No correlation between PE bonuses and performance

GPs working on underperforming funds still expect bonus packages equal to or greater than those of executives working on well-performing funds, according to a recent survey.

In a shift from recent years, fund performance now has little to no impact on the bonus pay expectations of private equity executives, according to the 2016 Private Equity and Venture Capital Compensation Report.

The 2016 report marks the second consecutive year of a diminished correlation between bonus pay and fund performance. Respondents working on funds that were down 10 percent or more reported anticipating bonuses averaging $43,000 in 2015. At firms down 1 to 9 percent, survey participants expected bonuses to average $94,000.

In contrast, respondents working in firms that were outperforming their targets by 1 to 9 percent were expecting an average $91,000 in bonus pay, $3,000 less than their counterparts in firms that were down by the same range.

“In our surveys through 2013, clear correlations existed between fund performance and bonus expectations. Last year, we saw the line drawn from performance to expectation blur. In 2015, it can only be described as extremely fuzzy,” the report noted.

The survey also revealed that 65 percent of professionals experienced an increase in their salaries and bonuses in 2015, with the average compensation totaling $272,000 for private equity and venture capital professionals.

For a comprehensive look at private equity compensation in 2015, see Private Equity International's sister title pfm's compensation report in the February issue.