Sovereign wealth funds will leave you out of pocket

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They might have lots of money, but they don't pay very well.

Sovereign wealth funds (SWFs) such as Dubai International Capital (DIC) and China Investment Corporation are on the lookout for new staff.

However, while SWFs are the new hot thing, working for them is liable to leave your bank account feeling rather chilly - particularly if you're coming from private equity.

The main problem appears to be a lack of carried interest - SWFs go for base salaries and bonuses instead.

"If you're working for a sovereign wealth fund you'll probably earn the equivalent of an investment banking package rather than a private equity package," says one Dubai-based headhunter. "Bonuses are typically 200% of base salaries. In a private equity fund, with carried interest, you could be looking at 10 times that."

"The reward systems at sovereign wealth funds are not yet on a par with private equity," confirms London-based Chris Kirkness at headhunter Whitehead Mann. "I wouldn't go as far as to say people are jumping to join them, but the weight of money involved is intoxicating."

The absence of carried interest hasn't prevented DIC and Bahrain-based Arcapita from employing scores of ex-private equity professionals in their London offices.

One private equity principal currently on gardening leave says he didn't contemplate London-based SWFs when looking for a job, but that he maybe should have: "They are clearly going to be a power house for the next five years. On the other hand, the investment decisions are all made overseas and there's probably a long blacklist of sectors you're not able to invest in."

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