Private equity can still pay eight figures, even in 2024
Private equity funds might not be the promised lands of finance that they once were, but one thing hasn’t changed (even if the scale of it has) – the people working in it are paid a lot of money.
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Just how much money, though? According to recruitment consultancy Odyssey Partners, private equity professionals will be paid anywhere between $275k to $1m, each, on average in 2024. And that's not including carried interest, either.
There is, however, a lot of variation based on fund size and performance. A bottom quartile associate at a small fund (with less than $500m in assets under management, or AUM), for instance, will earn an average of $200k in salaries and bonuses in 2024, according to Odyssey. A top quartile associate at a mega-fund (with over $10bn in AUM) can earn over $400k.
The numbers are even more extreme for principals (equivalent to investment banking directors). A bottom quartile principal at a small fund can expect to earn $425k or so, according to Odyssey, while a top quartile principal at a mega-fund could earn $960k.
But carried interest is where the money is, of course. Carried interest is a portion of a successful investment’s return paid out as an incentive to the professionals working on a deal. And while salaries and bonuses increase linearly as you climb the PE ladder, carried interest increases exponentially.
While the median private equity associate earns $500k of carried interest over a fund’s 5-7 year life cycle, around twice their “normal” annual compensation, the MD or partner guiding the deal earns around $9.4m on top of $1m in “normal” annual compensation.
The averages alone are misleading, however. Although the median MD or Partner earns $9.4m in carry from an average deal, only 4% of them earn over $20m according to Odyssey; and while the median VP earns around $2.9m in carry from the average deal, around 2% or so of them earn over $10m.
Private equity’s woes, however, might mean that pay has a stop put on it in the short-term. There are definitely some positives for the industry, such as an assumed regulatory bonfire under the second Trump administration. But interest rates are still high, even in the USA, and refinancing has mostly occurred under high interest rate scenarios. That will impact bottom lines, and therefore carried interest.
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