Private equity: how much can you really earn?

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Charles Sherwood, senior partner at Pemira, has criticised calls for disclosure of private equity pay as 'financial voyeurism'. That makes it no less interesting to peek behind the curtains.

The left-wing press has been particularly eager to rustle the pelmet. Last week, the Guardian quoted Andrew Wileman, a business consultant, who it claimed has worked with private equity firms for 10 years. According to Wileman, there are 100 partners in European private equity who are worth 100m plus, and several who are worth 200m or more.

Will Hutton, also writing in the Guardian, quoted a study from Manchester University's ERSC Centre for Socio-Cultural Change, which he said obtained the accounts of a fund with 8bn under management. Over five years, the 30 partners reputedly expected to make between 25m and 50m.

How accurate are these glimpses of corpulent compensation packages? Fairly accurate, according to the managing director of one private equity-focused search firm. He says a fund worth 8bn will earn a 2% management fee (160m), plus returns of 20% (1.6bn), to be divided between perhaps 30 partners and other less well remunerated staff. Each partner could easily expect to earn 45m, and perhaps more.

For associates, pay is predictably lower. Ben Aymé, a consultant at search firm Veni Group, says a typical basic pay package for a first-year associate in private equity is 65k to 90k, plus a bonus of 100%. For more senior associates this might rise to a 90k base salary, plus a 150% bonus - although Aymé cautions that every fund operates a "different pay structure".

Another headhunter puts junior pay higher still. He says pre-MBA associates at PE funds can command a 60k to 70k base salary, plus a bonus of 100% to 200%. Post-MBA senior associates or principals are looking at a base of 80k to 100k, plus a bonus of up to 300%, plus carried interest.

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