Finance

Private equity firms hike junior pay by 50% amid banker burnout crisis

Pay for junior private equity professionals in Europe has swelled by 52% over the past two years, showing the growing competition large investment banks face for talent in spite of recent salary hikes.

Private equity investment professionals with up to two years experience across Europe and Africa earned an average of €178,600 (£152,000) this year, according to new analysis from headhunters Heidrick & Struggles. This is up by 11% compared with 2020, but has swelled by 52% from the €117,300 paid out in salary and bonus in 2019.

Private equity firms vie for the best and brightest junior bankers, usually poaching them after one or two years’ experience in Europe and the buyside is known as a key so-called exit option for analysts and associates at top banks.

A surge in deals to record levels this year has pushed an already demanding job at banks into 100-hour+ weeks. This has led to a burnout crisis in the junior ranks and prompted banks to roll out special bonuses, salary hikes, hiring sprees and attempt to place new limits on working hours.

READ Banking exodus drives PE hiring spree: ‘I’ll earn more in private equity’

Salaries for first-year analysts at investment banks have increased from a average of £50,000 at most bulge bracket firms to £60,000 this year. Goldman Sachs now offers its first years £70,000, according to analysts, while boutiques including PJT Partners and Perella Weinberg Partners have hiked pay to the same amount. Bonuses have been around 100% of salary this year.

For private equity professionals with two to four years of experience, total compensation has increased by 42% over the past two years to an average of €213,350, according to Heidrick & Struggles. For those at the top of the tree, cash compensation has increased by 21% to €603,000 over the same period at the managing partner level, it says, but senior buyout professionals often earn the majority of their pay through carried interest or a share of the fund’s profits. The numbers were based on 439 respondents.

READ Why $100,000 a year still isn’t enough for 21-year-old bankers — ‘Banks need to worry’

In the UK, 68% of private equity firms surveyed by Heidrick & Struggles said they had increased pay from 2019-20, while 34% said they had over the past year.

An exodus of junior bankers has led to a surge in applications to private equity firms, with some specialist recruiters telling Financial News in June that they had seen double the number of inbound queries this year. Buyout firms have also responded by increasing junior recruitment, or expanding their graduate programmes.

The most recent focus on junior workload was sparked by a leaked presentation by a group of 13 Goldman Sachs analysts in San Francisco who outlined a pattern of 100-hour weeks, declining mental and physical health and threats to quit. The bank responded initially by increasing recruitment and automating more drudge work for juniors, but eventually followed rivals by hiking salaries to a global average of $110,000.

To contact the author of this story with feedback or news, email Paul Clarke

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