More than one-half (58%) of private capital firms participating in a survey by Preqin increased their headcount between 2022 and 2023, but base salary growth is likely to slow, according to the latest Preqin Private Capital Compensation and Employment Review released on Nov. 8.
The findings suggest that hiring at private capital firms with a focus on private equity, venture capital, private debt, real estate, infrastructure and natural resources was not dampened despite a challenging macroeconomic backdrop of climbing interest rates and a difficult exit environment for some asset classes.
Meanwhile, hiring remained flat at less than one-third of firms surveyed.
Hiring and retention has principally focused on investment deal teams (68% of hires) and corporate operations (12%), even as fundraising activity has slowed.
Fundraising reached $900 billion in 2023 through the end of September — on an annualized basis, this figure is likely to fall short of the $1.4 trillion in aggregate capital raised in 2022, the report noted.
Employee compensation remains the major expense at private capital firms — rising from a median of 57% of total revenue for 2022 to 58% to 2023. As firms seek to attract and keep talent, base salaries have grown over the past two years. Firms have primarily focused on increasing wages at the mid- and junior levels in order to retain a pipeline of talent in their organizations.
Increases in base salary have occurred across all levels but have been highest for mid-level professionals at 10% year-on-year, compared with 9% for senior-level professionals — the lowest such average increase.
But Preqin cautioned that the pace of increasing base salaries may slow down as wage pressure softens and inflation falls from its 2022 peak.
In addition, global private capital assets under management reached an all-time high of $10.9 trillion at the end of December 2022. This figure is expected to soar to $19.3 trillion by the end of 2028.
With respect to diversity, equity, and inclusion matters, 67% of respondents said such initiatives were implemented to attract and retain talent. The percentage of firms with at least some DEI initiatives increased from 71% in 2022 to 74% in 2023. Meanwhile, the proportion of women in executive management at these firms edged up to 13% in 2023 from 11% for 2022. The percentage of women in deal teams and portfolio operations was 21% and 23%, respectively, as of 2023.
According to survey respondents, women are considered the most under-represented group at these firms, and they are subsequently the most targeted DEI group by private capital firms.
"The growth of the private capital industry has created considerable career opportunities, and for firms active in the industry, getting compensation right is paramount for talent retention," said Preqin's Michael Patterson, lead report author, in the report. "Base salary increases across participating firms have become more common, but the pace of increasing base salaries may slow as wage pressure mellows and inflation falls from its 2022 peak."
The findings of the report were based on a survey of 84 private capital firms, as collected by Ferguson Partners on behalf of Preqin in May 2023.
