- Fundraising and “dry powder” in the private-equity industry is booming.
- This “perfect storm” has stoked demand for talent and increased compensation for junior-level employees, according to top recruitment firm Heidrick & Struggles.
- Senior talent is as coveted as ever, but money is less of a concern and they’re harder to lure away.
Compensation is surging at private-equity firms, especially for junior-level employees, thanks to a “perfect storm” in the industry that’s fuelling competition for talent, according to top Wall Street headhunting firm Heidrick & Struggles.
The firm recently released its “2017 North American Private Equity Investment Professional Compensation Survey,” compiling compensation data from more than 600 private-equity professionals.
Fifty-four per cent of respondents reported their base salary increasing from 2016 to 2017, consistent with last year’s survey figures. Associates and senior associates saw the largest increase, with salaries growing 14% to $US125,000, followed by vice presidents with a 13% increase to $US198,000, according to the survey.
“That’s a reflection of the fact that fundraising has been so strong. There’s so much capital pouring into private equity right now, to a certain extent away from real estate and away from hedge funds,” Jonathan Goldstein, a partner at Heidrick & Struggles who heads their private equity practice in the Americas, told Business Insider. “The allocation to alternatives is growing, because you have so many pension funds with underfunded commitments, so everybody is looking for yield.”
Fundraising boomed in the first half of the year, with investors committing $US113 billion to 117 US funds, according to Heidrick’s report. Dry powder stands at a staggering $US545 billion.
Deal-making and exits were also robust, with $US300 billion across 1,770 completed deals, according to the report.
The influx of money to private equity and record-sized funds has created more opportunities and thus more demand for young talent.
“This creates a perfect storm for increased hiring,” Goldstein added.
Salaries for principals increased 6% to $US250,000, while managing directors and managing partners saw no increase. Of course, most of the compensation at these levels comes not from salary but rather from bonus and carried interest – a slice of the profits a fund generates.
That data isn’t yet available for 2017.
Senior private-equity talent is as coveted as ever, but the opportunities at the top are fewer and the industry’s strength has made it more difficult to lure away the best talent, according to Goldstein.
Robust fundraising and performance has made already well-compensated managers “stickier,” and Heidrick, which focuses on hiring at the VP level or higher, reports having to reach out to two to three times as many prospective candidates as in recent years to fill positions.
Money isn’t as much a draw at this point as a bigger platform or more influence.
“To move requires an extraordinary opportunity,” Goldstein said. “Candidates don’t look to move from one firm or another for a slight uptick in comp.”