Once you’ve landed a job with a private equity firm, you can expect to experience some of the most interesting, fast-paced work in finance. The pay and benefits will be commensurate with this kind of work—but so will the pressure. Typically, private equity investments are high-stakes ventures; if you’re helping to manage a billion-dollar stake in a major company, you’ll be held responsible for the outcome.
At the analyst and associate levels, or in any support role, you can expect long hours—8 a.m. to 7 p.m. wouldn’t be seen as onerous. On the other hand, unless there’s something big pending, your weekends and vacation time can be your own. That said, if you’re supporting the dealmakers, and they’re deep in negotiations with a major publicly traded company, you’ll be expected to be right there with them on a Saturday night at 10:30 p.m.
In more senior positions, your day-to-day hours can actually be much more reasonable—8:30 a.m. to 6 p.m. in some cases—but you’ll also find the line between work and the rest of your life to blur considerably. Some of your meals will be spent working, while evening conference calls and the occasional late-night panic email will eat into what you once may have considered your private life. Travel will pick up considerably as well, no matter your role. You may have to fly out to Sacramento to convince CalPERS to invest in your fund, or head to Atlanta to finish a buyout deal, or tour a portfolio company’s facility in China looking for ways to improve productivity and cut costs.
It’s not like you won’t be able to take vacations, but since you’ll still be held responsible for outcomes in your absence, most high-level workers in private equity tend to schedule vacations carefully. If you’re in major negotiations for a deal right around Christmas, you may not be able to get away for the holiday. You’d be wise to schedule your summer trip after your portfolio company’s annual report to the fund’s board of directors.
For most high-level private equity employees, this lifestyle is par for the course. If you’ve worked on Wall Street in other capacities, you’re likely used to the trade-off. But if you’re just starting out and are eying a private equity career, bear in mind that your career can quickly become its own lifestyle—especially if you’re successful!
Pay and benefits
With billions of dollars at stake in each transaction, private equity firms are more than willing to pay for talent—so long as that talent executes properly. You can generally expect salaries, bonuses, and benefits to be at the high end of Wall Street pay scales. It’s not quite what hedge fund managers make, but it’s generally on par with the top investment banking salaries.
In the few entry-level positions available at private equity firms, you can expect to make a base salary of $60,000 to $75,000 as an undergraduate degree holder, and roughly $125,000 as a newly minted MBA holder. There are bonuses on top of that as well. Some firms have separate personal and companywide bonuses, while others combine them into one bonus. Typically, in your first few years you can earn 25 to 35 percent of your base salary in bonus money.
Once you’ve grown out of these support roles, or if you’re coming into a private equity firm with more experience, the base salary grows geometrically while your bonus money grows exponentially. Those who are in direct-action or supervisory roles can expect base salaries ranging from $250,000 to $1 million or more, depending on how closely they work with fund investors, dealmakers, or the portfolio companies. Their bonuses depend greatly on how well they manage their work. Did the dealmaker get the best terms for the fund? Did the fund raiser bring above-quota money into the fund for the year? Did the portfolio company manager cut costs and boost margins above projections? The bonus money for private equity professionals at the vice president, principal, or managing director levels can be anywhere from two to 10 times their base salaries.
Of course, like most Wall Street firms, private equity employers generally don’t skimp on other benefits. Medical, dental, and various insurance plans are generally very good. Some firms will also set aside up to 20 percent of base salary in a retirement fund—that’s on top of the base salary, not a cut into it. The retirement fund can, in many cases, be invested in the company’s private equity funds, giving workers an additional stake in their company’s success. Indeed, it’s worth noting that at the managing director level, most companies will take a cut of your bonus money and roll it into the fund for you. Given the outsized returns and personal stake in the firm’s success, few complain.
The above was adapted from the new Vault Career Guide to Private Equity.
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