Base Salaries Of PE Firms Remain Flat Between 2012-2013: Preqin

Base salaries of private equity firms almost remained flat between 2012 and 2013, a recent report from Preqin reveals.

Similarly the bonus pool size of private equity firms also remained flat.

Flat base salaries

Preqin’s recent report, titled “The 2014 Preqin Private Equity Compensation and Employment Review”, contains detailed analysis of compensation practices at participating PE firms.

Preqin in conjunction with FPL Associates conducted a survey of over 190 leading PE firms to collect data on their compensation practices and remuneration levels.

The following graph highlights a breakdown of average firm-wide changes in base salaries at participating firms between 2012 and 2013.

Base salaries

As can be elucidated from the above graph, base salaries at the participating firms are generally maintaining their current level or reporting only small increases. Only about 2% of participating firms reported a decrease in base salaries between 2012 and 2013, while a substantial 32% reported no change. However, the largest proportion, 54% of participating firms, reported an increase in base salaries varying between 1% and 10%.

Flat bonus pool size

Preqin’s report also revealed participating firms have largely reported either an increase or no change in their bonus pool size in the calendar / fiscal year 2012 as compared to 2011.

As revealed in the following graph, just about two-fifths of participating firms reported that bonus pool sizes increased at their firm compared to the previous year, while only 16% reported a decrease in their bonus pools in the calendar / fiscal year 2011 as compared to 2010. However, 43% of firms reported no change over the same period.

Bonus Payouts Base Salaries

Staff number varies with AUM

Preqin’s recent report also notes the average number of staff at each PE firm varies substantially based on the assets under management of that firm.

As can be gleaned from the following graph, the PE firms with the largest assets under management of $10 billion or more have the largest average number of staff standing at just 230 people.

Average number of staff Base Salaries

The report points out though these firms’ average number of staff is dramatically higher than firms of other sizes, there is only an average of 9.4 employees per $1 billion of firm’s AUM. The staff levels at these firms are balanced by the income they receive from charging management fees to their funds’ investors, which are normally based on a percentage of investor commitments.