet to come across them. "I've never seen signing on bonuses paid to juniors."
With private equity funds reputed to have 41bn of additional money to invest in 2006, both Townsend and Parker agree that private equity funds' appetite for junior hires is likely to remain strong in 2006. Parker said US funds which moved to Europe in 2005 are in particular need of junior staff to do number crunching.
Badenoch & Clark's figures were derived from pay for around 300 private equity employees registered on its database in November 2005.