A report released by PrivateEquityCompensation.com signals improvement in the private equity and venture capital markets and an upward compensation trend that will likely continue in 2011.
In a year where buyout deals heated up and the big players are complaining of being priced out of the market for some deals, private equity professionals reported a solid increase in total earnings over the previous year, with the average cash earnings coming in at USD230,000.
As 2010 wraps up, 45 per cent expected double-digit increases over last year. The average expected increase was 13 per cent.
Bonus practices are aligned with fund performance for 2010. Last year about half of the firms reported positive fund performance. That number this year is 85 per cent.
"Last year, there was plenty of discussion around the bank bailouts and public scrutiny of financial pay programs, especially bonus payouts," says David Kochanek, publisher of PrivateEquityCompensation.com. "This year funds performed well and the average expected bonus increase is over 20 per cent."
Twenty eight per cent of contributors reported having some level of bonus guarantees, although the level of guarantee was all across the board, from five per cent up to 100 per cent. Of those receiving bonuses, only 12 per cent were required to invest some amount of their bonus back into the fund.
With plenty of investment reserves at the larger firms and the clock ticking on the time frame to make investments, firms are looking to put that money to work. This means more deals and greater demand for talent from both the investment and operational sides of the business.
"We believe this is a sign of improvement in the private equity and VC markets," says Kochanek. "We expect continued demand for junior level investment professionals and operational improvement players at the senior levels. Add to this that firms are now positioning to keep talented professionals from leaving for greener pastures, and an upward compensation trend will likely continue in 2011, even if overall economic conditions show only minor improvement."
