When it comes to senior finance professionals in private equity real estate, the sweet spot for total pay packages is in the mid- to upper six-figure range, according to the results of a new compensation survey presented by executive search firm Sousou Partners at PERE’s CFO Forum 2013 in New York this week.
What's more, a large majority (77 percent) of the firms represented in the survey paid out carry in 2012, with 79 percent of the chief financial officers interviewed eligible to receive carry – a number that Hoda Tahoun, a partner at Sousou Partners, called “a sign of the times.” CFOs’ roles now are “very closely aligned with fund performance,” she noted during the presentation.
Rather than being focused solely on financial accounting and reporting, they’re also involved with investor relation assignments and responsibilities with clients, so their compensation now is tied to how the firm’s funds are performing, she elaborated.
Of the 60 professionals interviewed for the survey, the highest percentage (23 percent) earned $300,000 to $500,000 in total cash compensation, including base salary, bonus and carry, in 2012. The next largest group – accounting for 17 percent of participants – commanded $500,000 to $1 million. With an additional 43 percent earning between $100,000 and $300,000, the vast majority of respondents received remuneration in the six-figure range. Only 13 percent of participants had pay packages of more than $1 million, while 4 percent earned less than $100,000.
Base salary made up less than half of total compensation, with only 10 percent of participants getting paid more than $400,000 per year, according to the survey. Meanwhile, 37 percent of respondents received bonuses ranging between $55,000 and $99,000, and 23 percent saw bonuses of more than $250,000.
Twenty-seven percent of survey respondents held the title of CFO, while an additional 17 percent served as chief operating officer or controller. Fifty-six percent, however, held less senior financial or other roles at their respective firms.
More than three-quarters of participants came from private equity real estate firms, with private REITs, private equity fund of funds and operators rounding out the remainder. The majority of the firms were larger in scale, with 59 percent of respondents reporting 250 employees or more. Financial professionals, however, made up just a sliver of staff at those firms, as 79 percent of participants said their finance teams had 15 or fewer professionals and three percent identified themselves as their firms’ sole finance person.
In addition to compensation, Tahoun also discussed a number of hiring trends in the private equity real estate industry. Among survey respondents, the number one reason to pursue a new job opportunity this year would be higher cash compensation. However, 54 percent of participants identified other motives for seeking employment elsewhere, including a more active platform, a better capitalized platform and legacy issues.
“It’s not just always compensation,” Tahoun said. “People are asking smarter questions about the company that is potentially interviewing or approaching them. They want to know the track record of the company, they want to know the track record of the individuals, they want to know the track record of fundraising and where the investors are coming from.”
Another hiring shift in the past 18 to 24 months is that firms are seeking slightly more senior employees – junior vice presidents or vice presidents with three or four years of experience – rather than starting associates. Also, in the face of more intensive due diligence by investors, investor relations professionals are in high demand. “It’s no longer the smile-and-dial type of person that would work,” said Tahoun. “They want an IR individual that’s going to be able to answer very tough questions.”