Staff sizes are growing. What about bonuses?

Early insights into the MM&K 2020 PE and VC Compensation Survey from director Nigel Mills.

Nigel Mills
Nigel Mills: ‘One would have expected many more firms to be cutting bonus levels’

MM&K is in the midst of conducting its 2020 UK and European PE and VC Compensation Survey and is seeing some interesting trends coming through from the submissions so far.

It has been most encouraging to see so many European private equity and venture capital firms reaching final closes on their latest fundraisings in recent weeks and months. It also appears deal activity is on the rise again as PE firms have begun to have greater confidence in an eventual economic recovery in the UK and mainland Europe.

The combination of these factors has, it seems, encouraged firms to take a bullish view of the near-term future, and this is borne out by some interesting statistics coming out of our survey.

Almost two-thirds (63 percent) of participating firms have indicated they have increased the size of their investment teams in 2020 and 57 percent have increased the number of their back-office staff. And, looking forward, 64 percent of firms anticipate increasing the size of their investment teams in 2021. Only a very small number (8 percent) expect to see a reduction in investment professionals in 2021.

Bonus time

Earlier in the year I commented on the fact some firms had indicated they were reducing their bonus levels in 2020, partly with a view to needing more cash to help in their recruitment efforts. We have not yet been able to analyze the extent to which this is true, but it is interesting to observe that two-thirds of firms expect to see bonus payments for 2020 performance remain pretty much at the same levels as 2019. One would have expected many more firms to be cutting bonus levels given the low amount of PE and VC deal activity since March.

As far as salaries are concerned, a significant majority of firms (86 percent) are expecting to increase the salaries of their investment professionals at the next review date. This is less of a surprise as firms will continue to strive for having attractive base pay levels to ensure they are able to retain and recruit the best talent. Having said that, the expected levels of salary increases are fairly modest, with 5 percent for investment staff and 3 percent for back-office staff.

All the evidence we are seeing suggests the UK PE and VC market remains in good health and is optimistic about what the future holds for 2021.

MM&K has launched its 25th annual Compensation Survey for the European Private Equity and Venture Capital Industry. If you believe your firm might like to participate, contact Nigel Mills: Tel: +44 20 7283 7200