China PE compensation premium is shrinking - survey

Partners and managing directors and vice presidents in Australia and Singapore on average earn more than their counterparts in Greater China, while principals are not far off parity, according to Heidrick & Struggles' 2018-2019 Asia Pacific Private Capital Compensation Survey. Vice presidents and associates in Japan are also paid a premium to the same ranks in Greater China. Nevertheless, a substantial gap remains between China and the rest in terms of managing partner compensation.

“We believe the gains in compensation outside of Greater China reflect a number of factors, most notably rising deal activity in Southeast Asia, particularly Singapore; the industry’s maturation across Asia Pacific; and a paucity of talent with localized experience in the smaller markets,” Heidrick said.

Comparisons with previous surveys are problematic because the same investment professionals are not participating on a year-in, year-out basis, but in the 2017-2018 iteration – which didn’t break down its analysis by job title – only Australian executives earned more than those in Greater China. In 2016-2017, every geography trailed Greater China.

Average compensation levels – including base and bonus – continued to rise in Asia in general, reflecting the increases in deal sizes, fund sizes, and assets under management. A managing partner with a buyout firm received $1.24 million in 2019, with partners on $1.05 million, principals on $577,000, vice presidents on $401,000, and associates on $204,000. For the same roles in growth capital firms, the salaries are $1.75 million, $972,000, $459,000, $415,000, and $185,000.

The biggest increases over the past two years have been at vice president and associate level, with the additional compensation skewed towards bonuses rather than base. Heidrick said that hiring is especially robust for principals and vice presidents, which suggests that firms are looking to strengthen their middle ranks to position themselves for future growth. It also noted that there is more competition for talent, with LPs recruiting GP talent as well as emerging private equity firms.

Meanwhile, the historical compensation gap between venture capital and private equity has been closing in recent years in absolute terms. Managing partners made $844,000 in 2019, with partners and managing directors on $853,000, principals on $496,000, and vice presidents on $167,000. Associates – who earned $68,000 in 2019 – are the only ones not narrowing the gap.

Another trend is the dispersal of teams within certain geographies. For example, firms continue to use Singapore as a base in Southeast Asia, but they are opening offices in Indonesia, Thailand, and Vietnam to be closer to deal activity. For the same reason, more teams are located throughout China rather than just Hong Kong. “There is a shortage of professionals with the specific expertise, networks, and language skills required for success in these local markets,” Heidrick said.

Of the 215 survey respondents, 42% saw a year-on-year increase in their base salary in 2019, with 58% reporting no change. In terms of bonuses, 45% saw an increase, 49% reported no change, and 6% saw a decrease. For 2018 versus 2017, 45% received a higher base salary and 59% enjoyed a larger bonus. Nearly two-thirds of respondents expect a pay rise in the next 12 months.

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• Topics
• Greater China
• Southeast Asia
• Australasia
• North Asia
• South Asia
• People
• GPs
• Asia
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