Consulting firm Heidrick & Struggles published their 2014 North American Investment Executive Compensation Survey on March 31st. The report provides a number of interesting insights into hiring and compensation trends in the private equity sector.

The data in the report is a compilation of information collected from 370 investment professionals at 260 private equity firms (general partnerships) in North America.

Private Equity Compensation

Hiring in PE sector muted due to structural challenges

The authors of the report point out that the term “seller’s market” is frequently heard in describing the current state of the PE market. It’s not too surprising therefore that more than a few private equity firms have noted the dearth of reasonably priced investments today.

They note: “The employment market for investment professionals is largely driven by fundraising but given the challenges faced by many firms over the past few years (and conceivably for a number of years to come), hiring remains muted.”

The Heidrick & Struggles report highlights a few trends in hiring in the PE sector:

  • A demand for top investment talent to move from general partnerships to well-funded limited partner platforms as they increase their exposure to direct private equity;
  • A demand for investment talent at the VP level and above who can show a track record in, or ability to, source and convert investment opportunities;
  • A growing demand for investment professionals who have experience in the types of investments made at the hiring firm, ie, experience in specific industries, strategies or deal structures;
  • A growing interest in those who are familiar with non-traditional private equity models such as structured equity, non-control, PIPEs, and so forth.

2014 private equity compensation trends

Private Equity Compensation

It turns out that there has relatively little change in compensation in the private equity industry over the last three years. The graphics in the figure make it clear that the number of respondents reporting no change or a decrease stayed close to the 60% range, while the number of respondents recording an increase remained in the 40% range.

Of note, more respondents (on a percentage basis) said they saw an increase in bonus than base salary from 2013 to 2012 (50% compared to 40%). The report authors suggest: “Intuitively, this makes sense to us as firms that do well tend to increase compensation by augmenting bonus payments at the end of the year.”

Among the survey replies reporting an increase in base salary in 2014, a solid 40% saw an increase of 21%-50% and 7% enjoyed raises of over 50%. These numbers, however, match up with prior data, and suggest that there are a few star performers who are receiving a lot more compensation than their peers.

Private Equity Compensation