Good news for private equity professionals in Asia: despite the fact their employers are (collectively) raising less money, it looks as though they’re about to start getting paid more, courtesy of increased competition for their services.
At least, that was the conclusion of the Asia Private Equity Compensation Survey 2013/2014, which was released in March by executive search firm Heidrick & Struggles, based on a survey of 132 local professionals in December 2013.
All told, the mood was optimistic. Salaries and bonuses have been pretty flat across the region since 2011, the survey found – but this year, the majority of respondents (66 percent) were expecting an increase in their base salary. Just over a third were also expecting a higher bonus (with almost everyone else expecting no change from last year’s offering).
Heidrick suggested that this uptick was primarily a function of the rise of regional firms, who have now reached the kind of size where they can compete with the global firms for talent – both in terms of the compensation they provide and the opportunities they offer.
Harry O’Neill, managing partner of Heidrick’s financial services practice in Asia, says managers in the region are more sophisticated than ever before. And one consequence of this, he adds, is that they’re increasingly on the look-out not only for investment talent, but also operating professionals who can add real value post-investment.
That chimes with some of the conversations at this year’s Private Equity International Asia Forum in Hong Kong in March, where operational value creation was the topic on everyone’s lips. And no wonder: the weaker macro environment is forcing GPs need to find new, more sustainable ways to drive outsized returns.
Since this is placing an ever-greater premium on operational value-add capabilities, some believe that GPs need to start rewarding operators in exactly the same way as they reward their investment professionals. That’s the only way to reflect the significance of their input, attract the best people into the space and create a robust alignment of interest between the teams (or so the argument goes).
Silver Lake is one firm that is already doing this. “We [are] all [in] the same carry pool, so our focus is very simple: how do we get a good investment, manage it in such a way that we are delivering value to it, and get to the return that we want in the fastest possible way,” Serene Nah, head of portfolio management at Silver Lake in Asia, said at the event.
But while this approach remains the exception rather than the rule, most observers suggest that operating partners are actually perfectly happy with the status quo.
“I don’t think there is a growing dissatisfaction,” says Jason Jones, managing director at consultancy Operating Partners. “Most of the people in this space are very, very passionate about it and like doing it. And frankly there are a lot of guys out [in Asia that] want to stay in exciting operating roles, in vibrant markets with interesting business models.” What’s more, he argues, if deal partners deliver big returns through the way they structure a deal, it’s only fair that they get rewarded for that.
Either way, if salaries do go up across the board this year in the region, it’ll be interesting to see whether operating executives get a bigger share of the spoils.