As we noted earlier this month, as banks increase salaries for juniors, private equity funds are in danger of falling behind. Funds and banks are competing for the same talent, and with banks now paying starting salaries of $100k to first year analysts, rising to $110k after three years and up to $225k after five years, private equity funds' fixed pay is in danger of looking a little tired.
Some headhunters say junior bankers are thinking twice about quitting for private equity as a result.
However, a review of the salaries listed for junior private equity professionals at America's top PE firms reveals that the distinction isn't quite as great as might be supposed. As the chart below shows - based on data provided by firms hiring juniors on H1B visas, analyst salaries at funds like Blackstone already match banks' higher fixed pay. Associate pay at PE funds also looks comparable. And the same can be said for the principals in private equity who roughly approximate senior vice presidents (VPs) in banks.
Needless to say, salaries are only part of the pay story in private equity. Bankers who move to PE receive bonuses which average 65% of salary in investment roles according to pay benchmarking firm Emolument. As principals (and sometimes sooner), they will also receive a share of carried interest when the fund is closed and if investment hurdles are met.
It's the carried interest that is the big lure for private equity careers, but as the chart below shows the upfront salaries aren't bad either.
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