Headcount, Pay Up in Private Equity

Private equity is heading into 2016 with more and better paid staff as fundraising targets continue to rise.

Private equity staff at more than three quarters of international companies are in line for a rise in base pay in 2016—and more than half of all firms are already adding to headcount, research has shown.

Some 76% of private equity managers are planning to give staff a basic pay boost in 2016, data from Preqin has shown, with 74% of companies already awarding an average of 7% salary increases this year.

“2015 seems to have been a good year for employees of private equity firms, with salaries and cash bonuses both increasing,” said Selina Sy, manager of premium publications at Preqin.

“With many firms planning to increase their staff numbers and base salaries again in 2016, competition for talent looks set to continue.”More than half of private equity companies surveyed (53%) said they gave salary increases of between 0.01% and 10% between 2014 and 2015. Some 13% of companies said salaries across their organisation had risen between 11% and 20% in the same time. Just 6% of companies said they had reduced basic pay—with only 2% of companies announcing that they would reduce this rate going into 2016.

Regarding cash bonuses, some 46% of companies reported an increase in what staff took home over the past year, up from 26% adding to pay packets between 2013 and 2014. Just 16% said they had reduced these bonuses since 2014.

“At more senior levels, the largest firms will vie to attract top talent by offering rates of compensation that smaller firms may struggle to match,” said Sy. “Similarly, the location, structure, and strategy of a firm can all affect the available pool of talent and the number of opportunities available.”

US-based executives took home the highest overall remuneration, Preqin said, with an $86,000 uplift on their salary compared to their peers of the same level in Europe.

Addressing headcount, some 57% of firms said they had increased staff numbers in 2015, while 11% said they had cut personnel levels—a trend that Preqin said would continue into the New Year.

“With many firms planning to increase their staff numbers and base salaries again in 2016, competition for talent looks set to continue, as firms seek to attract new recruits while retaining current staff,” said Sy.

Fundraising in 2015 remains behind what the industry achieved in previous years. At the end of the third quarter $362 billion had been raised, which Preqin said was on track to match the $552 billion raised in the whole of 2014.

Related: The Argument for Private Equity; What Hedge Fund Managers Make in a Bad Year; SEC Head Talks Hedge Fund, Private Equity Regulation