DealLawyers.com Blog

You might think that with 2023’s challenging M&A environment, PE fund employees would be experiencing a big compensation hit. This Institutional Investor article says that’s not the case. In fact, this excerpt says that those folks are seeing double-digit increases in their pay:

The median total cash compensation for all levels of private equity employees — analysts through managing directors and partners — rose 13 percent in 2023, according to a survey of 1,179 workers across the U.S. by Odyssey Search Partners, a recruiting firm focused on alternative investment professionals. Analysts, the most junior employees, got the biggest bump this year, with a 21 percent increase in total cash compensation. All others expect raises in 2023, except for managing directors and partners, who said theirs would be flat.

The pay increases during a tough year aren’t as counterintuitive as they seem, Anthony Keizner, a partner at Odyssey, said. Unlike other professionals, such as investment bankers that rely on transactions, the most lucrative parts of private equity compensation stem from the performance of funds that span several years. Private equity firms charge investors management fees annually, so they can afford to pay higher salaries and bonuses, and right now they have to do that, according to Keizner.

The article goes on to say that the reason firms have to pay up for talent is that there’s still a strong demand for trained laterals in the PE industry.  Funds have a lot of dry powder and they need quality people to work on deals and with portfolio companies. So, if one PE fund isn’t willing to keep its employees happy, there’s another one that will jump at the chance to do that.

– John Jenkins