Do people make a lot of money in private equity?
Private equity is a very lucrative career. As an asset class, private equity has enjoyed tremendous success over the past decade. Investors around the globe continue to pile their money into private equity firms.
Working at a Private Equity Firm
Given that a PE firm with $1 billion of assets under management (AUM) might have no more than two dozen investment professionals and that 20% of gross profits can generate tens of millions of dollars in fees, it is easy to see why the industry attracts top talent.
For the vast majority of first-year private equity associates, the base salary is around $135k to $155k. Then, based on fund performance, bonuses tend to range from 100% to 150% of the base salary.
Private equity professionals work long hours and are highly competitive and must think critically, and have a passion for financial investing deals, not just following the markets. Other requirements to start a career in private equity are: Excellent grades and a notable transcript in school.
One way is to sell the company at a profit after making improvements to its operations. Another way is to take the company public, which can generate a large capital gain for the private equity firm. Some of the world's richest people have made their fortunes through private equity.
but nowhere near as much as in management consulting. While the travel will be less, the work in private equity is very stressful and demanding, so the hours you actually spend working may be more stressful or mentally demanding.
Private equity investors also face greater market risk with their investments compared to traditional investments since there's no guarantee that any of the small companies in which private equity firms invest will grow at all.
Private Equity Career Training
PE firms are small, tight-knit, and full of extremely smart and highly motivated people.
| Position | Typical Time in Role | Bonus |
|---|---|---|
| Associate | 2 – 3 Years | $50k – $150k |
| Senior Associate | 2 – 3 Years | $100k – $200k |
| Vice President | 3 – 4 Years | $200k – $500k |
| Director | 3 – 4 Years | $250k – $600k |
Because private equity investments take a long-term approach to capitalising new businesses, developing innovative business models and restructuring distressed businesses, they tend not to have high correlations with public equity funds, making them a desirable diversifier in investment portfolios.
Is it harder to get into private equity?
Yes! Private equity is one of the most competitive jobs to get – period. Not just in finance, but across the board. Private equity firms have very specific requirements for their hire candidates, both for entry-level analyst positions and for higher-level job openings.
At many smaller funds and middle-market funds, you can expect to work 60-70 hours per week, mostly on weekdays, with occasional weekend work when deals heat up.
For a student looking to break into one of the top 10 PE firms, your chance is 1 in 300 or 0.33%. To break into one of the top 10 hedge fund firms, your chance is 1 in 147 or 0.68%.
If 90% of millionaires come from real estate, then 100% of billionaires come from private equity. And every month I acquire several new companies. We've gotten into the game of mergers, acquisitions.
Warren Buffett is known for his successful investments in the stock market, but he has also made significant investments in private equity firms.
| State | Annual Salary | Monthly Pay |
|---|---|---|
| California | $89,038 | $7,419 |
| Maryland | $88,832 | $7,402 |
| Tennessee | $88,240 | $7,353 |
| Utah | $87,969 | $7,330 |
Raising enough capital is extremely difficult, and a startup PE firm requires more capital than a startup hedge fund. There are no second chances if you fail. It's stressful and time-consuming, and you'll almost certainly take a pay cut when starting out.
Highest salary that a Private Equity Associate can earn is ₹45.0 Lakhs per year (₹3.8L per month). How does Private Equity Associate Salary in India change with experience? An Entry Level Private Equity Associate with less than three years of experience earns an average salary of ₹15.4 Lakhs per year.
Unlike in a hedge fund, where an investor could be responsible for dozens of positions and the law of large numbers will help one out, private equity investors do so few deals at a time that a bad deal or two could significantly hurt your career.
Private-equity firms typically run leaner operations than banks and so have less need to cut jobs during slowdowns. But some have laid off about 5% to 15% of their staff, said Sasha Jensen, founder and chief executive of Jensen Partners, an executive-search firm for alternative-asset managers.
Is private equity overrated?
“Private equity is still outperforming public equity, but this outperformance is narrowing as all markets benefit from nonstop monetary and fiscal stimulus, and as private acquisition multiples rise,” Michael Cembalest, the chairman of market and investment strategy at J.P. Morgan Asset Management, wrote in a report ...
Prospective private equity employees should understand this motivation and have a true interest in the process. Private equity careers present a prime opportunity for finance professionals to work with concepts on a long-term basis rather than in the context of “one and done” deals.
The 22 members on the latest Forbes 400 list who made their fortunes in private equity are now worth a combined $153.7 billion. Leading the list this year is Stephen Schwarzman, chairman and CEO of Blackstone Group, with a net worth of $37.4 billion.
It is no secret that private equity firms have a bad rap. They are often seen as ruthless cost-cutters who gut companies and lay off workers in order to make a quick profit.
| Annual Salary | Weekly Pay | |
|---|---|---|
| Top Earners | $241,298 | $4,640 |
| 75th Percentile | $187,500 | $3,605 |
| Average | $143,004 | $2,750 |
| 25th Percentile | $113,500 | $2,182 |
