Big private equity firms pay better than small ones

You won’t all be rich enough to purchase copies of the Magna Carta (a la Carlyle Group’s David Rubenstein)–or to have the lion-guarded main building of the New York Public Library in Manhattan named after you (Blackstone Group’s Stephen Schwarzman)–or, as Vista Equity Partners’s Robert Smithpromised this week, to eliminate the student debt of an entire graduating class.

But you can still ask your boss for a raise, a higher bonus, a bigger slice of the carry pie. And your odds of success will be greater if you can present evidence that you’re a hard-working yet underpaid flight risk.

Private Equity Professional publisher and business partner John McNulty this week shared with me a copy of his 11th annual study of employee compensation in private equity. It’s based on a survey of 325 funds conducted late last year. Along with helping benchmark your comp against your peers, the results show why you may be better off, financially anyway, working for a bigger firm.

Consider that in the 12 months prior to the survey, partners at firms whose current fund is less than $100 million in size earned $395,000 in combined salary and bonus and $125,000 in carried interest. Not bad. But their take was dwarfed by the compensation of partners whose current fund is $1 billion or over in size. They brought in $750,000 in combined salary and bonus and $1.9 million in carry.

The simple reason: larger funds generate more in management fee income and they do bigger deals, leading to bigger carry payouts.

Junior professionals deciding between jobs at big and small firms should also ponder another survey finding. Firms managing larger funds tend to be more generous when allocating carried interest to the lower ranks. According to the study, just 10 percent of firms with current funds of $1 billion or more in size award no carry to mid-level professionals. The comparable figure is 65 percent for firms whose current fund is less than $100 million.

The study covers 11 common job titles and includes 6 breakdowns by fund size. Call me at 908/304-2842 if you want me to share another data point or two but natch I can’t share the whole study, which sells for $699. Learn more here.

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