At the London Business School, there is a private equity and venture capital elective every year. In 2011, Professor Florin Vasvari taught three sections of 80 students each. Fast forward to 2019 and he has seven sections.

The programme covers everything from valuations, deal processing and dynamics, to the technology sector and turnarounds, as well as the forces shaping the industry. Six of the sections have students with work experience and one comprises fresh graduates.

Vasvari tells us the school has seen very strong interest recently from students looking to get into the alternative asset management industry, especially after the credit crisis.

“It used to be that we place more than half of our graduates to investment banks, but we don’t see that anymore,” he says. Eight percent of the school’s graduates in 2017 across its four early and mid-career management programmes ended up in private equity, according to its employment reports.

Executive search firm Heidrick & Struggles says 2018 has been an active year for hiring within private markets in North America and Europe, with demand from existing and new general partners, limited partners and across portfolio companies.

Fierce competition

Several drivers are behind this. GPs are getting larger and need to hire more professionals. The robust fundraising market – $358.3 billion raised in 2018, according to PEI data – means more spin-outs and first-time funds. Public pensions and sovereign wealth funds, such as Caisse de dépôt et placement du Québec, Canada Pension Plan Investment Board and Singapore state investor Temasek, are on a hiring spree as they boost their in-house teams, Heidrick & Struggles noted in its North American Private Equity Investment Professional Compensation Survey.

Simon Havers, a consultant with Odgers Berndtson, points out there are now many other alternative asset providers offering interesting opportunities. “Private equity firms are now competing with hedge funds, alternative lenders, litigation funders. It’s a bigger picture overall,” he says.

Private equity is also competing for talent against tech titans like Facebook, Google and Amazon, notes Edward King, a partner focused on private equity at global search firm McLean Partnership. “In the past, private equity was very much the popular destination for bright and capable graduates with a few years of experience under their belt. Now tech companies are proving as attractive and, in some cases, more so, for capable individuals with similar skillsets.”

What’s more, a rising number of investment bankers in Europe in the past two years have switched to join private equity shops, a 2018 analysis by New York-based recruiter Options Group found. Some have even taken a pay cut to join firms in the UK, US, Switzerland and Hong Kong, according to the study.

The growing popularity of private equity in the finance jobs market is no surprise. The asset class is amassing larger amounts of capital and owns businesses that run the gamut of industries, from healthcare to technology.

Private equity’s high salaries are also a key motivator. The median annual base compensation of an associate or senior associate in North America in 2018 is $125,000, edging past 2016’s $106,000. With the annual bonus, a new starter at a private equity firm can earn as much as $200,000 in a year, data from Heidrick & Struggles show.

Compensation is increasing across all levels of private capital investment professionals globally and that trend is expected to continue, the firm noted in its report. This is especially true for positions that require in-depth experience or specific local or industry knowledge and networks.

In North America, more than half of respondents (57 percent) reported an increase in base salary from 2017 to 2018, of which 78 percent reported a raise of up to 20 percent. The same is true for Europe, where 41 percent reported an increase in the base salary in the same period. Of that figure, 33 percent saw a pay rise of 21-40 percent.

Across private equity employers Havers says: “The spin-outs will more likely offer carried interest earlier in the career, whereas larger firms probably rightly think it’s a better incentive to someone in their late 20s if they are receiving immediate cash in the form of a bonus rather than having to wait five years for the carry to pay out. Meanwhile, some pension funds who like to do their own direct investing are paying big annual bonuses instead of carried interest.”

The trouble with millennials

But it’s not all about the money. Despite all the sourcing and recruiting, the fight to keep top talent is getting fiercer.

“Historically in the recruitment process, compensation levels compared to your fellow PE firms was what mattered to candidates. Millennials have thrown a wrench in that,” says Dana Halasz, chief administration officer of New York-based mid-market firm Blue Wolf Capital.

“While compensation is important, they are also concerned about the social good that the firm is doing by giving back to the community, along with social activities and work-life balance within the firm,” she says, adding the firm has had to adjust the way it interviews and how it thinks about the employee experience. “That’s been a very dramatic and noticeable shift in the past two years.”

Millennials are also hungry for feedback. “It used to be you get your annual review, you get your bonus, you move on and you get another year. Millennials are looking for constant and immediate feedback on how they are working and their future. We’ve had to restructure our review process with this in mind,” Halasz notes.

Vasvari says it’s the opportunity to learn and grow that a lot of applicants look at. “It’s not all about pay, but intrinsic motivation.”