2015 North American Private Equity Compensation Survey by Heidrick & Struggles

Introduction

We are pleased to present our 2015 Private Equity compensation survey. In compiling this data, Heidrick & Struggles conducted a survey of 383 direct private equity firms (General Partnerships) operating in North America

Our survey focuses exclusively on compensation for investment professionals.

The data presented represents a compilation of information from 434 investment professionals at General Partnerships in North America.

Jonathan Goldstein
Head of Private Equity, Americas

Samantha Lassoff
Knowledge Manager – Private Equity & Venture Capital

Mohd Arsalan
Team Leader- Research

Market Backdrop

The 2015 survey requested that participants provide data for 2015, 2014 and 2013. In last year’s survey, we highlighted the recovery since the financial crisis in the private equity space. We feel that the recovery has progressed, but the term “recovery” should be further qualified.

Similar to last year, it is more of a “Seller’s Market” than a “Buyer’s Market.” Equity and debt are plentiful; the market is highly intermediated and multiples are high.

Fundraising has been strong over the past few years as a result of LPs’ coffers being full. In many cases LP’s are now under-allocated to private equity. We have also seen new entrants to the market from Asia.

All of the above speaks to robust fund formation and fund-raising, but also potentially lower returns.

As executive recruiters, we have seen a dramatic increase of hiring into GPs. This noteworthy increase commenced in the final quarter of 2014 and has continued unabated.

  • In particular, most of the hiring has been at the mid-level: namely, Vice Presidents and Principals.
  • We have also an increase in Managing Director/Partner-level work as well, albeit not as robust.
  • The demand for talent is emanating from new funds, existing funds that have raised more capital, as well as from funds that have not hired in many years.
  • Funds that have not hired for many years have found themselves either light in the middle or simply want to upgrade talent.
  • Our clients are focused on investment talent that can demonstrate not only experience in a specific industry vertical, but also the ability to source investment opportunities in the respective vertical.
  • More than ever, candidates are wary about joining firms that cannot demonstrate a clear path to partnership.

This survey examines the following topics

  • How has compensation developed over the past three years?
  • How does compensation compare across levels?
  • How does compensation compare across fund size?
  • How does compensation compare across AUM?
  • How does compensation vary across regions?
  • Educational background of the respondents
  • Range of ownership in the management company of private equity firms
  • Range of years of experience according to title
  • How does compensation compare across years of private equity experience and average carry by recent fund size
  • How does compensation compare across years of private equity experience and average carry by assets under management

2015 North American Private Equity Compensation Survey – A Note on the Methodology

We updated this year’s questions to reflect areas of interest from our clients. In particular, we added a section on ownership of the management company. We also added a section that shows how many years of experience professionals have at each level. We have been very careful in reviewing the data received, and have culled approximately 25% of the respondents. Some of the respondents did not fill out the survey completely; others filled it out incorrectly, and some respondents were not employed by direct private equity firms. Unlike other surveys in the marketplace, we have been very careful to include data from solely private equity firms making direct investments. All the data is self-reported.

General Observations on Compensation Trends

North American Private Equity Compensation Survey

From the above numbers, we see a slight majority (52%) of the respondents reporting an increase in year over year base salary when comparing 2015 to 2014. Approximately 80% of the respondents reported an increase of up to 20%.

In our previous survey, 50% of respondents reported an increase in bonus when comparing 2013 to 2012. This year we see 71% of respondents reporting an increased year over year bonus (2014 versus 2013). We believe that this dramatic increase is tied to a favorable market for exits and fundraising.

Base, Bonus & Carry by AUM

North American Private Equity Compensation Survey

North American Private Equity Compensation Survey

North American Private Equity Compensation Survey

North American Private Equity Compensation Survey

Base, Bonus & Carry by Recent Fund

North American Private Equity Compensation Survey

North American Private Equity Compensation Survey

North American Private Equity Compensation Survey

North American Private Equity Compensation Survey

North American Private Equity Compensation Survey

North American Private Equity Compensation Survey

Average Base, Bonus & All Fund Carry by AUM

North American Private Equity Compensation Survey

See full slides below.