December 3, 2023

Investment Banking

Let Your Investment Banking Do The Walking

Private equity firms hike junior pay by 30% to keep up with investment banks

Private equity firms have hiked pay by nearly 30% for juniors over the past year, as the buy-side faces pressure to keep pace with rapid pay inflation for investment banking analysts.

Investment professionals in Europe and Africa with up to two years’ experience in private equity were paid an average of €165,300 this year, according to new analysis by headhunters Heidrick & Struggles, up 16% on the previous year and 28% on 2020 when total compensation was €128,700.

Private equity firms typically hire junior staff from investment banks, poaching the best and brightest analysts from dealmaking teams after around two years.

But investment banks have hiked pay after a burnout crisis in the junior ranks over the past 18 months. Entry-level salaries for analysts in the UK have swelled from £50,000 at most large investment banks at the beginning of 2021 to £70,000 after at least two increases over that period.

Private equity firms have had to respond, according to Heidrick & Struggles.

“Cash compensation at the junior levels has been high, largely driven by the sources of talent for junior positions: as many private capital firms hire from investment banks, private capital firms are being forced to compete,” its report said.

Average base salaries for juniors in private equity were €97,960 in 2022, with bonuses at €69,6400, according to Heidrick & Struggles’ analysis, while 62% of respondents said they had increased salaries in 2022, compared with 38% a year earlier.

Investment banks have had to work harder to retain junior talent after a pandemic deal boom combined with remote working led to a surge in turnover. Juniors cracking under 100-hour weeks quit in droves last year, a trend that was thrust into the spotlight by a leaked presentation from a group of Goldman Sachs analysts outlining declining mental and physical health.

More recently, juniors have decided to stick with banking as exit options into technology and crypto have largely evaporated as those sectors have been struggling in the challenging economic climate. Banks have also started cutting junior jobs for the first time in years after bulking up on analysts and associates over the past year.

Similarly, the hiring boom in the UK private equity sector over the past 12 months has ebbed away, with recruiters saying that firms are becoming more cautious about taking on large numbers of analysts and associates.

From Financial News