Private Equity and VC Compensation Satisfaction

Although the average salary among the respondents was more than $220,000 with an average of 3.5 weeks of vacation, and work life balance was assessed favorably by most respondents, the results indicate only 26 percent of the respondents are happy with their compensation. The fact that Private Equity Search Digest is utilized by those who proactively manage their investment careers may add some bias to these results.

The following comments represent individual negative responses to the question, “Are you happy with your overall compensation? If not, what areas are you unhappy with?”

• Need to have a higher compensation and better linkages between compensation and results achieved.
• Always seeking more thru better fund performance.
• Base is low with bonus tied to heavily on operating profit of the fund versus investment performance.
• Base salary and carry are lower than what I read in the press about positions equivalent to mine.
• Bonus and carry scheme not yet implemented.
• Carry amount isn’t significant nor is it as well defined as it could be.
• Carry is reserved for only partners, I would change it so all partner track employees received some as well.
• Compensation is low. Lifestyle is very good.
• Could always use more current comp, but that is the deal in a small PE fund.
• I wouldn’t say I’m happy with overall comp, but it is the life and income I’ve chosen. Both current comp and carry are relatively small (due to small scope of funds under mgmt), but that is part of building my track record and, long term, a large income.
• Lack of carried interest.
• Cash comp significantly below market for my background/ skill set; no carry.
• No carry. No ability to earn a bonus comparable to the value I create.
• No formal carry system but institution does operate long term performance awards based on max 20 percent of salary.
• I feel that for my experience and status within the firm, along with the added duties I take on and are given, I should be paid a higher salary.
• There is no bonus or carry structure for Associates so there is no incentive to do (good deals) or stay on when larger firms with bigger/better track records are offering both.
• Current compensation is low, and carried interest across funds is unattractive.

Perhaps the most concerning feedback was that several firms limit the bonus opportunity. Most employees expect their bonus to be based on a formula that allows for unlimited upside if their personal performance and the fund performance support it. Capping this only leads to discontentment among the top performers.

This high number of dissatisfied team members should cause management to sit up and take notice. This, along with the high industry turnover, represents a potential competitive advantage in such a tight market for top talent. Additionally, interviews with recruiters in the industry indicate that moving from one firm to another is a common method of ensuring market level compensation adjustments. Turnover is very expensive and fund managers should carefully consider their retention efforts in this market. From the comments above, it seems sharing more of the carry would go a long way.

A large majority of the respondents stated that they were already partners or were on the partner track. 45 percent of the respondents said that they expected to become partner in only 3 years or less. 21 percent said that they 7 years away or more from becoming a partner in their firm.

This is especially interesting as 21 percent of all respondents have less than 2 years of experience in the industry and 42 percent have been with their current firm for less than 2 years. Also, an overall 53 percent of the respondents have less than 5 years of industry experience and 79 percent have less than 5 years with their current firm.

back to 2007 Private Equity and VC Compensation Report