Perhaps that helps explain compensation trends – after toughing it out for a while, employees of North American private equity and venture capital firms are being rewarded with fatter paychecks.
That’s according to the recently released 2013-2014 Holt‑MM&K‑Thomson Reuters Private Equity and Venture Capital Compensation Report. Based on a survey of over 100 organizations – the majority of them based in the United States – the report found salaries and bonuses rose for both partners and non-partners between 2012 and 2013. Profit distributions also increased over the two‑year period.
Total compensation (salary, bonus and carried interest) for all employees of buyout and venture firms rose 16 percent between 2012 and 2013. Partner-level executives saw 16 percent more in their compensation packages over this period, while non-partner employees saw 24% more. That’s a significant improvement over the crisis years.
The survey captured data for almost 3,000 PE workers, employed in 30 different positions – from analyst to managing GP on the investment side of firms, from receptionist to COO on the administrative side.
The report attributed the upward trend in overall compensation to better market conditions – i.e., generally higher levels of deal-making, exits and fund-raising.
Recent fund‑raising activity has been “a crucial component” in determining compensation, the report found. While limited partners have pushed for lower management fees, many firms have succeeded in raising decent sums of money. Consequently, they have brought in greater fee revenues and resources for paying their employees in salaries and bonuses.
The report found buyout firms charging management fees of between 1.5 percent and 2 percent of committed capital during investment periods, while venture firms are charging between 2 percent and 2.5 percent. On the other hand, other types of fees, such as deal fees and consulting fees, are increasingly being shared – in part or in full – with limited partners.
As one might expect, it was also found that sizes of salaries and bonuses tend to correlate with assets under management – the more a PE firm has, the more it pays out. For example, partners at large buyout firms (US$1 billion-plus under management) earned a median of US$919,100 in 2013, compared with US$366,700 for partners in small buyout firms (less than US$400 million).
The report comprises 167 pages of tables, charts and analysis detailing the wide variety of compensation practices at PE firms. For more information, contact Greg Winterton at 646-223-6787 or firstname.lastname@example.org.
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