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With a surge of new entrants into the sector from investment banks and private equity firms, and increased demand for their expertise, top private credit professionals are now among the highest-paid executives on the European buy-side. It has become.
Senior executives at European private financial institutions collected an average of 13.7 million euros last year, including salary, bonuses and interest, according to figures from executive search firm Heidrick & Struggles.
Figures for managing partners and partners working in the division show that remuneration consisted of a salary of 389,200 euros and a bonus of 710,000 euros, with the bulk of the salary coming from interest payments.
They have the highest salaries and bonuses of any senior executive in private capital, and only the hefty carryover interest earned by executives at major buyout companies puts them in second place overall.
According to Headhunter figures, the average income for executives at private finance companies in 2022 was €9.4 million. The jump in salaries in 2023 shows how demand for private credit expertise has soared as traditional investors and big banks enter the $1.8 trillion global sector. ing.
Buy-side firms such as Blackstone, Ares Management and Apollo Global Management have raised billions of dollars from investors to focus on private credit strategies. These include activities such as direct lending, mezzanine financing, and distressed debt investments.
read Regulators seek ‘level playing field’ before private market boom breaks out
In recent years, this has taken important business away from the banking sector, which often acts as an intermediary to sell fixed income products and leveraged loans. But investment banks are responding by launching their own private funds.
In late 2023, banks such as BNP Paribas, Citigroup, Goldman Sachs, JPMorgan, Morgan Stanley, and Nomura all entered private credit through their banking or asset management divisions.
The boom has come under intense regulatory scrutiny from watchdogs in the United States as well as the United Kingdom because of the opaque nature of the market. Lee Folger, director of financial stability, strategy and risk at the Bank of England, said in a letter on 29 January that “there are significant challenges in obtaining reliable data to monitor private credit risks”. Ta.
But the increased attention from regulators has not yet slowed new product launches, while compensation for junior staff has gradually increased.
Anna McLeod, a consultant specializing in credit in private equity recruitment, said: “The market is very focused on private credit professionals, particularly at mid-to-senior levels in Europe, and companies are building teams. I can see it starting to happen,” he said. . “But it’s still a very competitive market for talent.”
She said pay to associates in private credit – typically the point at which junior bankers move to the buy-side – had remained “steady” at around £100,000 to £120,000.
McLeod said salaries in investment banks are typically on the lower end, with junior staff receiving total remuneration of between £150,000 and £300,000, including sign-on bonuses, annual variable pay of up to 1.5 times salary and opportunities. added. To earn carryover interest that biases compensation toward acquisition funds.
“We are clearly seeing growth in this area,” said the European head of a large private credit fund, declining to go on the record. “We are focused on special situations and continue to hire. But in direct lending, I don’t think there will be much need for headcount beyond current levels because of the size of the business.”
read Private credit is not a panacea for Europe’s capital market woes
First-year employees at a major UK investment bank earned an average of £174,459 in total compensation in 2022, according to the latest figures available from recruiter Dartmouth Partners.
Oliver Noy, head of credit at PER, said that while most junior employees entering private credit come from the leveraged finance divisions of investment banks, there is now “a real mix” of different backgrounds. Stated.
“Normally people leave the banking industry for a raise, but there is a lot of redundancy in the banking sector, which is freeing up talent,” he said. “Credit funds are still very selective about who they take on because there are many candidates in the market.”
But European leaders warned that salary increases were a byproduct of companies looking to retain existing talent rather than bidding for new hires.
“We’ve raised a lot of money, but if we had $6 billion and now we have $8 billion, we don’t need more people,” he said.
To contact the author of this article with feedback or news, email Paul Clarke
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