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As reported in previous years, the bonus tends to be a substantial component of total compensation and it counts for more, the higher overall earnings. On average, bonus is reported at 31% of total compensation but for those making more than $300,000 the bonus tends to be 40% or more of total cash compensation.
Last year we reported that 1 in 4 expected no change in compensation — this year, that ratio is 1 in 3 (and, as a point of interest, is about the same level in the hedge fund industry where we see higher averages across the board). The percentage of respondents expecting a decrease in compensation dropped from 19% last year to 16% this year. Improved market conditions seem to be instilling a slightly higher level of confidence.
This year, Managing Directors and Managing Partners saw decreases of 3% and 11% respectively, while almost all other positions reported an expected increase in cash earnings. In fact, double digit increases were reported by both Managers and Analysts. One thing to keep in mind, common titles such as Manager and Analyst (or Senior Analyst) mean different things to different firms. Responsibilities and compensation vary significantly depending on the size and type of firm (private equity, venture capital, or both).
At the end of 2009, Analysts expected to see bonuses shrink more than 10% over last year. Managing Directors expected to see bonuses shrink by nearly 20% over last year, while Partners expected to see bonuses increase nearly 20% over last year.
Back to the 2010 Private Equity Compensation Report
