The 2011 Private Equity Compensation Report revealed positive momentum in the area of private equity and VC compensation.
At the end of 2010, 45 percent of private equity career professionals expect their compensation to grow by double-digits over last year. The average increase was 13 percent during a time when the number of deals getting done isn’t back to pre-peak levels but the biggest firms are pricing each other out of some deals.
Private equity professionals reported average cash earnings near $230,000 and a big part of that number is bonuses. Investors need not fret, however, as it seems bonus practices for 2010 are in line with fund performance. Speaking of fund peformance, this year 85 percent reported their funds were in the black.
Bonus guarantees play a role in hiring and keeping top investment talent. 28 percent reported having some guarantee as part of their private equity compensation package. That guarantee could range from very little to one hundred percent and a small portion of the respondents said they were required to invest back into the fund.
In 2011, expect more deals and greater demand for talent from both the investment and operational sides of the business. Why? With big reserves at the larger firms and a closing investment window, firms need to invest those dollars and that will required private equity talent both pre and post investment.
The report covers base and bonus compensation (both by title and by fund size), fund performance and its impact on bonus levels, the sharing of carried interest, and job security concerns. The Report also seeks to understand how private equity professionals perceive their work and what they expect from their employers.
Data was collected directly from hundreds of private equity and venture capital partners and employees at the end of 2010 to pull together the 2011 report.
A sample of the report can be found here.
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