So, let’s say you want to make more money. What do you do?
Here’s some advice: Head for the firms with the largest assets under management.
It’s simple arithmetic. The more assets under management, the more money a firm rings up in management fees and, in the case of LBO/growth equity firms, deal-related fees (those not handed over to LPs, anyway). Bigger transactions also translate to bigger profits when it comes time to doling out carried interest, all other things being equal. Firms managing more assets do tend to have more mouths to feed. But rarely do they ramp up their payrolls at the same pace as they do their fund sizes. The resulting disparities in compensation, as the infographics below show, are dramatic—and a source of ongoing angst for LPs, who worry that partners are tempted to raise bigger funds than they can wisely invest simply to generate higher fees.
According to the North American edition of the 2011-2012 Holt-Thomson Reuters PE/VC Compensation Report, senior partners at large LBO/growth equity firms (more than $1.5 billion under management) will earn $1.1 million in median salary and bonus this year, while their counterparts at small firms (less than $500 million) will earn a far smaller $450,000 in median salary and bonus.
At large venture firms ($1.5 billion-plus under management) senior partners will earn a median of $1.1 million in salary and bonus this year. Their counterparts at small firms with less than $500 million under management? Just $340,000 in median salary and bonus.
The percent differences aren’t quite so large at the associate level in our study samples. Associates at large LBO/growth equity firms will earn $201,400 in median salary and bonus this year; those at small firms will earn $142,500, according to the report. Associates at large venture firms will earn $169,000 in median salary and bonus this year, while those at small firms will earn $110,000.
The Holt-Thomson Reuters compensation report is based on a detailed survey of compensation practices filled out by 124 private equity firms in the spring and summer of 2011. Thomson Reuters is also the publisher of peHUB.
For editorial questions about the 2011-2012 Holt-Thomson Reuters PE/VC Compensation Report contact firstname.lastname@example.org. For information on how to order a copy contact Greg.Winterton@thomsonreuters.com.