Private equity funds have had some bad publicity when it comes to pay in the past few years. Performance hurdles haven’t been met and carried interest – the share of profits paid out to senior staff when an investment is successfully exited, has been cut. Still, it seems that long term you can earn more working in a private equity fund than in a hedge fund.
The chart below is the latest release from Emolument.com, the real time salary data specialist. Based upon salary data from 960 hedge fund and private equity professionals in front office jobs in London, it says pay in private equity funds is anything from 25%-33% higher than in hedge funds at VP and director level.
How right is this? Based upon a recent salary survey by private equity consultancy firm Preqin, average director-level compensation for people working in private equity in Europe is ‘only’ $347k – 20% below Emolument’s estimate. It’s also worth bearing in mind that private equity pay tends to be a very long term affair, spread over at least five years. Immediate total annual cash compensation in private equity was a mere $255k according to Preqin.
Hedge funds may pay less than private equity funds long term, but if you want shorter term rewards they’re likely to be the better bet.