Compensation spikes across private equity as fundraising nears record levels

As fundraising ramped up to near-record levels over the past few years, compensation has also spiked for many employees at North American private equity and venture capital firms between 2018 and 2019, according to the 2019-2020 Holt-MM&K-Buyouts PE/VC Compensation Report.

Buyouts and mezzanine firms are poised to raise more money than last year, collecting $251 billion as of late October, according to Buyouts data. And with heavy fundraising, fees continue to generally hover between 1.5 percent and 2 percent of commitments. This means firms will have more money flowing in from management fees and therefore more money to pay employees.

“As in other private equity markets, salaries and bonuses at LBO/Growth Equity shops tend to rise fastest during times when firms are raising money, rapidly
building up their assets under management, and competing aggressively for talent,” the survey said.

Particularly for senior professionals, compensation jumped dramatically, especially when carried interest starts flowing, according to the survey, which included answers from 162 organizations providing information on 6,446 employees.

More junior professionals only saw modest increases over the past several years, the survey found.

Median salary for partners increased 11 percent from 2018 to 2019 across the industry, the survey found. Partner salary and bonus shot up 13 percent while salary, bonus and carried interest rose 30 percent, the survey found.

Non-partner salary jumped 14 percent between 2018 and 2019, salary and bonus rose 21 percent and comp wtih carry increased 22 percent, the survey found.

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Managing partners/CEOs make an average base salary of around $1.2 million, combined salary and bonus of $2.4 million (based on answers from 56 firms) and carried interest distribution of about $1.8 million (based on 26 firms).

Senior partners make an average of $867,400 and an average of about $1.3 million of salary and bonus (based on 51 firms), and almost $2 million of carry distribution (based on 27 firms).

Going down a few steps, associates make an average of $135,500 in salary and $226,500 in salary and bonus (across 40 firms). Principal and VP level pull in an average of $311,300 in salary, $543,300 in salary and bonus (across 53 firms), and $319,500 in carry distribution (across 16 firms).

Action Item: Get the full survey here: