Because of the different types of private equity companies, it’s difficult to come up with a single point of reference for pay. However, focusing on the larger firms ($5bn+ in assets) across the broad geographical markets (Europe, the US and Asia) shows that pay can be very generous indeed.
Compensation is separated out into three components – base salary, annual bonus and long-term incentive, or ‘carried interest’. Simply put, carried interest – or carry – is a share of the profits distributed to senior people within the organisation once the fund profits go past a pre-agreed threshold. The idea is to motivate senior partners to improve performance as much as possible over the long-term.
A managing general partner at a private equity firm with more than $1bn in AUM can expect $4.9m on average in carried interest alone
Depending on the organisation, you’ll start to earn carry once you have five-ten years’ experience. Longer-term, this is where the real money is in PE – for example, a managing general partner at a private equity firm with more than $1bn in assets under management can expect $4.9m on average in carried interest alone, according to figures from Preqin.
At the junior end, as an associate with 2-4 years’ experience pay is £82-83k ($125k) as a base salary with a bonus of £71-84k ($110-130k), according to headhunters Kea Consultants.