Firms & Funds

Back to School: Salaries and headcounts up at private capital firms: Preqin

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private equity, salaries, compensation, preqin, fpl associates
A businesswoman at her desk in complete happiness as her business and investments are making bags of money. She is holding U.S. currency. Photo courtesy Photo courtesy RichVintage/iStock/Getty Images
  • Almost 80 pct of firms increased base salaries from 2016
  • Deal teams top hiring/retention priority at 72 pct
  • High turnover in analyst/associate roles

Amid boom times for the industry, private capital firms are adding employees and hiking compensation for those below the executive level, according to a new report.

Data firm Preqin, in partnership with compensation consultancy FPL Associates, surveyed 173 firms across all major strategies about changes in hiring and pay from 2016 to 2017. Sixty-one percent of firms reported upping their headcounts, while only 8 percent said they reduced staff. Nearly two-thirds intend to hire more people in 2018, with one-fifth anticipating an increase of more than 10 percent.

Unsurprisingly, a large majority (72 percent) consider deal team members the most critical employees to hire and retain. Ten percent said corporate operations positions (accounting, HR, IT, legal) were their highest personal priority, reflecting the needs of growing organizations in an increasingly complex market. Nine percent named portfolio operations, and 6 percent said investor relations.

Junior- and mid-level investment professionals were the top recruitment targets of 40 percent and 33 percent of participating firms, respectively, consistent with high turnover in analyst and associate roles. Just a fifth of respondents said they’re seeking senior people.

The firm-wide base salary rose at 78 percent of participating firms, which the report interprets as a function of increased employment opportunities for private capital professionals in a hot fundraising environment. Firm-wide base salary rose more than 20 percent at 5 percent of firms, suggesting that some of these saw significant increases.

At most firms, staff at all seniority levels got a raise, except those at the top. Pay for mid-level staff was reduced at 2 percent of firms, but no junior or senior staff had their compensation cut.

More than two-thirds of firms said they’ll raise base salaries from 2017 to 2018, with 11 percent expecting a boost of more than one-tenth. Thirty-one percent expect no change.

Overall, compensation amounts to 56 percent of the projected average total revenue of participating firms in 2017, up from last year’s 52 percent.

Most surveyed firms (71 percent) are based in North America. The top three fund types represented were growth (37 percent), buyout (23 percent) and venture capital (20 percent).

Action Item: Read sample pages of the 2018 Preqin Private Capital Compensation and Employment Review here.

Photo courtesy RichVintage/iStock/Getty Images