Special situations specialists in demand in Europe – Exclusive

Demand for new private equity fundraising professionals in Europe has generally slowed as a result of the challenging investment environment, but specialist managers have become increasingly sought after, according to the results of a private capital compensation study published by Heidrick and Struggles.

“Replacement hiring, especially of top-performing quarterbacks, continues apace. Growth in special situations has led to an increase in demand for proven professionals who are effective in a cross-capital structure investment environment,” Richard Thackray, Partner at Heidrick and Struggles told pfm.

The UK’s vote to leave the EU has played a big part in this shift, creating a period of uncertainty in the market which is not expected to ease over the medium term.

“At the same time, pressure is building across the private capital industry; there are record levels of dry powder, but with a ‘pricing gap’ between sellers and buyers expectations. Merger and acquisition activity is at its lowest since the global economic downturn,” Thackray said.

This combination has reduced demand from traditional GPs for fundraising and investment professionals in the European market, which isn’t expected to ease up in the medium term.

“The date on which the UK will formally start its exit process from the EU has only just been announced. This will extend the period of ambiguity and will continue to impact investment and hiring decisions over the medium term.” Thackray said.

Paying up

In terms of compensation, 41 percent of respondents said their base salary had increased compared to a year earlier, while 48 percent reported an increase in their bonus payments from 2015.

The data remained consistent with that accrued since 2013, indicating both salaries and bonus payments were on an upward trajectory across all experience levels.

Of those surveyed, base salary compensation levels for managing directors and principals was highest in distressed funds for the first time since the survey began. Pay averaged €350,000 and €160,000 for the two groups.

Buyout funds were found to pay the highest salaries, averaging €307,000 at partner level and €180,000 at principal level, with continued demand for credit professionals maintaining high compensation levels across the strategy.

Geographically, the UK is the most highly compensated market in Europe – taking the top spot from Switzerland. Germany is the only country in which juniors are paid more than their London peers.

Principals in Southern Europe, and managing directors in Benelux, also out-earn their equivalents in the UK.

The findings of the survey, which has been running for the past four years, are based on responses from 454 executives working in the European private capital industry, and the full results are available to view here.