Most PE professionals enjoyed raises in 2019

The money that continued to pour into the coffers of PE shops last year translated into higher salaries and bonuses for most investment professionals who worked at them.

Fifty-six percent of investment professionals reported getting raises last year, while just 1 percent experienced cuts in salary, according to the Heidrick & Struggles North American Private Equity Investment Professional Compensation Survey, released last month. More than three-quarters (77 percent) reported getting a higher bonus for 2018 performance than they did for 2017 performance.
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Columbia B-School employment report shines light on dramatic PE pay disparities

Ever wonder why so many private equity firms strive to raise ever larger funds? Simple. Larger funds generate more income–more management fees for certain, and more carried interest so long as their deals turn out to be sufficiently profitable.

More management fees translate into higher individual pay, since firms don’t hire at the same pace that they expand their assets under management. And that has led to some remarkable differences in pay for folks doing similar work at large and small shops. More evidence for these disparities comes from the 2019 employment report released by Columbia Business School this fall.

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From great to small, firms allocate lion’s share of carry to partners

You can’t blame small private equity shops for paying less in salary and bonus than the big ones. They simply don’t bring in the same level of management and portfolio-company fees. They can’t support comparable payrolls.

So they make up for it by being more generous when it comes to allocating carried interest, right? Well, not so much, according to the 2019 Carried Interest and Compensation Survey, now in its 12th edition and published by PE Professional.

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As population of operating pros explodes, smaller percentage work for firms; many lack a path to partner. Bummer!

Private equity firms, scrapping for every possible advantage to meet stratospheric investor expectations, continue to binge on the hiring of operating professionals.

In a recent survey-based report, executive recruitment firm Heidrick & Struggles found that as investment professionals spend more time looking for deals, and less time tending to portfolios, “PE firms are adding generalists, industry specialists, and functional specialists from the middle level through the most senior ranks.” Two of the most popular hires? Head of talent and CFO of portfolio operations.

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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.

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