The place to get paid in finance is private equity.
More than three-quarters of investment staff in that industry enjoyed bigger bonuses last year than in 2017, with 14 percent cashing checks half again the size or more, according to recruiter Heidrick & Struggles’ latest pay study. Thirty percent of investment professionals got bonuses that were between 21 and 50 percent larger. And it’s no wonder why.
Private markets are expected to contribute 32 percent of the global asset management industry’s revenue by 2024, according to consultant Casey Quirk.
[II Deep Dive: Asset Management’s Biggest Winners and Losers Will Be...]
More than half of respondents to Heidrick’s survey (56 percent) said their base salaries went up year-on-year. That’s slightly lower than the year before when 59 percent reported that their salaries increased on an annual basis. For investment professionals that got a raise in 2019, three-quarters said the increase was up to 20 percent.
Still, many believe they are underpaid, according to the recruiter.
Dissatisfaction with pay is concentrated on the lower rungs of the ladder. Sixty-two percent of associates and senior associates said they are “not happy” with their salaries and bonuses. These junior and mid-level staffers do the core work of analyzing companies and business plans, and conducting due diligence.
Even at the most senior level, one in three managing partners felt they were underpaid.
“This year, for the first time, respondents were asked to indicate whether they considered themselves to be receiving appropriate remuneration for their efforts,” according to Jonathan Goldstein and John Rubinetti, the report’s authors and members of Heidrick’s private equity practice.
“We found that across levels of seniority, investment professionals who believed they were underpaid were more often receiving compensation on the lower end of the scale reported in the survey than those who felt their pay was fair. Many of those who thought they received fair compensation were actually in the top quartile among their peers,” wrote Goldstein and Rubinetti.
Heidrick & Struggles surveyed 895 investment professionals in North America for the report.
Managing partners pulled in $1.59 million, on average, at small private equity firms, while partners and managing directors averaged $985,000 in salary and bonuses. For firms with $2 billion to $3.99 billion in assets, top bosses made $2.25 million, and partners and managing directors averaged about $1 million.
Notably, compensation didn’t necessarily rise in line with assets under management. At the large firms, those running between $10 billion and $20 billion, partners and managing directors averaged $1.52 million.
But those statistics don’t include carry, or the performance compensation based on fund results. Managing partners at firms with $4 billion to $5.99 billion reaped $120 million in carry across all funds, for example. Partners and managing directors in the same size category made $26 million in aggregate.
Private equity’s fastest-growing job category is operating partner, according to the recruiters. Yet investment professionals far outnumber operating partners, across all areas including growth equity and buyout. The raising of larger funds, according to Heidrick, is spurring fierce competition for talent, particularly at the most senior levels.
With the industry flush with cash, investment professionals don’t need nearly as much experience as they did in the past.
“Interestingly, we see some partners/managing directors with as little as one year of private equity experience and managing partners with as few as four years of private equity experience,” the Heidrick & Struggles report noted. “These data points are outliers, but we feel they are a reflection of the robust growth in the private equity market.”