Private Equity Compensation 2019

Private Equity and Venture Capital Compensation Gains Continue

Private Equity Compensation ReportIn this, our twelfth annual Private Equity & Venture Capital Compensation Report for 2019, we look to that past to better confront the challenges of the future. The goal of this report is to identify industry compensation trends and provide insights into their effect on compensation practices, recruitment and retention.

This year marks the fifth straight year of compensation gains in the private equity and venture capital industry, with 64 percent of this year’s respondents expecting total compensation levels to increase over last year, while only 5 percent expect to earn less.

We have noted several trends in this year’s compensation report, one of which is increasing base salaries and declining bonuses as a percentage of overall compensation for private equity and venture capital professionals in the highest pay band.

This year’s report confirms the continuation of another unsettling trend—the diminishing correlation between bonus pay and firm performance. For example, we see that respondents employed in firms where fund performance is down by 1 to 9 percent still forecast an average bonus of $114,000. Seeds of this trend surfaced in 2014, sprouted in 2015, grew in 2016 and matured in 2018.

In-house training continues to receive unfavorable reviews, despite last year’s movement in a positive direction. Why the industry ignores the potential benefits of robust in-house training programs remains a mystery, particularly in the competitive job market that exists today. Quality internal training programs have the potential to attract and retain talent, but statistics show this potential is broadly ignored, as a mere 17 percent of this year’s respondents rate their in-house training as good to excellent.

Higher MBA base salary, bonus compensation, and vacation time as compared to their non-MBA peers has been a regular feature of this report since its inception. This year, we can once again, confirm the monetary value of an advanced degree.

Job seekers will appreciate the section of this report devoted to identifying which positions are in demand, what percentage of firms are hiring, and what percentage are cutting back. For example, 54 percent of respondents’ firms are hiring investment personnel, while only 1 percent are cutting back in information technology hires.

The 2019 Private Equity and Venture Capital Compensation Report serves as myth-buster and forecaster, debunking misconceptions, and providing readers insightful, industry-specific information regarding the complex subject of compensation.

Other highlights from this year’s report include:

  • Respondents working in firms with less than $100 million in assets under management (AUM) earn almost 13 percent less than peers in firms with $1 billion or more;
  • 73 percent of respondents do not receive a bonus guarantee;
  • The least-favored investment strategy is PIPE;
  • Bonus pay totals 44 percent of all compensation paid to industry professionals; and
  • Fifty-two percent of respondents work in firms with expected fund gains of 10 to 24 percent.

About The Private Equity Compensation Report

The 2018 Private Equity and Venture Capital Compensation Report is based on data collected directly from hundreds of private equity and venture capital partners, principals and employees.

The report, in its eleventh year of publication, is widely regarded to be among the most comprehensive benchmarks for private equity and venture capital compensation. It provides independent and impartial data covering a broad range of salary, bonus, carried interest and other compensation related information, sourced directly from professionals working within the industry.

Private Equity Compensation Report 2018

Continued Demand for Investment Talent is Driving New Levels of Compensation

private equity compensation 2018The 2018 Private Equity Compensation Report, shows that increased fund raising and billions in funds looking for investments has resulted again this year in increased private equity and venture capital compensation.

Sixty-five percent of professionals reported an increase in cash earnings this year. The average reported cash compensation for private equity and venture capital professionals is $315,000 USD, another increase from the previous year. Private equity and venture capital professionals working in the largest firms continue to out-earn their peers in smaller firms.

North American dry powder levels are now measured in the hundreds of billions of dollars. The report reveals increased demand for investment talent again this year. “We predicted this trend several years ago based on private equity professionals reporting increases in both base and bonus, despite their funds not producing outstanding returns,” said David Kochanek, Publisher of PrivateEquityCompensation.com

The correlation between bonus pay and firm performance continues to diminish. In 2017, it became apparent that the absence of close correlation is the new normal. In this 2018 report, we see that respondents employed in firms whose performance is down by 1 to 9 percent still forecast an average bonus of $161,000.

For private equity job seekers, the Private Equity Compensation Report for 2018 reveals which positions are in demand, what percentage of firms are hiring, and where firms are cutting back – and the career opportunities are increasing across the board. For example, 25 percent of respondents’ firms are hiring in the back office for accounting personnel and 27 percent said they are hiring in operations and portfolio management.

As seen in prior years, when the demand for talent is high, the level of satisfaction with overall compensation is low. Again this year, more than half of respondents described their compensation as unsatisfactory, including some principals, managing directors and senior analysts.

Firms would be wise to tune into their team’s thoughts on compensation levels right now. “Often times, the first indication of a problem is when the employee turns in their 2-week notice and is headed out to join another firm,” Kochanek warns.

About The Report

The 2018 Private Equity and Venture Capital Compensation Report is based on data collected directly from hundreds of private equity and venture capital partners, principals and employees.

The report, in its eleventh year of publication, is widely regarded to be among the most comprehensive benchmarks for private equity and venture capital compensation. It provides independent and impartial data covering a broad range of salary, bonus, carried interest and other compensation related information, sourced directly from professionals working within the industry.

Private Equity Compensation Report 2016

The Private Equity Compensation Report for 2016 Uncovers Disconnect Between Fund Performance and Cash Bonuses

Cash increases slow while the demand for private equity talent increases.

SAN DIEGO, CA, January 20, 2016 — The 2016 Private Equity & Venture Capital Compensation Report, released today, shows that slower industry activity is reflecting in private equity and venture capital pay.

Although 65 percent of professionals reported an increase in expected salaries and bonuses, the growth in cash compensation has slowed. This year’s average compensation for private equity and venture capital professionals was $272,000 USD, a slight decrease from last year.

This marks the second consecutive year of diminished correlation between bonus pay and firm performance. Respondents working in PE Report Collage 2016firms that were down 10 percent or more, report anticipated bonuses averaging $43,000 USD. This disconnect continued to surface in firms down 1 to 9 percent, with these survey participants expecting bonuses to average $94,000. In contrast, respondents working in firms that realized gains between 1 to 9 percent were expecting an average $91,000 in bonus pay, $3,000 less than their counterparts in firms that were down by the same range.

The private equity job market, however, continues to shine. “Funds are looking to put their capital to work, that means deal sourcing talent is at a premium,” said David Kochanek, Publisher of PrivateEquityCompensation.com. This year’s report reveals that 45 percent of firms are looking to hire additional investment professionals.

Says Kochanek, “With all the dry powder firms are sitting on, we were not surprised to see increased demand for investment talent again this year. Further, based on the expensive multiples seen in recent strategic exits, we won’t be surprised to see demand increase over the next 12 months for professionals with deep due diligence experience.”

As seen in prior years, when the demand for talent is high, the level of satisfaction with overall compensation is low. Again this year, more than half of respondents described their compensation as unsatisfactory.

About The Report

The 2016 Private Equity and Venture Capital Compensation Report is based on data collected from hundreds of private equity and venture capital partners, principals and employees through direct surveys. The report, in its ninth year of publication, is widely regarded to be among the most comprehensive benchmarks for private equity and venture capital compensation. It opens the door to trusted, independent and impartial data covering a broad range of salary, bonus, carried interest and other compensation related information, sourced from respondents working within the industry.

Some of the participating firms over the years include: Alpinvest Partners, American Capital, Battery Ventures, BlackRock, Carlyle, Century Capital Management, Cerberus, Comcast Ventures, DuPont Capital Management, EdgeStone Capital Partners, GE, Guggenheim Partners, Highland Capital Partners, Hilco Consumer Capital, Intel Capital, Mission Ventures, Mohr Davidow, North Atlantic Capital, RBC Capital Partners, RBS, Safeguard Scientifics, SV Life Sciences, Siemens Venture Capital, TPG, Venrock, and Warburg Pincus.

2014 Private Equity Compensation Report Released

The seventh annual Private Equity and Venture Capital Compensation Report, released by the consulting firm Benchmark Compensation, indicates compensation growth in the private equity and venture capital markets is slowing.

Although private equity professionals in certain roles reported increases in compensation this year, overall, the growth in cash compensation flattened from last year’s numbers. The average private equity professional worked more than 60 hours per week and earned $271,000 USD in cash compensation this year.

2014 PE Report 225x136 for LinkedIn activity updateWhen it came to compensation changes by job title, some positions outperformed others, with Managing Partners, Principals, Directors and Investment Managers seeing some of the biggest increases. In the junior ranks of the firm, analysts, senior analysts, associates and senior associates all saw fairly modest gains.

“We were closely watching cash compensation trends in 2013 because we anticipated that the carried interest tax break was in jeopardy,” said David Kochanek, Publisher of PrivateEquityCompensation.com. “It looks like carry will live to fight another day, so we don’t think we will see any major shifts in how private equity and venture capital compensation is structured in the near term.”

Due to the correlation with position within the firm, work experience remains a leading factor in carried interest allocations. At the 6 to 9 years of experience range, the percentage of professionals participating in carry increases significantly. After 10 years in the workforce, however, the participation percentage is relatively flat.

On average, bonuses comprised 39 percent of this year’s cash compensation total and contributed more than 70 percent of cash earnings for those taking home more than $1 million.

In most cases, cash compensation increased along with the size of the fund. Those in analyst positions saw the biggest difference in cash compensation between small and large funds. Analysts at big funds, on average, earned nearly double that of their peers in smaller funds. “Although somewhat higher base salaries were in place for the analysts at larger funds, this differential was mostly bonus dependent,” said Kochanek.

About The Report

The 2014 Private Equity Compensation Report is based on an industry survey conducted in October and November 2013. Data was collected directly from hundreds of private equity and venture capital partners and employees. The full report can be purchased at http://www.PrivateEquityCompensation.com

The Report has grown to be the most comprehensive benchmark for private equity and venture capital compensation practices. Some of the participating firms over the years include: Actis, American Capital, Bain Capital, Battery Ventures, BlackRock, Carlyle, Century Capital Management, Cerberus, Comcast Ventures, DuPont Capital Management, EdgeStone Capital Partners, GE, Guggenheim Partners, Highland Capital Partners, Hilco Consumer Capital, Intel Capital, Mission Ventures, Mohr Davidow Ventures, North Atlantic Capital, RBC Capital Partners, RBS, Safeguard Scientifics, SV Life Sciences, Siemens Venture Capital, Venrock, Warburg Pincus, and Wellington Partners.

2013 Private Equity Compensation Report Uncovers Higher Pay

The 2013 Private Equity and Venture Capital Compensation Report demonstrates that the private equity and venture capital markets are continuing to enjoy increases in compensation and that 2013 will bring additional compensation increases.

Less Focus on Financial Engineering

Years ago, the upside in private equity was achieved primarily through financial leverage… LBO’s were the key to return on investment. Today, with aging portfolios, firm’s are focusing on the long term success of portfolio companies. Firms are assembling appropriate capital structures and teams to execute a long term growth plan.

Deal structure is only the beginning. The combination of cost savings from operational improvements and increased top line performance result in tremendous margin growth and increases in company value.

Good Times for Private Equity

It seems this new focus in private equity has resulted in a competitive market for talented investment professionals. More than half of respondents expected their cash compensation to increase over last year, and more than 40 percent expected to wrap the year end with double digit increases.

Private equity professionals reported increases in both base and bonus compensation. The average professional earned over $270,000. Bonuses comprised over one third of this year’s mean cash compensation, with the highest earners realizing bonuses that made up more than 60 percent of their total cash compensation.

This year, even professionals at small firms reported higher base and bonus compensation. This is likely due to the new competition for these talented professionals.

Romney Raised Awareness of Private Equity

The 2012 presidential election brought with it discussion about the value of private equity in terms of its contribution to job growth and overall economic benefit. Despite democrats trying to paint private equity firms as single-minded entities willing destroy companies in effort to maximize return on investment, the reality is that these firms focus on growth, benefiting both the shareholders and employees.

The industry is performing well and has a positive outlook for 2013 and beyond.  Professionals will continue to see healthy increases in base salary and, as long as portfolio companies continue to grow, bonuses will follow suit.

About The Report

The 2013 Private Equity Compensation Report is based on an industry survey conducted in October and November 2012. Data was collected directly from hundreds of private equity and venture capital partners and employees. The full report can be found at http://www.PrivateEquityCompensation.com

The Report has grown to be the most comprehensive benchmark for private equity and venture capital compensation practices. Some of the participating firms over the years include: Actis, American Capital, Bain Capital, Battery Ventures, BlackRock, Carlyle, Century Capital Management, Cerberus, Comcast Ventures, DuPont Capital Management, EdgeStone Capital Partners, GE, Highland Capital Partners, Hilco Consumer Capital, Intel Capital, Mission Ventures, Mohr Davidow Ventures, North Atlantic Capital, RBS, Safeguard Scientifics, SV Life Sciences, Siemens Venture Capital, and Wellington Partners.