The outlook for compensation for private equity executives has worsened in the past 18 months, according to a survey of buyout professionals demonstrating the increased fears about lower pay in the sector.
In a survey carried out by Investec Fund Finance, the private equity finance arm of investment bank Investec, fewer individuals are expecting to receive profits from their firms’ funds.
The survey of more than 100 senior executives, predominantly at mid-market firms, found the proportion of individuals at UK private equity firms expecting to receive carried interest – pay from successful exits – dropped to 76% from the 83% recorded 18 months ago.
The survey also showed one in four people were completely reliant on carried interest as a means of investing in future funds. Individuals at buyout firms personally invest in their firms’ funds. Private equity firms take 20% of a fund’s profits after returns rise above 8%.
The research has come amid concern that deals carried out at the top of the market will fail to deliver returns due to over-leveraging and the high prices paid in the boom years of 2005 to 2007.