Does Fund Size Affect Your Pay?

One of the biggest draw cards to working in the private equity industry is often the large salaries on offer, with average compensation exceeding the $200,000 mark. However, the big compensation offered can often make it difficult to break into the industry, particularly with the top firms and largest funds.

One of the most common questions for those within the private equity industry is ‘Is it really worth the effort to work for larger funds?’. Before you decide to pursue the greater responsibilities and challenges of large funds, you need to identify the value to your career and to your bank account.

After thoroughly researching private equity remuneration, we found that fund size has the ability to affect your pay substantially. No matter where you are in your private equity career, the good news is that working with a larger fund will dramatically boost your salary.

Here are some highlights from the 2012 Private Equity Compensation report:

For those in the earlier stages of their private equity career, fund size doubled compensation.

  • Analysts working with large funds (over US$500 mil) received over 89% more compensation than those working with small funds (under US $100 mil)
  • Associates working with large funds (over US$500 mil) received 100% more compensation than those with small funds (under US $100 mil) – double the salary of an associate with a small fund

However, the effects of fund size on compensation aren’t just beneficial for analysts and associates. Salary increases were still considerable for all positions in the typical private equity firm:

  • Senior associates with large funds had 63% higher salaries than those who worked with small funds (under US $100 mil)
  • Directors had a significant pay jump of over 67% when working with a large fund (over US$500 mil), compared to directors working with small funds
  • Vice presidents have the biggest increase in compensation: a 191.66% rise in salary

If a higher salary is what you’re looking to achieve, a strategic career move to a larger fund will help you reach your compensation goal. While there will undoubtedly be greater responsibilities associated with the pay increase, working with larger funds will help your bank account, as well as your career by assisting you to develop your skills.