The Pandemic Didn’t Touch Private Equity Paychecks

Amid the market volatility and economic uncertainty of the pandemic, compensation for professionals in private equity and venture capital continued to rise.

In Benchmark Compensation’s annual survey of industry professionals, 68 percent of respondents said they earned between $150,000 and $1 million last year, marking the highest percentage to report earning more than $150,000 since the company began publishing the annual report 14 years ago, the firm said in a press release Tuesday.

The 2021 report also marks the seventh consecutive year of gains in private equity and venture capital compensation. Overall, the study found that respondents working in private equity earned more money than those working in venture capital, but respondents working in hybrid firms earned the highest levels of compensation as vice presidents and managing directors.

The report was based on a survey of hundreds of workers, from partners to junior advisors, from October to November 2020. Participating firms included Goldman Sachs, KKR, Bain Capital, and BlackRock.

“Overall, compensation is up, but more than half of those surveyed are dissatisfied with their pay,” David Kochanek, the publisher of the study, said in a statement. According to Benchmark Compensation, employees cited market conditions and employee expectations as the reasons why they were dissatisfied.

Investment managers reported the most dramatic decline in pay satisfaction, according to the study. Chief financial officers were the happiest with their overall compensation, while managing partners and managing directors earned the most money.

“The Highest Paid People on the Planet”

For Joseph Healey, senior client partner at executive search firm Korn Ferry, the findings of dissatisfaction were incongruous with his experience as a recruiter. According to Healey, venture capital and private equity professionals are more likely to voice discontent with other factors before they worry about compensation.

“These are some of the highest paid people on the planet; I don’t feel [the discontent] is pervasive,” Healey said. “When someone says to us ‘I think I need to leave my firm, and I want to find a new firm,’ the fourth or fifth thing on the list is compensation.”

Firm culture, management, investment strategies, career development opportunities, and training hold more weight for professionals in the industry than compensation, he said. Healey said he believes professionals would be reluctant to give up a position at a firm with strong qualities on the sole basis of compensation. He also cited the “switching cost” as a big factor in dissuading professionals from leaving positions.

As for the overall trends in compensation, “it’s as if the pandemic didn’t happen,” Healey said.

According to Benchmark Compensation, bonuses as a percentage of total compensation have been declining since 2014 among the highest-paid private equity and venture capital professionals. Despite this decline, the consistently increasing pay suggests that firms are providing high incomes through other forms of compensation. This year, 59 percent of respondents expect to see greater cash earnings, according to the study.

The declining bonus percentages also depended on the size of the firm, with Benchmark Compensation reporting that the largest bonus payouts occurred at the largest firms, based on firm performance.