Private equity firms have doubled down on hiring this year, while slightly bumping compensation for most investment professionals and paying top dollar for diverse talent.
Hiring on the rise
As competition among private equity firms remains fierce, 2021 may very well beat 2019’s record year of hiring activity, indicates the 2021 North American Private Equity Investment Professional Compensation Survey by Heidrick and Struggles. The firm’s findings are based upon the anonymous survey of 1011 investment professionals in North Americal.
However, the hiring dynamic is shifting to filling more positions on principal and vice president level, from substantial hiring for investment partners and managing directors two years ago, Jonathan Goldstein, a regional managing partner at the firm’s Americas private equity practice, told PE Hub.
“In general, the amount of activity is dramatically more than last year given covid, but it’s quite possible that there will be even more hiring activity than 2019, which was the record year for us,” Goldstein said. “But that is also true, in general, across all private equity, including portfolio work and investment activity.”
Top candidates consistently have at least two other offers in front of them, and sometimes more—and the competition is even fiercer for divese candidates, according to Goldstein.
“Because there is so much capital flowing into the private equity space, and more funds — larger funds being raised, when our clients want to recruit people from one firm to another, they pay full market for those candidates,” he said.
Diverse candidates see huge raises
“Private equity professionals, who are diverse by ethnicity and gender, are getting paid top dollar, because PE firms don’t want to lose them,” Goldstein said.
“We’ve seen people receive offers that are 50 percent to 100 percent greater than their current compensation to move from one firm to another, which is something we’ve never seen.”.
While this trend is positive it does not solve the lack of diverse representation in the PE community, Goldstein noted.
“We are not increasing the overall number of diverse professionals in private equity,” he said. “What would be great is if private equity firms were able to bring in diverse professionals from outside into senior roles, but it hasn’t been happening yet.”
Compensation in private equity is holding strong and it’s a very tight market for employment, according to the report findings.
Just over half of all respondents to this year’s survey (56.7 percent) reported an increase in base in 2020 from 2019, and 54 percent expect an increase in 2021.
Slightly fewer respondents reported an increase in their bonus: 67 percent saw an increase in 2020, down from 77 percent in 2019. Most 2020 bonuses increased between 11 percent and 50 percent.
But according to Goldstein, while it looks like compensation is increasing, it actually is steady. Higher numbers are attributable to the fact that investment professionals are rising within the ranks and larger funds are being raised, he said.
“Where we really see the big jumps is people moving up from vice president level to the principal level and from principal level to the partner level,” Goldstein said.