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If you work for Morgan Stanley and want to make the big bucks, you’re forever chained to the island of Manhattan. If you work for a private equity firm, less so, apparently.

Firms are opening new offices and hiring staff away from the industry’s traditional core cities, while pay for many professionals in the Midwest and Southeast last year outpaced that of their peers in the Northeast, according to a report released Wednesday by Heidrick & Struggles International Inc…. Private-equity employees who joined the Covid migration generally saw no impact on their pay from moving to lower-cost areas, the report shows. Pay reductions have been seen in other industries under similar circumstances, Heidrick & Struggles said.

About 57% of survey respondents reported an increase in base compensation last year from 2019, and 67% reported receiving a higher annual bonus. Just 1% reported their base salary had declined, while 8% got lower bonuses. More than half of professionals surveyed say they expect an increase in base pay in 2021, with another 45% saying their base pay has held steady this year compared with 2020.

And why not? It works, and p.e. firms can certainly afford it.

“There are very few roles in the organization that have to be in the office five days a week. That has been very liberating,” [Carlyle Group chief human resources office Bruce] Larson said.

Matt Brubaker, chief executive of private equity-focused advisory firm FMG Leading, said remote working is likely to be treated as a benefit that workers negotiate individually. The competition for workers has made firms much more flexible on working remotely than they were pre-pandemic, to attract the best talent, he said.

The Trump administration’s farewell gift to the buyout industry was part of a pattern that has spanned Republican and Democratic presidencies and Congresses: Private equity has conquered the American tax system.

The industry has perfected sleight-of-hand tax-avoidance strategies so aggressive that at least three private equity officials have alerted the Internal Revenue Service to potentially illegal tactics…. But the I.R.S., its staff hollowed out after years of budget cuts, has thrown up its hands when it comes to policing the politically powerful industry….

The Times reviewed 10 years of annual reports filed by the five largest publicly traded private equity firms. They contained no trace of the firms ever having to pay the I.R.S. extra money, and they referred to only minor audits that they said were unlikely to affect their finances.

Private-Equity Pay Rose in 2020 Despite Covid-19, Survey Finds [WSJ]
Private Inequity: How a Powerful Industry Conquered the Tax System [NYT]


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