Salaries frozen, down at private equity firms this year

Posted Dec 2nd 2009 12:00PM by Tom Johansmeyer
Filed under: Private Equity

For more than a third of private equity employees, employee compensation either stayed the same or declined. A recent report by alternative investment research firm Preqin estimates that 38% of private equity employees saw base salary freezes in 2009, and 6% of firms participating in the survey indicated that they were cutting salaries this year. Of course, this means that 56% kicked base salaries up this year, though the average increase was a mere 2%.

For the employees of 22% of the firms participating in the Preqin survey, the brush with a pay cut was close as these companies considered a freeze. But 40% haven't cut or never considered it.

Bonuses also increased 43% of private equity firms, while an equal amount cut them. Fourteen percent reported no change in bonus payouts year-over-year. The average decline in the bonus payout was 40%, while the average increase for private equity firms on the upswing was only 21%.

Sam Meakin, managing editor of 2010 Preqin Private Equity Compensation and Employment Review said in the press release that "The large proportion of private equity firms implementing base salary freezes or cutting base salaries is reflective of the performance of private equity funds over the last year." He indicated that the one-year horizon returns for buyout and venture funds through the end of the first quarter this year were -33.8% and -17.1%, respectively. "With returns likely to move back into positive territory next year," he continued, "we are likely to see fewer firms implementing base salary freezes and cutting base salaries than this year."

Tags: Alternative investments, bonuses, compensation, inthenews, Preqin, Private equity