Along with the rest of the investment world, the private equity industry experienced its share of ups and downs in 2011. So, it is not so remarkable that the attitudes, expectations and actual results expressed by firms and employees in the 2012 Private Equity Pay Report very closely reflects that. As a whole, industry players remain positive and upbeat in their outlook moving forward, while their expectations have achieved a little more parity with recent outcomes and trends, which may explain their high level of overall satisfaction with their compensation. Of course, much depends on how high up the perch one sits, as well as size of the perch. With the many different sizes and shapes of PE firms, there is not much homogeneity in the way compensation is viewed or actually paid out, which makes for a more interesting analysis to say the least.
Source: http://www.getloans.com
Industry Ups
- Annual average compensation – up 6 percent to $248,000 USD. Partners, who last year reported a decrease, reported an increase in total compensation of 12 percent. Vice Presidents, Associates, and Senior Analysts lead the way, all reporting cash compensation increases of over 20 percent.
- Average annual bonus – 50 percent of total compensation up from 36 percent last year. The highest expected bonus increases came from Managing Directors who expected a 63 percent bigger bonus this year.
- Base salaries for MBA’s – up 13 percent on average, although the average bonus was no higher than non-MBA employees.
- Demand for internal fund raisers – greater emphasis being placed on hiring individuals with proven capital raising experience.
Industry Downs
- Number of people predicting an increase in compensation – 90%, down from 94% a year ago.
- Percent of employees projecting a positive fund performance for 2012 – 73%, down from 85% a year ago.
- The size of the carry pool – only 48 percent of employees reported that the size of the carry pool was the “standard” 20 percent, down from 53 percent a year ago.
- Carry pool participation – Partners, Principals, Managing Directors and Managing Partners as a group did not report as high participation in the carried interest pool as last year
The overall level of satisfaction with compensation was 41 percent, an increase from 36 percent a year ago with the biggest increase coming from Managing Partners. That increase could very well be the result of a prevailing attitude of “it could have been worse,” considering the state of the market and the mixed bag of fundraising and investment results over the last year. Once this turns around, we are likely to see increasing expectations along with a commensurate decrease in satisfaction.
