PE competes with tech on talent and salary

Top talent being enticed away by tech unicorns is pushing up salaries in private equity, says search firm Heidrick & Struggles.

Pay is increasing for junior private equity professionals, in large part due to competition from technology companies, according to research from an executive search firm.

New entrants across all roles are seeing a 13 percent annual rise in compensation on average, with new investment professionals receiving a 13.5 percent rise, data from Heidrick & Struggles show.

“The tech sector is actively competing with financial services for talent, hiring high-potential candidates who are looking to work at the next Facebook or Google,” said Tom Thackeray, a principal at the firm.

In addition, smaller intakes in other financial services areas, such as investment banking – where many private equity start – is impacting private equity’s search for talent.

“Investment banks had smaller intakes following the financial crisis, which has had a knock-on effect on private equity,” said Thackeray.

At the other end of the spectrum, the firm’s recent survey on European salary trends in private equity showed a significant increase in respondents reporting salary cuts. In total, 15 percent of respondents reported a salary decrease, compared with one percent of respondents in last year.

While cash compensation grew for all professionals in the industry, the amount by which it grew was lower. For private equity firms’ partners and managing partners, salaries grew only 2.5 percent this year compared with 4.7 percent last year.