Private equity firms might be having a few issues with costs and exiting their investments, but this has not prevented them from paying very handsomely.
US recruitment consultancy Heidrick & Struggles has released its 2023 compensation report for North American private equity firms, and the numbers are impressive.
Although salaries and bonuses and private equity firms are a healthy chunk of cash (and always have been), the real money is, as always, in the carried interest. This is the percentage of a successfully executed private equity deal that those that worked on it (from partner to associate) get to keep. When deals are exited successfully, it can be very high indeed.
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Heidrick & Struggle’s data suggests that at the top end, a managing partner in a private equity firm with at least $1bn in Assets Under Management (AUM), can expectto earn at least $3.5m in salaries and bonuses, plus around $35m in carried interest over a fund's lifecycle (typically around five years).
The higher the assets under management, the higher the carried interest. Although exact numbers are scarce for managing partners at megafunds with over $10bn in AUM, Heidrick & Struggle’s data suggest that an MD at such a fund could earn $100m at such a firm in carried interest.
If you're planning to become managing partner at a fund with $10bn under management, all of this sounds really great - providing that the future resembles the past. For the moment, however, many private equity funds are struggling to exit investments and so carried interest may not be forthcoming, or certainly not at the levels of the recent past. - Which is probably why funds like Apollo are suddenly keen to skew compensation towards carried interest as an incentive for partners to help climb out of the whole.
Many people in private equity also don't receive carried interest at all. You'll need to be an investment professional to get it. Heidrick & Struggles says some associates receive it, but even in a good year their payouts are predictably smaller. However, Heidrick says that even associates at funds with over $40bn in AUM can (or could) expect $4m in carried interest, which explains private equity careers' enduring appeal to juniors in investment banks.
Heidrick & Struggles don't say explicitly that private equity pay is likely to fall from these heights. They do say that pay will probably remain stable next year, with "exceptions."
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FAQs
A source of investment capital, private equity comes from firms that buy stakes in private companies or take control of public companies with plans to take them private and delist them from stock exchanges. Private equity can also come from high-net-worth individuals eager to see outsized returns.
Where do private equity funds get their money? ›
A source of investment capital, private equity comes from firms that buy stakes in private companies or take control of public companies with plans to take them private and delist them from stock exchanges. Private equity can also come from high-net-worth individuals eager to see outsized returns.
How does private equity pay out? ›
On the “Uses side,” private equity salaries and bonuses are straightforward. These are cash payments made each month during the year (base salaries), with one lump-sum payment at the end of the year (the bonus).
What are top salaries in private equity? ›
Private Equity Managing Director Salary + Bonus: Compensation here is highly variable, but a reasonable range is $700K to $2 million, with slightly less than half from the base salary. “Senior Partners” will earn more if the firm makes the distinction.
How much does a private equity CEO make? ›
What Is the Average Private Equity Ceo Salary by State
| State | Annual Salary | Monthly Pay |
|---|
| New York | $80,941 | $6,745 |
| Alabama | $80,795 | $6,732 |
| Nevada | $80,199 | $6,683 |
| Ohio | $79,589 | $6,632 |
46 more rowsTypical private equity salaries (US)
| Position | Typical Time in Role | Bonus |
|---|
| Associate | 2 – 3 Years | $50k – $150k |
| Senior Associate | 2 – 3 Years | $100k – $200k |
| Vice President | 3 – 4 Years | $200k – $500k |
| Director | 3 – 4 Years | $250k – $600k |
2 more rowsSep 2, 2023
Another major downside is that private equity is a much more saturated market today than in previous decades. There's too much capital chasing too few high-quality companies, which means that returns will almost certainly decrease in the future.
How much does a VP make in private equity? ›
Private Equity Vice President Salary in California. $113,500 is the 25th percentile. Salaries below this are outliers. $187,500 is the 75th percentile.
How much does the average person in private equity make? ›
What Is the Average Private Equity Firms Salary by State
| State | Annual Salary | Monthly Pay |
|---|
| California | $89,038 | $7,419 |
| Maryland | $88,832 | $7,402 |
| Tennessee | $88,240 | $7,353 |
| Utah | $87,969 | $7,330 |
46 more rowsA Partner Private Equity in your area makes on average $103,200 per year, or $1 (0.014%) more than the national average annual salary of $100,180.
Private equity funds are illiquid and are risky because of their high use of debt; furthermore, once investors have turned their money over to the fund, they have no say in how it's managed. In compensation for these terms, investors should expect a high rate of return.
Is private equity a stressful job? ›
but nowhere near as much as in management consulting. While the travel will be less, the work in private equity is very stressful and demanding, so the hours you actually spend working may be more stressful or mentally demanding.
What CEOs make $100 million a year? ›
| PAY RANK | CEO | TOTAL PAY (MILLONS) |
|---|
| 1 | Sundar Pichai | $225.99 |
| 2 | Michael Rapino | $139.01 |
| 3 | Tim D. Cook | $99.42 |
| 4 | Peter Zaffino | $75.31 |
45 more rowsJul 4, 2023
$50M to $150M
We found the lowest salary in this category to be $235,000. The highest salary for a CEO in a company with between $50M and $150M in revenue is $500,000. Of the participants in this category, the median salary is $300,000.
How much does a CEO of a $1 billion company make a year? ›
US CEO compensation
By company size, base, bonus, and total cash compensation all rise as revenue does, with total median cash compensation coming in at $1,639,000 at companies with revenue above $1 billion. By industry, CEOs at financial services firms are paid the most: $1,013,000 in median total cash compensation.
How do private equity funds raise their own capital? ›
Private equity firms raise funds by getting capital commitments from external financial institutions (LPs). They also put up some of the their own capital to contribute into the fund (commonly 1-5% but it can be higher).
How do private equity funds start? ›
Starting a private equity fund means laying out a strategy, which means picking which sectors to target. A business plan and setting up the operations are also key steps, as well as picking a business structure and establishing a fee structure.
Where does equity money come from? ›
Equity financing is the process of raising capital through the sale of shares. Companies raise money because they might have a short-term need to pay bills or need funds for a long-term project that promotes growth.
Who invests into private equity funds? ›
A private equity fund is typically open only to accredited investors and qualified clients. Accredited investors and qualified clients include institutional investors, such as insurance companies, university endowments and pension funds, and high income and net worth individuals.
