While the investment banks continue to face pressure to pare back bonuses and slash compensation costs, private equity firms (like hedge funds) are keeping bonuses and salaries stable.
Private equity research firm Preqin has just released its 2013 Compensation & Employment Review. It surveyed 200 private equity firms, 34% of whom said they'll pay larger bonuses this year. 47% intend to keep them on a par with 2012. Only 19% intend to pay their people lower bonuses than last year.
Needless to say,salaries and bonuses aren't your main preoccupation if you work in private equity - the real money is in the carried interest that senior members of the fund earn when investments are cashed out and a specified return has been met. On average, only around 60% of private equity employees receive carried interest according to Preqin. As we've noted previously, carried interest is paid less frequently now because many funds have not met the hurdle at which carry can be paid.
If you work in private equity and you're unhappy with your pay, don't count on finding a new job easily. Gail McManus, managing director of Private Equity Recruitment, says that private equity funds in Europe aren't expanding and that much of the recruitment in Asia-Pacific is focused away from the core financial centres and towards Malaysia and Indonesia, where international firms are looking for Western experience and regional private equity firms are targeting local talent.
“There’s still big demand for private equity professionals at the mid-level, between four-five years of experience,” she says. “Private equity firms simply stopped hiring in 2008-09, most now feel they are lacking expertise at this level, but the talent pool remains strained. We’re still seeing demand at the junior level, but next to no recruitment in the senior ranks.”
Preqin’s figures suggest that it pays to work in the US private equity industry. At director level, for instance, average total compensation was $614.4k in the US, versus $341.4k in Europe and $294.2k in Asia-Pacific. At the junior level, meanwhile, Asia-Pac is a bad place to start out – a lack of long-term incentives means that average comp is $44.4k for analysts in the region, compared to $96.1k in Europe and $115k in the US.