Compensation Rises in Private Equity

Private equity specialists have had a good run of late, with compensation increasing across almost all job levels from 2003 to 2006. Another report has hit the street showing what a healthy competition for talent can do to pay.

The 2007 Private Equity Compensation Report, published by Glocap Search and Thomson Financial, said the driving force behind the increase continues to be the sheer volume of money pouring into all classes of private equity, including buyouts, venture capital and funds of funds. In particular, record-breaking fundraising by several large buyout/growth equity funds led to increased demand for professionals to help invest those funds. That, in turn, drove demand - and compensation - throughout the industry.

Competition from hedge funds for the same talent also contributed to the increase in compensation.

"The competition for top talent has been as strong as we've ever seen it, said Brian Korb, senior partner at Glocap. He sees "few signs" the competition for talent is letting up.

Among the report's major findings:

• Senior associates, vice presidents and principals enjoyed the biggest gains in compensation as total average compensation rose 16 percent, 18 percent and 9 percent, respectively.
• Large LBO funds are paying senior associates right out of business school at least $375,000 in total compensation.
• While matching the compensation of buyouts funds, some large VC funds are also implementing a more bonus-heavy structure.
• Larger fund of funds, are beginning to demand more of analytical/investment skills, and so are having to increase compensation in order to compete with private equity funds
• The report analyzes base salary and bonus compensation for thousands of professionals at later-stage private equity (buyout/growth equity) funds, venture capital firms and private equity funds of funds for the years 2003 through 2006.