Surveys

Private Capital Industry Can Boast Some High Earners; Not All Professionals Prosper In It - Preqin

Tom Burroughes Group Editor 14 November 2016

Private Capital Industry Can Boast Some High Earners; Not All Professionals Prosper In It - Preqin

A new report reveals recent pay trends in the private capital industry.

Private capital – a term covering various asset classes – has prospered in recent years as investors have sought superior returns and diversification away from listed markets following the global financial crisis, but remuneration changes have been mixed in the industry, figures show.

Preqin, the research firm tracking alternative investment asset classes such as private equity, hedge funds and real estate, surveyed 175 private capital firms to look at employment and pay trends. It found that between 2015 and 2016 almost half (47 per cent) of surveyed fund managers made firm-wide base salary increases, while 38 per cent left salaries unchanged and 15 per cent cut them.

One in five firms, though, have made salary increases of more than 10 per cent, and 13 per cent of firms have increased their base salaries by more than 20 per cent. Looking ahead to the coming year, most firms (57 per cent) are forecasting that they will not make changes to their base salaries between 2016 and 2017. Some 6 per cent of firms indicated that they are planning to make salary cuts. Meanwhile, 37 per cent plan to increase their base pay, with 14 per cent planning to increase it by more than 10 per cent. 

The private capital market has benefited in some ways from a move towards alternative funding for businesses as traditional bank capital has been squeezed by tougher funding rules after the financial crisis, less liquidity in conventional debt markets and a desire for higher yields in a low- or negative-rate environment.

Among other findings, there has been a fall so far this year in the number of new private capital firms holding a final or interim close on their debut funds. To date, 340 new firms have entered the private capital market, down from 395 new firms closing debut funds in 2015. 

As of September 2016, Preqin tracked 8,001 active firms across the private capital industry, including 1,223 buyout firms, 812 growth firms, and 2,704 venture capital firms. This number has doubled in the past decade, rising from 4,344 active private capital firms in 2006. 

The research house estimates that private capital firms worldwide employ around 163,000 people. Venture capital firms account for the largest number of these employees with approximately 36,600 industry participants, just ahead of buyout firms, which employ around 34,600 members of staff.

 

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