Preqin Survey: Private Equity Salaries Stay Flat in 2016 Despite Successful Year

Nov 10 2016 | 11:09pm ET

Salaries in the private capital space have stayed relatively static through the volatility of 2015 and this year, according to a new survey from industry data provider Preqin, and the majority of firms don’t expect to hike base salaries next year as pressure on fees remains high. 

The results were part of Preqin’s 2017 Private Capital Compensation and Employment Review, in which surveyed 175 firms for insights into compensation and employment practices in the private capital industry. 

Between 2015 and 2016, 47% of surveyed fund managers made firm-wide base salary increases, Preqin found, while 38% have left salaries unchanged and 15% have decreased them. One in five firms, however, have made salary increases of more than 10%, and among them are 13% that have hiked base salaries by more than 20%.

Looking ahead to the coming year, 57% of firms said they do not expect make changes to their base salaries between 2016 and 2017. Six percent indicated that they were planning to make salary cuts, and 37% plan to increase their base pay and 14% planning to increase base pay by more than 10%. 

Other key facts from Preqin’s survey: 

  • 2016 has seen a fall in the number of new private capital firms holding a final or interim close on their debut funds. So far this year, 340 new firms have entered the private capital market, down slightly from the 395 new firms that closed their debut funds in 2015. 
  • Active Private Equity Firms: As of September 2016, Preqin is tracking 8,001 active firms across the private capital industry, including 1,223 buyout, 812 growth, and 2,704 VC firms. This number has doubled in the past decade, rising from 4,344 active private capital firms seen in 2006. 
  • Employment by Firm Type: Preqin estimates that private capital firms worldwide employ around 163,000 people. Venture capital firms account for the largest number of these employees, with approximately 36,600 industry participants, followed by buyout firms with 34,600. 
  • Staff by Firm AUM: Larger firms tend to have fewer employees per $1 billion in AUM, and benefit from economies of scale. Firms larger than $1 billion employ 159 people, on average, which equates to eight employees per billion in AUM, whereas firms smaller than $250 million employ 127 members of staff per billion in AUM.

“The private capital industry has had a very successful year by most accounts, but the majority of firms have not made general salary increases,” commented Christopher Elvin, head of private equity products at Preqin. “The largest proportion of firms surveyed by Preqin indicated that they maintained their base salaries over the past year, while a significant proportion decreased them. However, those firms that had made salary increases tended to make large raises, and overall the private capital industry remains an exceptionally well-compensated profession.”

Founded in 2003, Preqin is a leading source of information for the alternative assets industry, providing data and analysis via online databases, publications and bespoke data requests. More than 40,000 professionals in 90 nations use the company’s products.  

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