Majority of Private Equity and VC Staff Are ‘Dissatisfied’ With Pay
Compensation increased for the sixth straight year in 2019 — but not enough, according to a survey of private equity and venture capital professionals.
More than two-thirds of private equity and venture capital professionals earned more than $200,000 last year, according to a report on 2019 pay trends from Benchmark Compensation.
When asked if they were satisfied with their income, however, 55 percent of respondents said they were not, according to the report’s publisher, David Kochanek.
The report — based on a survey of partners, principals, and employees at private equity and venture capital firms — found that total compensation increased in 2019, marking the sixth straight year that pay improved overall. The 68 percent of respondents who reported earnings above $200,000 made up the largest proportion to do so in the survey’s 13-year history, according to Benchmark Compensation.
Among those who were dissatisfied with their income, 30 percent said they had expected to earn more in 2019, while 26 percent were disappointed with the allocation of carried interest at their firms.
The results echo another recent compensation study, by executive recruiting firm Heidrick & Struggles, which found that 62 percent of associates and senior associates at private equity firms were “not happy” with their salaries and bonuses. Among managing partners — the most senior employees — one in three felt that they were underpaid.
The Heidrick and Struggles report found that managing partners at small private equity firms earned $1.59 million on average in 2018. At private equity firms managing between $2 billion and $3.99 billion, these executives earned $2.25 million on average.
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Benchmark Compensation declined to share its breakdown of 2019 pay by role or level of assets under management. However, the firm reported that pay increased year-over-year across all job titles in private equity and venture capital.
According to the report, base pay made up 55 percent of the average respondent’s income, with the remaining 45 percent coming from bonuses. Bonus payouts tended to be based on a combination of factors, such as firm performance, fund performance, and the employee’s individual performance. The largest bonuses, however, were tied to fund performance at firms with more than $1 billion under management.
“We have seen this trend of an overall increase in base and bonus levels,” Kochanek said by phone. However, he warned that the end of the current bull market is likely to quash this trend. “When markets are under pressure, that does impact employment and compensation,” he said.
For the most part, however, private equity and venture capital professionals surveyed by Benchmark Compensation were not too worried about their jobs. Roughly two-thirds said they weren’t concerned about job security, while 31 percent said they were somewhat concerned. Only 2 percent reported that they were “very concerned.”
Most surveyed firms said they were actively hiring, including 54 percent that were looking to hire investment professionals. Meanwhile, 40 percent said they were hiring operations and portfolio management staff, while 29 percent were recruiting for accounting and controls positions. Just 1 to 3 percent of firms were reducing headcount across the board, according to Kochanek.
“Firms need to better understand internal satisfaction with their compensation levels, training programs, and work environments,” he said in a statement. “Or, they risk losing talented professionals because, in this private equity job market, people have options.”