That’s the upshot of a survey of North American buyout and growth equity firms conducted this spring and summer by Thomson Reuters, publisher of Buyouts. Just under eight in 10 (79 percent) said that bonuses for partner-level investment professionals would likely hold steady this year. Just more than one in 10 (11 percent) said they would increase.
Junior investment professionals, such as analysts and associates, have more to look forward to. According to the survey, more than four in 10 (43 percent) North American buyout and growth equity firms expect bonuses for their non-partner investment professionals to rise this year, with nearly all the rest expecting them to stay the same. Only 4 percent expect bonuses for their junior investment professionals to drop this year.
Altogether, 37 North American buyout and growth equity firms participated in our survey this year; those firms that did have an average of $1.3 billion in assets under management. The results appear in the just-published study, 2012-2013 Holt-Thomson Reuters Private Equity and Venture Capital Compensation Report.
A similar pattern is evident for administrative professionals, such as chief financial officers and directors of investor relations. Nearly nine in 10 (88 percent) North American buyout and growth equity firms said they expected no change in bonus level this year for partner-level administrative and support staff. Just 6 percent said they would rise. By contrast, nearly a quarter (24 percent) anticipate bonuses will rise for non-partner administrative and support staff, while more than two-thirds (68 percent) expect no change.
The results are consistent with a steadily recovering U.S. buyout and mezzanine market, which saw fundraising bottom out at just $65.8 billion in 2009 but rise every year since. Through the end of October, U.S. buyout and mezzanine shops had already secured $136.5 billion in fresh capital. The 1.5 percent to 2 percent management fees typically charged ensure ever-swelling payrolls for many firms in the months ahead.
Ever wonder how your bonus practices stack up against those of your rivals? Here are a few highlights from the study on how such programs are structured:
- The vast majority of bonus programs at buyout and growth equity shops are discretionary for both investment professionals and non-investment professionals, as opposed to being based on a formula. Many take into account individual performance or firm performance or some combination of the two.
- Bonuses tend to get distributed either before the end of the financial year or within two months of the end of the financial year.
- If the bonus is partially or fully discretionary, the managing partner is mostly commonly the one to determine them. The second most common method is for the partners to determine them as a group.