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Mixed results on remuneration at private equity firms

The latest Preqin private equity compensation study reveals that changes in bonus payouts to employees at private equity firms have been mixed.



While base salaries have remained relatively stable, with three-quarters of firms reporting no change or relatively small increases, bonus payouts are where the real divergence has occurred.

The study finds that 24 per cent of firms reported a decrease in bonus payouts for performance in 2009 compared to the previous year. Of these firms, nearly one-fifth (19 per cent) almost completely withdrew bonus payouts altogether, reducing them by 91 to 100 per cent.

Twenty eight per cent of firms reported an increase in bonus payouts. Of these firms, nearly a tenth (nine per cent) more than doubled what they paid out in the previous year, while a similar proportion increased payouts by 91 to 100 per cent.

The average decrease in payout at firms reporting a decrease was 45 per cent, and the average increase at firms reporting an increase was 42 per cent.

Nearly half (44 per cent) of firms made no changes to their overall base salary levels, and 31 per cent of firms increased base salaries by one to five per cent.

A small number of firms (two per cent) reported a decrease in base salaries between 2009 and 2010.

Sam Meakin, managing editor of the 2011 Preqin Private Equity Compensation and Employment Review, says: “Private equity performance suffered as a result of the downturn, but amongst many strategies there has since been at least a partial recovery in net asset values and fund IRRs, although this has not been across the board. As a result, changes in terms of individual compensation from last year have varied quite widely across firms. Data from the 2011 Preqin Private Equity Compensation and Employment Review shows that some firms withdrew bonuses completely while others doubled or more than doubled their payouts.”

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