Seventy-four per cent of private equity fund managers made firm-wide increases in base salary from 2014 to 2015, according to Preqin’s 2016 Private Equity Compensation and Employment Review.
According to the survey of almost 200 private equity firms, the average increase in salary was 7 per cent, with 14 per cent of firms increasing base salaries by more than 10 per cent. Almost half (46 per cent) of firms increased their performance-related cash bonus pay-outs in 2014, up from 26 per cent of firms that increased bonuses in the previous year. The median bonus pay-out increase in 2014 was 20 per cent, while only 16 per cent of firms reported a decrease in the levels of cash bonuses paid to employees.
From 2015 to 2016, 76 per cent of surveyed firms plan to increase their firm-wide base salary, while 22 per cent predict no change in pay rates. Only 2 per cent of firms anticipate reducing base salaries next year.
Some 625 new fund managers entered the private equity market with a 2015 vintage fund, the highest number ever. There are now over 7,400 active private equity firms tracked by Preqin, including over 600 private debt firms.
Altogether, private equity fund managers employ an estimated 145,000 people worldwide. Buyout, venture capital and real estate firms comprise 68 per cent of that total. Firms with USD10 billion or more in AUM have an average of 160 staff, while firms with less than USD250 million AUM have an average of 14.
Private equity firms in the Asia-Pacific region have the highest median proportion of women, at 40 per cent of total staff. Women represent a median 35 per cent and 33 per cent of staff respectively at Europe- and US-based firms, while at South America-based firms women comprise a median of only 15 per cent of total staff.
Total fundraising for private equity firms in 2015 YTD stood at USD362 billion at the end of Q3 and seems broadly on track to match the USD552 billion raised globally in 2014. The record year for private equity fundraising is still 2008, when funds closed raised an aggregate USD688 billion in capital commitments.
“2015 seems to have been a good year for employees of private equity firms, with salaries and cash bonuses both increasing,” says Selina Sy, Manager – Premium Publications at Preqin. “At more senior levels, the largest firms will vie to attract top talent by offering rates of compensation that smaller firms may struggle to match. Similarly, the location, structure and strategy of a firm can all affect the available pool of talent and the number of opportunities available. With many firms planning to increase their staff numbers and base salaries again in 2016, competition for talent looks set to continue, as firms seek to attract new recruits while retaining current staff.”
