2023 North American Private Equity Investment Professional Compensation Survey
Welcome to our 2023 North American Private Equity Investment Professional Compensation Survey. This report provides a comprehensive picture of the compensation that North American private equity executives are currently receiving.
For this report, Heidrick & Struggles compiled compensation data from a survey of 587 investment professionals in North America.
We hope you enjoy reading the survey, which remains the only one of its kind. As always, suggestions are welcome, so please feel free to contact us—or your Heidrick & Struggles representative—with questions and comments.
Executive summary
Investment professional hiring trends
- After a busy few years, we have seen a slowdown in hiring in 2023. We are now seeing a large supply of high-caliber candidates, but significantly less demand overall.
- Where there is demand:
- It has increased for credit, special situations, and operating partner hires at private equity firms.
- Despite the headlines about the technology and consumer sectors, both remained active in hiring investors.
- Firms who we successful in raising capital in 2022 or 2023 now find themselves in an excellent position to bring on high-quality talent.
- A lack of succession planning at many PE firms is leading to new firms being created, a trend we expect to continue.
- Diverse candidates continue to be particularly sought after at all levels.
Compensation trends
- Compensation trends remained relatively steady between 2022 and 2023, with more increase than decrease; moving into 2024, however, we expect compensation to flatline.
- Bonuses are already under some threat: 11% of respondents reported a decrease in their bonus between 2021 and 2022, up from 6% who reported a decrease between 2020 and 2021.
State of the private equity market
After several years of growth, the private equity industry has started to reverse course this year as sustained higher interest rates, inflation, and more recently the threat of a government shutdown damped deal and exit activity.1
By the end of Q1 2023, quarterly exit value was down 75.1% from the peak in Q2 2021. Pitchbook further notes that quarterly exit activity is now well below the pre-Covid (2017 to 2019) median with no signs of bottoming, which indicates “that a new normal is firmly in place.”2 The Wall Street Journal reports that the value of exits in the third quarter fell almost 41% to $44.1 billion from the second quarter and was more than 80% lower than the peak reached in the second quarter of 2021, and the number of US exit deals fell about 46% in the third quarter from the comparable period a year earlier.3
Pitchbook also noted that, as of the end of June, US PE firms had completed an estimated 4,338 deals, with a cumulative estimated deal value of $418.3 billion. Deal count is still solidly ahead of pre-COVID levels, by 56.3%, but only marginally so by dollar value.4
Hiring trends
Overall, this year has seen a market that has flipped from candidate-driven to firm-driven. In 2021 and 2022, firms were growing and needed to recruit, creating an ultra-competitive talent market. Now, however, we are seeing a large supply of high-caliber candidates but significantly less demand.
In that context, the balance is shifting toward credit, operating, and special situation roles as firms focus on making sure their current portfolios are performing. In 2021 and 2022, there was a great deal of mid-level vice president and partner-level growth buyout work; this remains active, though less so. We also see more hiring at firms drawing on alternative sources of capital, as these firms have not faced the same fundraising issues as other firms.
There is still activity across every sector, except for traditional energy and exploration. Technology, particularly software, has been hit hard, and we are now seeing a tremendous amount of hiring activity due to firms changing strategies or replacing leaders.
Diversity, particularly gender diversity, continues to be top of mind for every firm. Firms have been successful in finding diverse candidates, but the talent pool of candidates from underrepresented communities is not necessarily growing; new candidates are not being brought into senior roles because industry leaders still want people who have prior PE experience. (That said, we do see diversity increasing at junior levels, which offers some hope for additional improvement in the future.)
Meanwhile, over the past five years, we have seen an increase in the number of first-time funds, many of which have been started because more junior partners feel that their firm’s founders are not creating a path for growth or creating meaningful leadership succession plans.
While our survey’s results show that there were no dramatic changes in compensation or how executives are paid, it is important to note that these studies are, by nature, backward-looking. Our sense for 2024 is that compensation will remain for the most part flat, with exceptions on both sides; though fundraising has been challenged, some funds have done well, and that will continue to be reflected in their high performers’ compensation.
Compensation trends
Overall, we have seen that firms that have historically underpaid their people have lost talent and have had to use the past few years to catch up. That said, the share of investment professionals who reported an increase in base pay decreased slightly: from 70% who saw an increase between 2021 and 2022 to 63% who saw an increase between 2022 and 2023.
The share reporting a rise in bonus remained steady, at 66%, compared to 67% in both 2022 and 2021’s survey respondents. The share reporting a rise in bonus of more than 50%, however, returned to the levels seen two years prior after a spike last year: down to 14% from 32% last year.
For full compensation data, download the full report.
About the authors
Jonathan Goldstein (jgoldstein@heidrick.com) is the regional managing partner of Heidrick & Struggles’ Private Equity Practice for the Americas; he is based in the New York office.
John Rubinetti (jrubinetti@heidrick.com) is a partner in the New York office and a member of the Private Equity Practice.
Acknowledgments
The authors wish to thank Mohd Arsalan for his contributions to this report.
References
1 Maria Armental, “Private-equity exits sink to one of lowest points in over a decade,” Wall Street Journal, October 11, 2023.
2 US PE Breakdown Q2 2023, Pitchbook, July 2023, p. 25.
3 Maria Armental, “Private-equity exits sink to one of lowest points in over a decade,” Wall Street Journal, October 11, 2023.
4 US PE Breakdown Q2 2023, Pitchbook, July 2023, p. 8.