Private Equity Fund Size and Performance

There seem to less defining lines between venture capital and private equity. When asked to identify their primary investment strategy, nearly a quarter of this year’s respondents classified themselves as both VC and private equity.

This year’s report had a good distribution representing firms of many sizes: 90 percent of respondents work in teams of about 10 or less, and 60 percent work in firms of 10 or less. Average comp by Firm Size shows a steady drop-off after 25 people, until the 1000 people mark (not shown in the graph) when it surges to its maximum. Interestingly, that trends holds neither for base nor for bonus independently.

It turns out that size does matter and that bigger is better as compensation varied by fund size and performance. We found that private equity funds in the mid range seem to pay the best. Working at a small fund can pay for junior employees as the Analyst pay curve is actually slightly U-shaped, suggesting that starting at a small fund may be a good career move as long as it is followed up with a move to a fund with over $500 million to reap the benefits at the Associate level, where the disparity can be 70 percent or higher.

Again this year, we received a good representation of different size funds, including a few very small ones with less than $1 million under management (which we’ve grouped together here as under $100 million). The “don’t know” option was offered as an easy way to preserve confidentiality should the respondent wish. (As a matter of fact, most who chose “don’t know” were mid-level, or senior-level and likely did know.) Still, only half as many chose this option as in the hedge fund survey; showing that confidentiality is less essential to the private equity and venture capital industry

In private equity and venture capital firms, for the most part, when the fund performs well employees are paid well. For those funds that performed well, the average compensation was over $260,000. When looking at fund performance, the lowest pay did, in fact, go to those in the lowest performing funds.

back to 2008 Private Equity and VC Compensation Report