In retrospect, 2021 was an intense year of recruiting across the board at all levels, and 2022 began with the same intensity. After all, historically, hiring has been driven by increases in a firm’s AUM, and 2021 was a record year for fundraising. The drastic increase in AUM drove not only a higher level of recruiting, but also increased pressure to put dollars to work.
On the investment side, hiring increased for senior investors to join groups where they could add dealflow origination. These were more strategic hires, where a firm targeted individuals that had expertise in a specific industry or a Rolodex of relationships. We saw an even greater demand at the mid-level, where firms looked to bring on VPs and associates that could help execute deals and keep up with the deployment pace.
The main challenge for hiring in this pool, specifically from within the mid-market, has been competing with larger compensation packages that firms such as Blackstone, KKR or Apollo could offer. In 2021, we saw a shift at many investment banks when they dramatically increased compensation at the junior and mid-level to retain talent – people whom in previous years would have moved to the buyside.
For example, base salaries for analysts went up from $80,000 to $110,000 and top performers within this group could expect bonuses to be 100 percent of their base. Mega-funds had an easier time adapting to this shift as they could meet the uptick in compensation demands, whereas mid-market firms had to get creative.
Promoting workplace culture
In turn, we saw mid-market firms emphasise the importance of culture, work-life balance and the prospect of long-term growth within their platforms. Creative ways of doing this included offering carry, putting in place a more hybrid work schedule, and creating a dynamic where there can be shorter promotion cycles for strong performers.
Many of the mid-market firms have also started to build out their fundraising teams in a significant way. Traditionally they relied on managing partners to be the point person for fundraising, or used placement agents. Last year, many firms decided to start growing their teams internally, hiring a managing director-level professional to own fundraising and build a team around them, and this trend continues to build momentum through 2022.
One of the most meaningful hiring trends we have witnessed is the strong demand for diversity hiring across all mid-market platforms. In the last 12 months, we have not conducted a single search where firms have not emphasised their need to create more diversity among their teams. As these platforms continue to look to hire the best talent for any given role, they have become more open in expanding their parameters for the types of backgrounds they will consider, which helps create a more balanced recruitment pool.
Recruiting at all levels kicked off at a rapid pace in 2022, and, while firms might be assessing hiring needs for the tail end of the year, the market continues to be a competitive one for talent. We believe firms will keep being creative in how they attract and recruit top talent and we do not see this demand tapering off in a meaningful way any time soon.
Mary Gay Townsend is managing partner at recruitment firm Norgay Partners