“Private equity has had a bad year, but that doesn’t mean lower pay for people in the industry. 

Private-equity investment professionals expect their total cash compensation to be 13% higher this year than last year, according to a survey by Odyssey Search Partners, a New York firm that assists asset-managers with employee search and hiring.

Nearly half of survey respondents either have contractually guaranteed bonuses or have already been told what their payout will be, so they have good reason for optimism, said Anthony Keizner, an Odyssey managing partner.

Bonuses in private-equity don’t follow the feast-or-famine dynamic seen in investment banking or hedge funds, where pay falls sharply in down years and inflates in good, he said. Private-equity salaries and bonuses are paid from management fees, generally a steady income source that is locked in and predictable over several years.

“In some parts of the corporate world, a tough year would immediately translate to lower compensation. It’s different in private equity,” Keizner said.

For the long term, however, “there is more uncertainty than people are letting on,” he said, noting there is a cloud over prospective profits from carried interest—private-equity managers’ share of deal proceeds—because of a slowdown in mergers and acquisitions. Keizner said that some employees are trying to negotiate higher guaranteed cash compensation, reflecting the uncertainty of carried interest. 

“Nobody’s getting carry checks. But if we’re just talking about cash compensation, you’re fine,” said John Rubinetti, a partner at executive-search firm Heidrick & Struggles.

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Private equity has long been one of the most highly paid sectors of the U.S. economy. Top earners take home astronomical sums even by Wall Street standards.

In 2021, a year of blowout pay across the financial sector, the chief executive of Blackstone, the world’s largest private-equity manager, took home $1.1 billion, while the CEO of JPMorgan Chase, the largest U.S. bank, earned $34.5 million.

But private equity entered a new era when the Federal Reserve began raising interest rates in March 2022. The buyout business model has depended on financing deals with cheap debt for more than a decade. Many in the industry now wonder whether future results can match those of the past. 

Buyout firms have struggled to raise money and sell assets over the past 18 months. Private-equity fundraising had its worst three-month period this year in five years, and asset sales in the third quarter approached their lowest level in more than a decade.

Asset sales are the big question mark for future pay, said Keizner, because the biggest income stream for top private-equity staff flows from carried interest rather than salary and bonus.

On the other hand, cash compensation—how people in the industry refer to salary and bonus—has remained remarkably steady through a downturn stretching to a year and a half.

Bonuses are handed out at the end of the calendar year but often communicated in advance. Among private-equity professionals who already know what this year’s bonus will be, the biggest gains have shown up among those in more junior roles, the Odyssey Search Partners survey shows.

Analysts expect a median pay bump of 21%. Higher-ranking workers expect less, with principals anticipating an 8% increase. Managing directors and partners expect pay to be flat—though at a median of $1 million.

The reason for the discrepancy is that lower-level employees typically have fixed, negotiated compensation, while upper-level management pay depends more on fee streams, which ebb and flow.

“People in the management company will be affected the most,” Rubinetti said. But “nobody is really panicking.” 

Cameron Boland, president of recruiting firm GoBuyside, said top private-equity performers are still being aggressively recruited at all levels, which helps bolster cash compensation for lower-ranking professionals. 

“Compensation is driven by supply and demand in talent,” Boland said. “It will take a more significant downturn for [employees] to feel significant pain.”

The industry’s long-term pay structure and the stability of fees over time means firms are unlikely to make major changes based on one bad year.

“You can’t lose your talent today because you had a down year,” Boland said. “The market could look very different in two years, just like we see looking back two years ago.”"“

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