Will PE Comp Increase
With banks increasing comp for Analysts and Associates, will PE firms be pressured to offer higher cash comp or some carry to new hires in order to keep them from going A2A?
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New hires aren't getting carry. Cash comp will prob go up but unlike investment banking, comp varies by firm so it won't be a simple +10% across the board situation.
Got it. Thanks. Assuming you're starting at a smaller fund that doesn't have a large standardized associate class each year, how negotiable do you think comp is?
Don’t think it’ll have a material impact in the short term (1-2 years) I think its a supply/demand issue. Reason why banks are increasing comp is because of the heavy attrition and they’re hoping that increasing comp by x amount will solve the issue. Will it work? That remains to be seen.
On the flip side most MM/LMM can get away paying less than IB (at least on the associate side) since IB kids will still want to go to PE even if comp is less 10-20% than banking for various reasons. So until there is a somewhat noticeable trend of IB analysts not going to PE due to compensation I wouldn’t expect a material increase
Agree that PE funds unlikely to react as the future promise / carrot of carry is strong (even it is not allocated for analyst/associate level).
I think you might see very modest increases at the associate level, but I'm not sure it will match the comp increases we are seeing in IB. The reality is, enough talented people will still want to jump into PE for a variety of reasons - the work tends to be more interesting (not always, of course), somewhat better hours (in some cases), etc. And at the end of the day, most people realize that the comp upside of PE comes from staying on as as VP+ and starting to get carry. Worrying about an extra $25-50k at the associate level isn't really worth it.
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