1. Executive Summary 1,486 1,454 1,400 1,312 1,1521,169 1,200 1,083 1,089 972 No
Total Page：16
File Type：pdf, Size：1020Kb
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 © 2014 Preqin Ltd. 1 Executive Summary - Sample Pages 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 © 2014 Preqin Ltd. 2 Executive Summary - Sample Pages 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.