What is the Salary in Private Equity?
Private Equity Salaries are a major consideration for those considering an exit to the buy-side. In this article, we’ll provide salary ranges of private equity professionals starting from the associate level – as well as a comparison to the salaries received in investment banking.
- What is the average salary for a private equity associate?
- How much does the salary increase for principals and vice presidents (VPs)?
- Which factors determine the pay in private equity?
- How does the salary in private equity compare to investment banking?
Table of Contents
Private Equity Average Salaries by Hierarchy
The chart above summarizes the general salary ranges for private equity salaries.
The higher up the hierarchy you go, the less transparency there tends to be regarding compensation – for that reason, we have excluded compensation data on managing directors (MDs) and principals.
The compensation data was obtained from a global alternative investment management firm (i.e. a mega-fund), so note that lower middle market or middle market funds may offer salaries below the range shown above.
Private Equity Salary vs Investment Banking Salary
The typical private equity associate comes with one to two years of investment banking experience, so clearly most private equity firms pay above the average salary in investment banking.
Besides the marginally reduced hours and being able to work on the buy-side (i.e. investing rather than advisory), the higher compensation is one reason that many exit to private equity.
Note that one exception is Centerview Partners, an elite boutique highly regarded for paying its analysts salaries competitive with buy-side opportunities – hence, its industry-leading retention rate.
Given the recent widespread increases in pay for investment banking analysts, private equity compensation should also follow suit.
Private Equity Associate Salary + Bonus
For the vast majority of private equity associates, the base salary is around $135k-$155k.
Then, based on fund performance, bonuses tend to range from 100% to 150% of the base salary.
But the “all-in” combined salary is approximately around $275k to $390k at top PE firms – but this figure can be much lower for smaller-sized funds and exceed $400k for firms with reputations for being the highest-paying (e.g. Apollo Global).
Carried Interest (“Carry”) in Private Equity
Carried interest, or “carry”, is the share of profits that flows to the general partners (GPs) of a private equity firm.
Further, carry functions as performance-contingent compensation, as it is intended to incentivize the firm to perform well.
Unlike management fees, carried interest is typically only paid if the fund’s returns meet a certain minimum threshold.
The carried interest structure depends widely on the firm, but in general, those on the investment team should not expect any proceeds until at the very least the senior associate level – which is still uncommon.
Starting at the vice president (VP) level, one can expect to receive some carry, with the amount increasing for senior-level members like managing directors (MDs), as expected.
- Associate: No Carry
- Senior Associate: Not Common
- Vice Presidents (VP): Moderate Amount
- Managing Directors (MD) / Partners: Significant Amount
For mega-funds and also firms with $1+ billion in funds, receiving carry at the lower levels (e.g. associate) is practically unheard of.
Private Equity Analyst Salary
Next, we’ll discuss is the rising trend of private equity firms recruiting candidates straight out of undergraduate.
The PE analyst and IB analyst salary comparison largely depend on two factors:
- If the private equity role is mostly sourcing-related (i.e. cold calling), the salary tends to be relatively close to the pay in investment banking.
- Or if the role comes with responsibilities mostly related to investment diligence, the salary can be expected to be higher than most investment banks.
As a side note, for private equity analysts, getting an MBA is often a requirement to get promoted – therefore, joining a PE firm post-graduation does not come without drawbacks.
That leads to our next point, which is those with an MBA degree or differentiated backgrounds can expect higher compensation.
Still, the standard investment banking stint and the subsequent exit into private equity remains the far most common pathway.
PE Compensation and Location
Another important factor impacting salaries is the location of the firm because financial hubs typically pay more.
The financial hubs in the U.S. are:
- New York City (NYC)
- San Francisco
- Los Angeles (LA)
Other cities with either a strong presence or an optimistic outlook in the coming years are: