How much does private equity pay in China?
There are no shortage of reports on pay at investment banks in China. Pay at private equity (PE) firms in China is a different matter, however. - China's PE industry is young and information is hard to come by. Rates also vary by type of firm.
One Beijing-based headhunter who specializes in PE, gives the following information about the pay level at Chinese PEs.
These are all annual base salaries. Depending upon performance, bonuses can add another 50% to 100% to form total compensation, but base salary itself has been steady in recent years.
“I haven't seen any notable increase for PE's base salary in the past one or two years, ” comments Sara Yue, a financial industry consultant at CGP Financial Service, a search firm.
Chinese private equity pay isn't this simple however. Overseas private equity funds pay differently to domestic Chinese ones. Mostly, they pay more. "Foreign PEs pay several times higher than domestic PEs," says a China-based industry insider who asked not to be named.
Even within global funds, the variations can be huge. The insider says he knows of a 24 year-old analyst at the Chinese office of one global PE fund who's paid around 1 million RMB ($157K) a year. Another 29-year-old senior associate at a similar fund is making in excess of 3.5 million RMB ($550K).
These figures may sound pretty impressive, but they're only half the story. In China, many PE funds allow staff to make co-investment, together with the firm, into the project that the fund is working on. For a lucrative project, even if an employee (or, a team of employees) only get to share 1-2% of the stake, the return can be hundreds of times of initial input.
Apart from co-investment, Chinese PE funds, just as elsewhere, also pay staff 'carried interest', based upon the profits made by the fund they're working on when the investments are exited (sold on).
"This is how we make the most of the money," says the industry insider, "pay accounts just for a tiny part of our total package."
Given that this eventual return is a percentage of the initial amount of money invested, it is not unheard for senior private equity professionals to make 100 million RMB ($15.7m) from successful projects. Banks can't match this, which seems to be why private equity as a profession tends to attract so many young bankers.