Private Equity Firm CEOs Record Hefty Earnings – Juniors Follow


March 3, 2015

The start of the week has seen some interesting news and reports regarding earnings in the private equity sector. As big firms publish the big earnings, which see Blackstone Group’s Schwarzman on top, the junior pay in private equity firms is also on the rise.


Blackstone Group’s Good Year Shows
Private Equity News reported Blackstone Group’s chief executive Stephen Schwarzman won the battle for top earnings in 2014 after Schwarzman earned more than $690 million. It comes after the private equity firm managed to benefit from cashing out of investments in a positive atmosphere created by last year’s market conditions.


Schwarzman’s personal earnings grew by 52% in 2014, as the distributable earnings of the firm went up from $1.9 billion in 2013 to $3.1 billion last year. He received most of his earnings, a hefty $570 million, through dividends from Blackstone shares.


The other private equity CEOs didn’t do much worse. The New York Times reported that Leon D. Black, the chief executive of Apollo Global Management, earned $330.6 million last year. Similar to Schwarzman, Black made most of his money from the dividends from Apollo shares. But for Black, Apollo’s less successful year showed in the payslip, as his earnings did drop from 2013.


According to Reuters, the biggest firms don’t show detailed figures of “how much of the capital returned to their founders as a result of their personal investments in their funds is profit and how much is capital invested”.


Private Equity Firm Juniors Following Suit
Although private equity pay for junior associates has not been as attractive in recent years, the firms are now truly offering a pay rise to juniors. According to eFinancial Careers website, private equity associates’ cash compensation has gone up by 26% year on year on average.


Private equity firms have to compete with banks and other financial institutes for fresh talent, which has led to an increase in junior associate pay in the largest private equity firms (private equity funds with over $7.6 billion). Data by Kea Consultants shows that junior associate pay (at the two to four year level) has increased by 26% on average at the upper end of the spectrum and 23% on average at the lower end of the spectrum.


But the increase isn’t quite as staggering when you look at the large private equity firms (PE funds with $2.3-7.6 billion). In these firms, the junior level pay increase was only 14% and 6% on the upper and lower ends of the spectrum respectively.


Furthermore, the small- and mid-sized private equity firms (PE funds with $538 million to $2.3 billion) saw slight declines in earnings.


The Big Picture
The recent reports on earnings are part of the bigger picture in regards of private equity. The competition is heating up and firms are competing to attract the investors. At the same time, the funds are sitting on a lot of capital, hoping to find attractive ways to get rid off it. Until they do so, it can be difficult to increase earnings for the associates and the management staff.

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