Compensation levels in private equity and venture capital continued trending upward in 2020, according to two separate reports.
One was published by Holt Private Equity Consultants and MM&K, while PEI Media (publisher of Venture Capital Journal) produced the other. Data for both surveys are collected in April each year, meaning the 2020 edition reflects a pre-covid financial climate.
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“Compensation all comes down to fundraising,” says Mike Holt, author of the North American survey. “If fundraising is good, management fees are good, and firms can increase salaries and bonuses.”
Fundraising set a record in 2019, leading to an increase in compensation across the board in 2020. In 2019, private equity firms raised $663 billion globally, according to PEI Media data. Despite the pandemic, firms raised $535.2 billion last year.
“The reports indicate just how healthy the European VC and buyout markets are,” says Nigel Mills, director of MM&K. “In terms of remuneration, the private equity industry wasn’t really negatively affected by covid – possibly completely the opposite.”
‘Muted, but stable’
Compensation levels took a significant hit in the years following the global financial crisis, but covid-19 is unlikely to have such a drastic effect, says Gail McManus, founder and managing director of Private Equity Recruitment.
McManus says salaries and bonuses are likely to remain “muted but stable.”
Global turmoil aside, base salaries and bonuses generally see relatively little upward or downward fluctuation, demonstrating “remarkable stability over the years, even over the decades,” says Simon Havers, a consultant at executive search firm Odgers Berndtson.
“I think that’s partly pinned down by limited partners’ expectations that salary levels should be set at a place that allows people to live but not to get too rich,” Havers says.
“They don’t want to see people getting rich without making carried interest.”