Private equity managers are hiring more junior-level investment professionals and rewarding them with greater base pay and bonuses, as their need for more people to execute deals increases, according to a survey from executive search firm Heidrick & Struggles.
Among the 939 private equity manager executives surveyed online earlier this year for the 2022 North American Private Equity Investment Professional Compensation Survey, 78% reported an increase in bonuses this year, up from 67% in 2021, and further, 32% of respondents reported a rise in bonuses of more than 50%, compared with 15% in 2021.
John Rubinetti, partner in Heidrick & Struggle's global private equity practice, said in an interview that the survey, which concentrates on growth equity and buyout managers, reveals that compensation is seeing a return to normal this year after an extremely active and successful 2021.
"What that led to was these one-time cash payments, so somebody was receiving their bonus and receiving another 100% of their bonus on top of it," Mr. Rubinetti said. "Part of it was retention, and part of it was 'Hey, we're trying to do the right thing here.'"
According to the survey results, Mr. Rubinetti said the cash payment was a "one-time thing."
The share of respondents that reported an increase in base pay, meanwhile, fell very slightly to 65% in 2022 from 67% in 2021. Within that universe, median base cash compensation rose 26% for associates and only 15% for managing partners.
Private equity managers, meanwhile, are also increasing cash compensation for diverse candidates by a range of 50% to 200%.
The extremely high fundraising activity has contributed to managers seeking out investment professionals, according to a report about the survey. U.S. private equity managers have raised $176 billion across 191 funds in the first half of 2022.
The report said private equity firms have been adding staff at all levels, and while 2021 saw a focus on hiring vice presidents and principals, this year the focus has moved to junior-level professionals.
The report also said hiring is expected to slow in the near term because staffing has increased so much in the past several years, and that after the spike in compensation for junior-level professionals, the balance going forward will move back to senior-level professionals.
The full report is available on Heidrick & Struggles' website.
