Private Equity Salaries Increase

Private Equity Salaries Increase in Financial Crisis

For many Americans, especially those working in the financial sector, the economic crisis has brought lower salaries or even lost jobs. Private equity is a different story. According to the 2009 Private Equity Compensation report, private equity compensation has not lowered in any categories and the majority of private equity positions showed increases in compensation. In fact, the report reveals a 6% increase in bonuses awarded to Principles, a striking contrast to the struggling investment banking firms.   For tips on how to make more money in a private equity career, see this free article.

Dealscape reports further on the private equity compensation data:

The total cash compensation (base salary and cash bonus) for senior associates at the largest buyout funds (those with $5 billion or more in assets) is now $435,000, a 4% increase over their 2007 levels....At the principal level, large buyout funds pay an average total cash compensation of $885,000, also a 4% increase from last year. Bonuses for principals at these funds rose 6% to an average of $607,000, which is included in the $885,000.

This is pretty startling considering the gloomy predictions for private equity lately, and the decline in most other financial sectors. Compared to this week's reported layoffs at Lehman Brothers and several major retail companies, the estimated 6% rise in bonuses is quite impressive. Private equity firms are well-known for paying high salaries to employees as a way of retaining talented deal-makers and attracting skilled young professionals to the industry. But there was plenty of reason to anticipate that private equity firms would make reductions in salaries and employees:

...private equity dealflow fell roughly 75% to $143 billion in the first half of 2008. Among megabuyouts, Kohlberg Kravis Roberts & Co. posted a loss of $1.1 billion for the first half as difficult credit markets took their their toll on the values of the firm's holdings. Blackstone Group LP posted a net loss of $156.5 million for the second quarter, compared with net income of $774.4 million a year earlier. Blackstone also had negative $198.6 million in performance fees for the first six months of 2008 (meaning it reversed previously recognized performance fees), compared to about $1.1 billion in performance fees it earned for the first six months of 2007. I'm not even going to bring up the price of Blackstone's stock.

The most reasonable cause for the increase in private equity compensation during such a poor year for deals is the impressive capital fund raising of 2008. Dealscape reveals "When combined with 2007, which set a record for capital inflows, private equity funds continued to have the resources to maintain compensation levels and in many cases increase them, according to Glocap."

Source: Dealscape and the 2009 Private Equity Compensation report

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Link to This Resource: Private Equity Salaries Increase

http://privateequityblogger.com/2008/11/private-equity-salaries-increase.html