One of the only professions where it is absolutely conceivable to double your pay every few years is private equity jobs. A profitable investment fund has the potential to grow exponentially in size regardless of the number of investment experts employed in it.
Private equity entry-level positions already pay well; at the top funds, 25-year-old private equity associates may expect to make more than $300,000. And if you succeed in moving up the corporate ladder at a successful fund, you’ll continue to enjoy annual increases in your pay.
Due to the small number of data points and the industry’s relative secrecy, it can be challenging to obtain accurate compensation statistics for private equity, but we’ll do our best to scour reliable sources.
The following variables most directly affect compensation in private equity:
- Seniority of the position (higher seniority Equals higher pay)
- Size of the fund (greater investments and a bigger fund equal more potential returns).
- Fund performance (better investments = more possibility for profit)
Ladder and Seniority in Private Equity
Understanding private equity’s organizational structure and various levels of seniority is crucial. Every level of promotion typically results in a 50–100% rise in pay; for instance, moving from Associate to Vice President may result in a 100% increase in overall pay.
Analyst and Associates
The more junior roles at the Analyst and Associate level, just like in investment banking, are mostly focused on developing models, performing in-depth analysis, and other tactile diligence activities. The most typical pre-MBA positions are analyst and associate. In a rather absurd hiring process, analysts are chosen from the best business schools in the world (Penn, Harvard), while associates are chosen from the best investment banks.
Vice President is a common title for mid-level positions that are primarily focused on execution. This is a rather broad mandate, but it can entail things like collaborating with consultants and lawyers, helping to draught an investment memo, and reviewing term sheets.
At each firm, the precise title of Vice President or Principal varies. Principal is sometimes the position immediately before Managing Director, and other times it is the senior associate equivalent.
The title of managing director and partner is the highest position. These experts are concerned with finding new business opportunities, selecting investments, and managing the company. Because it depends heavily on a fund’s success, it is difficult to pinpoint and generalize the typical salary for these people. At this level, you receive a lot more equity, so if the fund performs well, you will be paid significantly more.
- Analyst ($150-$200k) with 0–2 years of experience
- Associate ($250-$350k) with 2-4 years of experience
- Vice president ($400k-$700k) with 5-8 years of experience
- Principal ($800k-$1.5mm) with 9–12 years of experience
- Managing Director / Partner ( >$1.5mm) 10+ years experience
These numbers represent the payouts of the biggest North American funds. You might expect to see some moderate variation because these numbers are average across a broad range of funds.