Why is REPE pay so much lower than REIB
I’m in REIB (London) recruiting for REPE roles and whenever I ask about pay it’s usually around £70k base with 50% bonus target for the associate level whenever I ask recruiters why the pay cut they tell me it’s market standard and to expect a pay cut when moving into RE.
Compare this to IBD where associates start on £90-95k and achieve bonuses of 100-150%, REPE pay sounds so low. I also see on this forum many people talking about low pay in REPE.
Excluding the megafunds, why do most REPE funds pay so low in comparison to REIB / corporate PE?
Is it due to the fact they target lower returns / IRR compared to corporate PE so generate less profit to distribute as pay? However I thought this would be countered with having a larger AUM size / number of employees ratio?
Banking is dominated by the top conglomerates whereas REPE is incredibly fragmented. Doesn’t take a whole lot of AUM/clout to buy a few apartment assets for $50mm a pop with a healthy amount of debt financing. The REPE shops with a few hundred M’s under management doing 20-75mm deals are the ones paying pennies. RE arms of top financial institutions pay just fine. Basically on an apples to apples basis RE pays as well as IB, there is just more low hanging fruit in RE and that skews sample size. Also worth noting is that the principles of small RE shops are typically worth millions based on their equity in the portfolio. But fees pay the bills and for low AUM shops the fees are accordingly low and can’t cover $200K per analyst.
Thanks for the reply, good points.
That makes a lot of sense for the small funds with less than £1bn AUM. However, even for some of the large funds (not megafunds but large funds that have an AUM in the £billions) I’m still quoted low pay figures. Three examples of large funds I interviewed with (didn’t receive offers):
A) £2bn AUM offering associate 1 base of £70k with a 75% target bonus
B) £5bn AUM offering associate 1 base of £75k (didn’t disclose the bonus target)
C) website never specified the AUM but my guess is it’s around £5bn offering associate 1 base salary of £80k plus up to 100% bonus. This one sounds pretty decent pay but still £20-30k lower than IBD in total comp on.
Are these Core funds? I think many people see core funds with huge AUM and are confused by low pay. Opportunistic/value-add funds will be more in line with traditional PE
In addition to everything said here, RE generally has better hours too, so the $/hour compensation is comparable
because the associates are dumber
Amazon could afford to pay their warehouse workers $35/hour but they don’t... because they don’t have to. Same with REPE associates.
The reality is the demand for these jobs is high and the “quality” of the candidate doesn’t really have to be that high which implies a large applicant pool. That’s it.
Do the math on the fees. REPE funds earn about the same as a corporate PE fund if you control for size. They pay less because they can. But that’s good for when you make partner - lower costs :)
Because you have to pay people more to work in banking. The higher pay offsets a worse quality of life.
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