Private equity hiring cools, leaving glut of job searchers

But now, with a glut of Wall Street talent looking for work, buyout firms are mostly taking a pass on new hires.

The current wave of corporate layoffs so far hasn’t reached private-equity shops, say people who work with firms to manage their workforces and hiring processes. While Wall Street giants such as Goldman Sachs Group Inc. and Morgan Stanley are slashing head count to cut costs, private-equity firms are mostly standing pat.

But the manic private-equity hiring binge of the past few years has ended, as many firms grow more cautious about adding professionals, executive recruiters say. When firms do make offers, salaries and bonuses have leveled off after a few years of rapid increases.

“We’re coming back to reality a little bit," said Mary Gay Townsend, founder and managing partner of Norgay Partners, an executive-recruiting firm that works with alternative-asset managers.

Beginning with the recovery from Covid shutdowns in 2020 through roughly the middle of last year, demand for private-equity professionals climbed higher than it has ever been, recruiters say. Fundraising and deal making were at record levels, and firms needed more people to handle the workload.

That meant top-performing candidates could negotiate big pay increases when shifting jobs, and often could weigh a handful of competing offers.

“There was a complete imbalance of supply and demand in terms of talent," said John Rubinetti, a partner in the private-equity practice of executive recruiting firm Heidrick & Struggles International Inc.

The largest private-equity firms have been the most active in hiring new talent in the past 12 months. Blackstone Inc. added the most employees, at more than 1,300, followed by KKR & Co. and Apollo Global Management Inc., according to data from executive search and advisory firm Eastward Partners.

But as private-equity activity slowed in the second half of last year, so did hiring. From 2021 highs, private-equity deal volume fell 39% to $729 billion last year and fundraising fell 17% to $491 billion, according to a Jan. 24 report from consulting company Ernst & Young Global Ltd.

Despite this decline, private equity has avoided the layoffs and bonus cuts that have created such a sour mood elsewhere on Wall Street. Most observers say mass job cuts are very unlikely absent a severe macroeconomic crisis.

Private-equity firms “don’t overextend themselves from a talent perspective in the first place" and typically have little fat to cut, said Brett Vecchio, head of private equity for Eastward Partners.

Private-equity pay has also held up despite the slowdown. A report last week from Eastward said median base compensation rose 26% over the past two years.

But the furious competition for talent, which boosted pay to record highs, ended by late last year, observers say. The balance of power in the hiring process is tipping back from the candidate to the firm, said Jordan Brugg, global head of private equity for executive recruiter Spencer Stuart.

“You’re starting to see a real shift where there formerly wasn’t enough supply [of talent] to meet the demand, but now there is more supply and far less demand," he said.

Executive recruiters say the number of people looking for work in private equity has ballooned even as firms have slowed hiring.

Mikael Stelander, head of the global private-equity practice for recruiting firm Stanton Chase, said the number of people who contact him seeking a job in the industry has doubled or tripled in the past six months.

Mr. Rubinetti of Heidrick & Struggles says many private-equity professionals at firms whose prospects have dimmed in the past year are beginning to consider a move.

“Compared with a year ago when everything was great and everyone was happy, people are now becoming a little more thoughtful about the future," he said.

The layoffs taking place elsewhere on Wall Street—and displeasure with lackluster 2022 bonuses—have enlarged the pool of available candidates for private-equity jobs. Bank layoffs have significantly expanded a major source of talent for private equity, particularly for more junior roles, and have helped reduce the upward pressure on salaries of the past few years, said Ms. Townsend.

But facing the prospect of a slowing economy—and having already added many workers since 2020—few firms are eager to capitalize on the large number of people looking to work in the industry.

“I don’t think PE firms are in a rush to pick up that talent," Mr. Brugg said.

Recruiters emphasize that despite the slowdown, the market isn’t yet dire for private-equity job seekers. While there are fewer searches, firms continue to fill what they see as key roles. Highly experienced, sought-after candidates can still attract top dollar, though the number of openings is lower than it was six months ago.

“When private equity hires, they want the best, and they pay as much as they need to pay," said Mr. Stelander. “If you’re worth it, you will get the compensation."