Comparing pay packets

It’s hard to remember a time when the compensation of private equity professionals was such a hot topic. Bain alumnus Mitt Romney’s run for president and the subsequent media scrutiny of his tax returns – all alongside regulators’ renewed interest in GP pay, both in the US and abroad – has thrown a spotlight on the issue. So when our sister publication PE Manager presented the preliminary results of its annual compensation survey earlier this year at the 9th Annual Private Equity COOs and CFOs Forum in New York, we knew the figures would be received with great interest. 

The survey revealed, for instance, that a typical top-level investment professional is taking home a $793,000 base salary – even before bonus and carry. There are some more specific examples on the opposite page, but perhaps the stand-out point from the survey – which didn’t just cover deal-makers – was that private equity firms are, generally, a pretty good place to work. Average total compensation for a secretary at a private equity firm stood at $53,477, rising to $68,563 at the biggest firms. 

In addition to salary data, firms were also questioned about their fee arrangements. This, too, threw up some interesting results. On carried interest, for example, one third of respondents said they had no hurdle rate whatsoever; for the remaining two-thirds, the performance metric was, in 85 percent of cases, based on IRR rather than multiple. Another surprise was that respondents were split roughly 50:50 between those who had to return all capital invested before carry was paid out, and those that did not.  

KEY PERSONNEL

Based on the survey results, we unveil what some of your hypothetical colleagues would have earned in 2011

$5,050,000
Senior-level dealmaker
A partner at a GP with $4.8 billion AUM, he has top-level oversight of the firm and is considered a “key man” by investors. He is entitled to the highest percent of carried interest as well as ownership of the management company. With more than 20 years of experience, he has developed a reputation as one of the leading voices within the private equity universe, which is why he takes home a base salary of $4,200,000.

$487,500
Mid-level director
A mid-ranking deal professional at a firm managing $1.3 billion in capital, she has 11 years of experience scouting investment opportunities. She sits on a couple of portfolio company management boards, and has proven herself as a rainmaker at her firm. Her base salary is $275,000, but her bonus is significantly more than that. 

$205,000
Pre-MBA analyst
An associate who has shown promise so far, landing a spot with a firm responsible for $4.3 billion in capital. She has worked hard to impress, but the real driver behind her bonus this year is her employers’ success. Yet to complete an MBA. 

$99,375
Post-MBA analyst
An associate at a firm managing $220 million in capital, he is responsible for digging through target company numbers and assisting dealmakers in general due diligence matters. He holds an MBA degree. He has failed to impress his superiors, resulting in a less than satisfactory salary relative to industry colleagues.