Young investment bankers seeking bigger pay packets longer term and better job security would be advised to move into private equity. While investment banks put the squeeze on compensation, private equity firms are – in the majority of cases – still increasing pay.
The 2014 Preqin Private Equity Compensation and Employment Review, which surveyed 200 firms, suggests that 66% globally have increased salaries over the past year, while 63% said they expected to do so again over the coming 12 months. What’s more, a measly 1% of respondents said they intended to decrease salaries, with 36% anticipating pay would remain flat.
The situation for bonuses isn’t as positive, however, with just 16% expecting an uptick in bonus payments. Meanwhile, 43% of private equity firms said they would keep bonuses flat, and 41% said they expected a decrease.
Needless to say, in private equity the real money isn’t in base salaries or bonuses, but in the carried interest members of the fund earn when investments are cashed out and a specified return has been met. The lion’s share goes to senior employees, but Preqin’s figures suggest that a decent proportion of staff have received carried interest this year. 47% of firms said they offered carried interest to between 60 and 100% of their staff, while 24% said that between 40 and 59% of employees were eligible. However, only 11% of firms said they offered all of their staff carried interest.
If you want to make real money in private equity, Preqin’s figures suggest that you should head to the U.S. While junior positions generally pay similar rates across various regions, once you hit director level and above, the U.S by far outstrips both Europe and Asia-Pacific, as the figures below indicate.