Preqin: Majority of private capital firms increasing headcount, base salaries

Many private capital firms expanded their headcount and increased employees' salaries in 2017 with plans to continue these actions in 2018, said a report from Preqin.

According to the report, 61% of the 173 private capital firms surveyed increased their headcount in 2017 and 65% of firms said they expect to add staff in 2018, with a fifth planning to increase their staff by more than 10%.

Meanwhile, 78% of firms increased their base salaries in 2017, with 19% increasing them by more than 10%, and 68% of firms said they plan to increase base salaries in 2018, with 11% expecting to increase them by more than 10%.

Among the 39% of firms that did not add staff in 2017, 8% reduced their headcount while 31% maintained their headcount.

Also regarding headcount, the majority of respondents (72%) identified the investment team as being the most important position from a hiring standpoint, followed by corporate operations (accounting, human resources, information technology and legal) at 10%.

Regarding compensation practices, among the 22% of firms that did not raise base salaries in 2017, 2% reduced base salaries and 20% made no changes.

Also according to the report, the average proportion of women in CEO roles at the participating firms was 5%, while the average proportion of women in managing director roles in the investment team was 3%.

"The private capital industry is seeing a record-breaking period of expansion, with fundraising accelerating, assets under management growing and more investors than ever becoming active. In order to keep pace with this growth, many private capital firms are seeking to increase their staff headcounts to better enable them to expand their operations, make deals and attract investor capital," said Selina Sy, editor of the research, in a news release accompanying the report. "In an environment where attracting and retaining top talent is key, private capital firms may look to their compensation practices as an enticement. The majority of firms have raised their base salaries in the past year, and many expect to do so again within the next 12 months, some at levels far above inflation. While other elements of compensation, such as carried interest practices, may become more important among senior staff, many junior private capital employees receive little or no compensation beyond their salaries, so this metric is key in attracting new talent."

Global private capital assets under management totaled $4.6 trillion as of Dec. 31, according to the report. So far in 2017 (to September), $482 billion has so far been raised by 885 private capital funds.

The surveyed firms span across private equity, private debt, real estate and infrastructure, and natural resources.