Remuneration at European private equity firms has risen this year. A survey shows, however, that women in senior positions are earning significantly less than their male colleagues. What happens now?

For venture capitalists, 2023 has been an emotional roller coaster. Rising interest rates and geopolitical unrest brought an abrupt end to the sustained upturn in the private equity sector (PE).

The significant slump in deals and a weak market for IPOs are likely making this year one of the worst in the last decade. Even the sector giants were forced to scale back their ambitions for flagship funds this year.

A Rougher Climate

In the shadow of this scenario, however, one thing has certainly proven resilient: the salaries of PE managers. A survey of headhunters Heidrick & Struggles performed on 212 PE specialists shows that salaries in the sector are continuing to grow in Europe, in spite of the rougher climate. Admittedly, this growth is at a more moderate tempo than before, but still indicates a surprising resilience of the PE business model.

According to the survey, almost all levels of the hierarchy reported an increase in basic salaries and bonuses – with the exception of bonuses for managing partners and partners. So-called associates – the lowest level in this pyramid – recorded the greatest leap in wages in 2023: on average, wages increased by almost 13 percent to around 190,000 euros compared to the previous year. Meanwhile, the basic salary of the top managers increased from 307,000 to over 325,000 euros.

Certain Concessions

While associates and principles pocketed considerably more than in the previous year in terms of bonus payments as well, the top echelons have had to make concessions when it comes to their bonuses. With an average of around 321,000 euros, the bonus payments of the uppermost management level are nevertheless still respectable – last year’s figure was around 338,000 euros.

The striking thing here is that those surveyed outside of the United Kingdom reported lower basic salaries and bonus payments on average.

A Fight for Talent

In a slightly longer-term observation, the salary increase of associates is the most striking. Their overall cash remuneration has increased by an average of 20.7 percent per year over a three-year comparison.

According to the experts from Heidrick & Struggles, this remarkable increase can be traced back to the more intense competition for young talent among investment banks and corporate finance institutions, as well as to the increased demand for financial expertise in sectors such as technology and healthcare.

Invisible Income Gap

The wage inequality in the executive floors is also striking, however. The remuneration based on gender shows a clear gap in the top management levels. In 2023, women earned around 377,000 euros in salary and bonus. Their male colleagues brought home almost double as much with 631,000 euros.

The study states that the reason for this is that some of the top women do not work full time and only a few are founding partners, which has an effect on their remuneration.

It is positive news that on the lower levels, the salaries of men and women are almost the same. Here, women even earn slightly more than their male colleagues. This at least indicates that the wage equality between the genders on the top management levels should improve with time.

Have We Hit Rock Bottom?

After the very difficult start to the year, the activities in the PE sector recovered in the second half of the year. The transactions increased once more, as the businesses have a better overview of the interest rate development, and the macroeconomic volatility is coming back down.

In this context, the PE companies announced transactions to the value of $101 billion in the third quarter of the year, which is around the level of the first two quarters of the year, as shown by a current study by auditing firm EY. The number of transactions has certainly increased once more after the lowest point in the first quarter.