Quitting investment banking for private equity? This is where you can earn seven figures after two years

Private equity firms have been ramping up junior pay and targeting investment banking analysts ever earlier as they look to attract the best people from the banks' graduate pool. Salaries have shot up by 14% year-on-year, but there's one element of PE pay that takes it into the big leagues - carried interest.

New figures from headhunters Heidrick & Struggles suggest that average salaries for associates or senior associates in the U.S. - a role that juniors move into after two to three years' experience - are now $125k, an increase of 14% on last year, while vice president salaries were up 13% year on year, to $198k. But salaries are only one part of pay on the buy-side, and even bonuses are dwarfed by carried interest. What's more, how much you receive is very much dependent on the size of the fund you work for.

In private equity, generally speaking, bigger is better. Heidrick & Struggles figures suggest that carried interest heads north of $1m for associates and senior associates once assets under management at the private equity firm go above $6bn. Smaller funds tend to compete on salary and bonuses, but their overall pay is tiny compared to big buyout funds once carried interest comes in to play.

This trend continues into the senior ranks, with managing directors and partners hauling in tens of millions of dollars in carried interest alone this year. For example, Heidrick & Struggles figures suggest that managing directors working for a private equity fund with more than $15bn in assets under management brought in $52.8m in carried interest on average. The comparable figure at a fund with less than $250m in AUM was $2.4m.

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