1. Executive Summary 1,486 1,454 1,400 1,312 1,1521,169 1,200 1,083 1,089 972 No

Executive Summary - Sample Pages

The 2015 Preqin Private Equity Compensation and Employment Review Fig. 1.1: Annual Private Equity Fundraising, 2000 - November 2014

1,600 1. Executive Summary 1,486 1,454 1,400 1,312 1,1521,169 1,200 1,083 1,089 972 No. of Funds Private Equity Fundraising on Track some improvement, particularly recently, 1,000 959 862 852 Closed fundraising levels are still not growing at 816 800 706 685 Private equity fundraising has gained the rate they grew pre-2008, and therefore 630 667 600 556 543 526 Aggregate momentum in recent years, with increasing it is unsurprising that the number of active 428 Capital Raised 362 389 amounts of capital raised each year since private equity fi rms has experienced a 400 318 296 342 ($bn) 238 2010. As of early November 2014, funds similar pattern, with the annual growth in 173 218 200 137 106 closed in 2014 had raised $428bn, $60bn the number of active fi rms tapering in recent more than in the equivalent period in 2013, years. A mix of factors have led to this: 180 0 though this was secured by 96 fewer funds fi rms are deemed to have become inactive than in 2013 (Fig. 1.1). As this suggests, in 2014 (meaning they have not raised a 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 average fund sizes have increased. In fact, fund in the past 10 years) and 2014 saw the Jan-Nov capital raised in 2014 YTD has already lowest number of new private equity fi rms Year of Final Close exceeded the amount raised in 2012 launch in any year since 1998. ($389bn) but this was across 336 fewer Fig. 1.2: Number of Active Private Equity Firms over Time (By Vintage of First Fund Raised) funds. The $428bn raised so far in 2014 is The 2014 data only includes fi rms that just 19% behind the $526bn raised across have reached a fi nal close or at least one the whole of 2013, and with two months left interim close on their debut funds in order 6,000 of the year and with signifi cant numbers of to begin making investments. It is possible funds expected to close in this time, 2014 that uncertain economic conditions, in 5,000 looks set to be another strong year for conjunction with the challenges faced by private equity fundraising. fi rst-time fund managers in the private 4,000 equity fundraising market, may be New Number of Active Private Equity Firms impacting the number of new private equity 3,000 fi rms choosing to bring vehicles to market. Existing Fig. 1.2 shows the continuous growth in Preqin has previously noted the increased 2,000 the number of active private equity fi rms disparity between the amount of capital No. of Active Firms over time. The pace of this growth has secured by those larger, more established 1,000 declined; this can be tied to the diffi culty managers and those that are raising debut in raising capital for private equity funds in private equity funds. The majority of capital 0 the wake of the global fi nancial crisis. While raised for private equity funds has always fundraising has, as we have seen, shown been accounted for by the larger fi rms, but 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Vintage Year

the industry has seen the gap widen and do not raise or have not yet raised distinct Fig. 1.3: Average Number of Staff by Firm Assets under Management the proportion represented by fi rst-time private equity funds (i.e. those that manage fund managers has declined signifi cantly. corporate or personal capital and those 140 133 that manage third-party capital without 118 120 Chapter 3 of the 2015 Preqin Private Equity pooling into commingled private investment 105 Compensation and Employment Review vehicles) are included, the total number of 100 Average No. of Employees takes a closer look at how these trends active fi rms under consideration increases 80 differ by fund type and by geographic to 9,000. In total, these fi rms employ an 66 60 54 location. For example, some strategies, estimated 125,000 people, with buyout, Average No. of such as growth and distressed private venture capital and real estate fi rms 37 Employees per 40 28 equity, have seen a greater increase in the representing an estimated 67% of the total 23 25 $1bn AUM 20 16 15 number of active fi rms than has been seen employment of the private equity industry. 6 among other strategies. 0 Preqin’s analysis of employment in the Employment Levels at Private Equity private equity industry, discussed in $10bn or More $250mn

Firms $5-9.9bn

Chapter 4, shows the positive correlation $1-4.9bn Less than between the number of staff employed by $250-499mn $500-999mn There are currently almost 6,000 fi rms a fi rm and its assets under management. Firm Assets under Management actively managing private equity funds Fig. 1.3 shows that fi rms with the largest worldwide. When private equity fi rms that assets under management (AUM) of $10bn

Fig. 1.4: Breakdown of Average Firm-Wide Changes in Base Salaries of Participating Firms Fig. 1.5: Proportion of Participating Firms Reporting an Increase, Decrease or No Change in between 2013 and 2014 Bonus Payouts for Performance in Calendar/Fiscal Year 2013 Compared to Previous Year

60% 55%

50% 11% 26% 40% Increase in Bonus Payouts

30% 30% No Change in Bonus Payouts 20% Decrease in Bonus Payouts 10% 7% Proportion of Participating Firms 4% 3% 2% 63% 0% Decrease No Change 1-10% 11-20% 21-50% More than Increase Increase Increase 50% Increase

or more have an average of 118 staff. This $1bn or more that is double the median base Fig. 1.6: Breakdown of When Participating Firms Make Promote/Carried Interest Award equates to an average of six employees per salary of an individual in the same position Payments by Investment Strategy $1bn of AUM. The staff costs are covered at a ﬁ rm with assets under management 100% 0% 3% 5% 10% 7% 11% 5% by the income received from charging of $150mn. Similarly, a managing general 90% 9% 22% Other 5% management fees to their investors, which partner in a ﬁ rm headquartered in the US 80% 45% 22% 32% At the end of the life of 30% 45% are usually based on a percentage of makes on average $84,000 more a year 70% 22% 47% the fund 60% 15% 5% investor commitments. than the same position in Europe. 10% Annually (e.g., at the 50% 9% 11% end of the year)

Firms 10% 40% 81% 7% As in previous years, funds with smaller Chapter 7 of the Review lists detailed 30% 59% At the sale of the AUM have a much higher average number benchmark compensation fi gures 50% 52% 20% 45% 44% 40% 40% investment when the of staff per $1bn of their AUM, despite for different positions at participating 10% promote/carried interest having lower average numbers of staff. fi rms. The tables in this chapter include Proportion of Participating 0% is generated Preqin’s latest data shows fi rms with AUM fi gures for base salary, total annual cash of less than $250mn have 16 employees compensation, long-term incentive/carried Other on average, but have an average of around interest awarded and total remuneration Buyout

130 staff members per $1bn of their AUM, data for 60 different positions, including all Mezzanine Real Estate Distressed Infrastructure Private Equity

a much higher fi gure than the average for levels of seniority for deal-making positions, Fund of Funds funds with AUM of $10bn or more. Smaller as well as senior executive, administrative/ Venture Capital sized fi rms may have fewer employees, but corporate positions, and positions specifi c with their management fees charged on to real estate management, including smaller amounts of investor commitments asset and portfolio management and small proportion (2%) of participating pool in calendar/fi scal year 2013 compared compared to the larger private equity fi rms, transactions. Where possible, in addition fi rms reported a decrease in base salaries to 2012. the operating economics of the largest to the aggregate fi gures, the information is between 2013 and 2014, while a substantial funds, with higher income from management broken out by assets under management, 30% reported no change. The largest It is evident that compensation practices fees, are often more favourable for their geographic market, and the strategy proportion of participating fi rms (55%) vary by the location or size of a fund. managers. employed (buyout, venture capital, reported an increase in base salaries that Fig. 1.6 details the methods employed infrastructure etc.). Figures are provided for ranged between 1% and 10%. by participating fi rms focused on different Compensation on an Individual Level the 25th percentile, median, average and strategies to make promote/carried interest 75th percentile benchmarks in each case. The majority (63%) of participating fi rms award payments. Exactly half of the fi rms The operating economics, which vary also largely reported no change in their that operate a distressed & special situations by a fi rm’s assets under management or Compensation on a Firm Level bonus pool size in the calendar/fi scal year strategy make award payments at the geography, also impact the remuneration 2013 compared to 2012 (Fig. 1.5); last year, sale of the investment when the promote/ available to individuals at each private equity In addition to this individual data, the the proportion that reported no change in carried interest is generated, which is in fi rm. For example, a managing general Review also contains detailed analysis of their bonus pool size was 20 percentage line with the corresponding proportions of partner at fi rms participating in the survey the compensation practices at participating points lower at 43%. Over a quarter of participating fi rms active in funds of funds conducted for the 2015 Preqin Private private equity fi rms. Fig. 1.4 shows a participating fi rms (26%) reported that (45%), infrastructure (44%), mezzanine Equity Compensation and Employment breakdown of average fi rm-wide changes bonus pool sizes were increased at their and real estate (both 40%), venture capital Review could have a median base salary in base salaries at participating fi rms fi rm compared to the previous year, with (59%) and other strategies (52%). Buyout at a fi rm with assets under management of between 2013 and 2014. Only a very just 11% reporting a reduction in their bonus fi rms are the only outlier in terms of when

the promote/carried interest award payment is made; 81% of participating buyout ﬁ rms followed this timing, while only 9% make award payments at the end of the life of the fund, below the average of 35% for all other fund types.

The 2015 Preqin Private Equity Compensation and Employment Review

In order to analyze the latest trends in compensation in the private equity industry, Preqin, in conjunction with FPL Associates, conducted a survey of over 200 leading private equity fi rms to collect data on their compensation practices and remuneration levels, for which we are grateful to the participating fi rms. This has allowed us to compile meaningful statistics covering a wide range of different types of position at these fi rms, from senior executives through to junior-level professionals.

Another key feature of this publication is the information on employment within the private equity industry worldwide. Preqin’s databases allow us to provide meaningful estimates on levels of employment, and to break this down by main ﬁ rm strategy and ﬁ rm size. We hope that this publication serves to provide an understanding of the levels of employment and remuneration standards across the industry, and as ever we welcome any feedback you may have.

Contents 1. Executive Summary 7 7. Individual Compensation by Position 39 Benchmarks of (25th percentile, median, average and 75th percentile of) base salary, total annual cash compensation, 2. Data Sources and Contributors 11 long-term incentive award plus carried interest award, and total remuneration for:

Global Positions - Deal-Making Evolution of the Industry - Growth in Number of Active 3. 13 - Managing General Partner/CEO Firms over Time - Senior Managing Director/Advisor - Managing Director/Partner Private equity fundraising over time; number of active ﬁ rms over - Director/Principal time; number of active ﬁ rms over time by location and strategy - Senior Associate - Associate 4. Current Employment in the Industry 19 - Analyst

Total worldwide employment in the industry; employment by Global Positions - Administrative/Corporate strategy; employment by fi rm assets under management; number of employees per $1bn in assets under management; share of total - Chief Operating Officer industry employees by fi rm size - Chief Financial Officer - Chief Compliance Officer General Company and Financial Information of 5. 21 - Controller Participating Firms - Corporate Accounting Manager - Senior Corporate Tax Executive Average number of employees by region; types of funds - Executive Assistant sponsored; geographical markets in which assets are managed; - Administrative Assistant average breakdown of assets under management by strategy; - Administrative/Office Manager average number of employees involved with and receiving carried - Head of New Business Initiatives/Product Development interest from funds/accounts - Head of Investor Relations/Capital Raising - Senior-Level Investor Relations & Capital Raising Professional 6. Compensation Practices at Participating Firms 27 - Mid-Level Investor Relations & Capital Raising Professional - Junior-Level Investor Relations & Capital Raising Professional Changes in base salaries from 2013 to 2014; changes in bonus - Heading of Investor Reporting payouts for performance in 2013 compared to previous year; - Mid-Level Investor Reporting Professional employee eligibility for carried interest awards; how carried - Junior-Level Investor Reporting Professional interest awards are obtained; methods used to grant carried - Director of Financial Reporting interest awards; how carried interest awards vest; average vesting - Head of Portfolio/Fund Accounting schedules of carried interest awards by geographic market; - Portfolio/Fund Controller when carried interest award payments are made; what happens - Portfolio/Fund Accounting Manager to vested and unvested interests under various employment - Staff Accountant – Portfolio/Fund termination scenarios; co-investment programs; additional - Chief Human Resources Officer benefi ts/perquisites; paid time off - Human Resources Manager - General Counsel - Associate General Counsel - Paralegal - Head of Research - Mid-Level Research Professional - Associate - Research - Analyst - Research - Senior Accountant - Staff Accountant - Head of MIS/IT - MIS/IT Manager

Real Estate Positions - Asset Management

- Head of Asset Management - Senior-Level Asset Management Professional - Mid-Level Asset Management Professional - Associate - Asset Management - Analyst - Asset Management

Real Estate Positions - Portfolio Management

- Head of Portfolio Management - Senior-Level Portfolio Management Professional - Mid-Level Portfolio Management Professional - Associate - Portfolio Management - Analyst - Portfolio Management

Real Estate Positions - Transactions

- Head of Transactions - Senior-Level Transactions Professional - Mid-Level Transactions Professional - Associate - Transactions - Analyst - Transactions

8. Figure Index 125

Contributors

Below is a list of participants in this year’s survey. The list does not include all 202 participants, as some companies prefer that their names not be listed. The participants listed below gave approval to list their names as participants.

- ABS Capital Partners - Forum Partners - Rockwood Capital - AEW Europe - Georgian Co-Investment Fund - Sarona Asset Management - AIIM - GI Partners - Satori Capital LLC - Altius Associates Ltd - Grey Rock Energy Management - StepStone Group - Ampersand Capital Partners - Grotech Ventures - Terra Firma Capital Partners - Amundi Private Equity Funds - Hemisferio Sul Investimentos S.A. - The Catalyst Capital Group Inc. - Arborview Capital - Ignition Partners - The Sterling Group LP - Arcadia SGR - Illuminate Ventures - The Wolff Company - Argan Capital - Insight Equity - Tower Arch Capital - Berkshire Property Advisors, LLC - JCM Capital - Trident Capital - Birch Hill Equity Partners - JPB Partners, LLC - True North Management Group - Bridge Property Management - Kaete Investimentos - UBS Global Asset Management - Broadreach Capital Partners, LLC - LaSalle Investment Management - Value4Capital - Cantor Fund Management - Lowe Enterprises Investors - Virtus Real Estate Capital - Carmel Partners - Madrona Venture Group - Vivo Capital LLP - Catalyst Principal Partners - Mekong Capital Advisors Company - Vortus Investments - CBRE Global Investors Limited - WHI Real Estate Partners - CHS Capital LLC - Meridiam - CITIC Capital Holdings Limited - MicroVest Capital Management, LLC - Colony Capital LLC - MITA Ventures - Corporación Mexicana de Inversiones - Moringa Partnership de Capital, S.A. DE C.V. - New Harbor Capital - CrossHarbor Capital Partners LLC - New Leaf Venture Partners - Delta Partners - Novus Energy Partners - dfe Partners GmbH - Occasio Funds, LLC - Development Partners International - Omnes Capital - Eureka Growth Capital Management, - Radius Ventures, LLC L.P. - Ram Realty Services - F.N.B. Capital Partners, LP - Renaissance Venture Capital Fund - Federal Capital Partners - Rockland Capital, LLC

5. General Company and Financial Fig. 5.1: Private Equity Fund Types in Which Participating Firms Are Involved

40% Information of Participating Firms 35% 34%

30% 27% 25% 23% This section of the Review provides general had classifi ed themselves as institutional. 20% 18% Firms company and fi nancial information of the 15% 10% private equity fi rms that participated in Geographically, two-thirds (67%) of 10% 9% 8% 8% the study. The next section, Chapter 6, participating fi rms have offi ces in the 5% looks at the rest of the company survey US (Fig. 5.2). Just under a third (29%) of Proportion of Participating data, including examination of how fi rms participating fi rms have offi ces in Europe, 0% structure their remuneration, base salaries, while 16% have a physical presence in incentives and more. Chapter 7 provides the Asia-Pacifi c region. Many fi rms will Other Buyout Capital more detailed individual compensation have offi ces in multiple regions as they Venture Mezzanine Real Estate analysis by position. are pursuing a globally diversifi ed strategy. Distressed Infrastructure Private Equity Private Only 4% of participant fi rms have an offi ce Fund of Funds Fund Type Demographics in South America. Other regions include Africa, Central America and the Middle East. Fig. 5.1 provides a breakdown of the private Fig. 5.2: Geographic Regions in Which Participating Firms Have Office Locations equity fund types that the participating The average gross managed assets of fi rms are involved in and shows that some participating fi rms in each region are shown participant fi rms are involved in multiple in Fig. 5.3. Europe-based fund managers 80% investment strategies. The greatest represented the highest proportion (38%) 70% 67% proportion (34%) of fi rms are involved in of fi rms with gross managed assets above 60% buyout funds, with real estate and venture $1bn, nine percentage points higher than 50% capital being the next most prominent fund the US. Australia and South America have types, making up 27% and 23% respectively. the highest proportions of smaller investors, 40% 29% Ten percent of the participants are involved with 40% and 38% of participating fund 30% in mezzanine, 9% in distressed & special managers in these regions having gross 20% 16% situations, 8% in funds of funds, and 8% in managed assets below $50mn respectively. 12% 10% 5% 4% infrastructure. Almost a fi fth of participants

Proportion of Participating Firms 0% (18%) are involved in funds described as Employment Levels ‘other’, which consists of strategies such as US debt, growth strategies and secondaries. Of Fig. 5.4 shows the mean and median Other Europe South Australia the ﬁ rms that participated, 77% said that they number of employees from participating America are independent, while the remaining 23% ﬁ rms based in various regions. Participating Asia-Pacific Geographic Region

Fig. 6.1: Breakdown of Average Firm-Wide Changes in Base Salaries of Participating Firms 6. Compensation Practices at between 2013 and 2014

60% Participating Firms 55% 50%

40% This chapter analyzes the latest trends in at the breakdown of projected increases, base salaries and incentives, as well as 56% of fi rms are envisioning average 30% detailing how companies structure elements increments of between 1% and 10% in base 30% of their remuneration. salary, 9% anticipate 11-20% rises and 3% expect 21-50% increases. 20% Base Salaries Promotional Increases 10% 7% Fig. 6.1 shows that 55% of participants in the Proportion of Participating Firms 4% 2% 3% most recent compensation and employment Naturally, the size of promotional increases 0% survey reported a 1-10% increase in base will vary depending on a number of micro Decrease No Change 1-10% 11-20% 21-50% More than salaries between 2013 and 2014, making and macro factors. Weak performance Increase Increase Increase 50% Increase this the most common size interval by which or volatility in the market will generally base salaries increased in the past calendar lead to low promotional increases, if any year. Most survey respondents stated that at all. Indeed, results show that 49% of Fig. 6.2: Breakdown of Projected Average Firm-Wide Changes in Base Salaries at base salaries increased across the fi rm, with participating fi rms stated that no employees Participating Firms between 2014 and 2015 11% of companies reporting an average in their respective companies were promoted rise of 11-50%. However, almost a third of between 2013 and 2014, perhaps indicative 60% 56% participating fi rms stated no changes were of the tough fi nancial environment in which made and just 2% reported a decrease in these participants found themselves (Fig. 50% base salary in the defi ned time period. 6.3). In 2013, a fi fth of participating fi rms had less than 10% of employees receiving 40% Firms were also asked for the average a promotional increase, 26% of fi rms had projected percentage change in base salary 10-20% of their staff receive a promotional 31% 30% for the company overall between 2014 and increase and 5% had a signifi cant 21-50% 2015. The results, summarized in Fig. 6.2, of their employees awarded a promotional are largely similar to the actual changes increase. 20% recorded between 2013 and 2014. Again, 9% the majority fall in the 1-10% increase Results show that the mean promotional 10% Proportion of Participating Firms category. Around 30% forecast no change increase with respect to base salary 3% 1% 0% in the average base salary and very few are between 2013 and 2014 was 16.8%, and 0% expecting a decrease in packages. Looking the median was 15.0%. Decrease No Change 1-10% 11-20% 21-50% More than Increase Increase Increase 50% Increase

Typical Years of Experience Typically Reports To Alternate Title(s) Typical Education Managing Director/Partner Minimum of 10-15 Managing General Partner, Board(s) Executive Director Advanced

Has a significant financial or operation background. Skilled dealmaker who collaborates on transactions. Sits on company boards and keeps track of them once they are a part of the portfolio, and subsequently prepares an exit strategy.

Base Salary Total Annual Cash Compensation 25th 75th 25th 75th Median Average Median Average Percentile Percentile Percentile Percentile Aggregate Under $150 Million $150 Million - $399.9 Million $400 Million - $1 Billion Assets under

Management Over $1 Billion

Asia/Pacific Africa/Middle East Central/South America Europe Market

Geographic United States Other

Distressed & Special Situations Fund of Funds Infrastructure Leveraged Buyout (LBO) Mezzanine Type of Fund Real Estate Venture Capital

Average Target Annual Incentive (% of Base Salary) - 25th Percentile Median Average 75th Percentile Job Description Degree of Match Calendar/Fiscal Year 2014

Long-Term Incentive Award + Promote/Carried Interest Award Total Remuneration 25th 75th 25th 75th Median Average Median Average Percentile Percentile Percentile Percentile Aggregate Under $150 Million $150 Million - $399.9 Million $400 Million - $1 Billion Assets under

Management Over $1 Billion Asia/Pacific Africa/Middle East Central/South America Europe Market

Geographic United States Other Distressed & Special Situations Fund of Funds Infrastructure Leveraged Buyout (LBO) Mezzanine Type of Fund Real Estate Venture Capital

Average No. of Funds Currently Average Average Promote/Carried % of GP’s Share % of Management Team’s Share Number of Direct Reports Participating In Interest Allocation - Most Recent Fund(s)

Produced in collaboration with leading compensation specialists FPL Associates, the 2015 Preqin Private Equity Compensation and Employment Review is the industry’s most comprehensive guide to compensation practices. The Review includes detailed information for 60 diff erent positions, including 15 real estate-specifi c positions, using data on thousands of employees actively employed by over 200 leading private equity fi rms worldwide that have contributed data. A source of reliable and accurate information on the latest trends in private equity compensation and employment is a vital tool for decision-makers and advisors, enabling them to examine existing compensation practices against wider industry benchmarks.

Key content includes: The 2015 Preqin Private Equity Compensation and Employment Review • Compensation data by position, including base salary, bonus, carry, and quartile splits.

• Compensation data split by fi rm type, region and size where possible.

• Survey of compensation practices at private equity fi rms. In association with:

alternative assets. intelligent data • Current employment within the private equity industry. www.preqin.com/compensation • Growth of the industry.

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