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The Talent Imperative in Private Equity Growth

Private equity remains a highly people-intensive industry, and CFOs across firms continue to see talent management as a critical pillar for sustaining growth and competitiveness.

February 05, 2025 • Estimated Reading Time: 17 minutes

In this article

Private equity remains a highly people-intensive industry, and CFOs across firms continue to see talent management as a critical pillar for sustaining growth and competitiveness. Among firms managing over $15 billion in AUM, 76% identified retaining talent as their top priority for remaining competitive, emphasizing the industry's heavy reliance on expertise and stability in leadership teams. Meanwhile, 52% of respondents highlighted the importance of hiring the right talent, particularly as firms expand into new strategies and markets. This focus on talent underscores a broader trend in private equity: in a competitive environment where innovation and operational excellence are paramount, assembling and retaining high-performing teams is seen as essential to delivering value to investors and portfolio companies alike.

Beyond talent, private equity CFOs are also focused on diversifying their capital sources and product offerings to enhance growth. With retail and wealth channels gaining traction as new sources of funding, many firms are looking to attract alternative investors through innovative and tailored investment products. The chart highlights that while data management (24%) and expanding product offerings (30%) rank lower as immediate priorities, they remain part of a long-term strategy to support scale and efficiency. Private equity leaders are also navigating the cultural and strategic aspects of growth; when considering potential transactions, 53% of CFOs emphasize finding partners who can contribute to business expansion, while 47% also prioritize preserving firm culture. This dual focus on people and strategy positions private equity firms to thrive in an increasingly competitive landscape.

Key takeaways from chart

1. Retaining Talent (76%)

  • Top Priority: Retaining talent is critical for ensuring continuity in deal-making and maintaining investor confidence.

  • Actionable Focus: Firms are likely investing in long-term incentives, robust cultures, and career development to reduce turnover.

2. Hiring the Right Talent (52%)

  • Why It Matters: Specialized roles in ESG, tech, and data analytics are in high demand, making talent acquisition a pressing need.

  • Actionable Focus: Strengthening recruitment pipelines and targeting diverse talent pools are key strategies.

3. Expanding LP Base (42%)

  • Strategic Need: Diversifying the investor base reduces risk and ensures capital inflow stability during economic shifts.

  • Actionable Focus: Firms may target sovereign wealth funds and institutional investors globally.

4. Expanding Product Offerings (30%)

  • Growth Opportunity: New fund strategies (e.g., impact investing or sector-specific funds) cater to evolving LP preferences.

  • Actionable Focus: Firms can innovate with perpetual capital vehicles and emerging asset class strategies.

5. Data Management (24%)

  • Supporting Role: While lower priority, strong data systems improve reporting, compliance, and operational efficiency.

  • Actionable Focus: Investment in analytics and AI platforms can help firms leverage data strategically.

Hiring trend

The private markets industry continues to demonstrate resilience and adaptability, even amid macroeconomic headwinds and slowing assets under management (AUM) growth due to the higher interest rate environment. According to Preqin’s 2025 Private Capital Compensation and Employment Review, 89% of private capital firms surveyed plan to maintain or expand their headcount over the next year, underscoring the sector’s sustained appetite for top-tier talent. While hiring is expected to slow compared to the rapid growth of previous years, the increasing demand for professionals in investment and fundraising roles highlights the strategic focus of private capital firms on enhancing operational capabilities and ensuring continued growth. This focus aligns with broader industry forecasts, with AUM projected to reach $23.5 trillion by 2029, up from $12.2 trillion at the end of 2023.

Despite some cooling in the pace of hiring, the industry is recalibrating its workforce to meet evolving challenges and capitalize on opportunities. Investment team professionals remain the most sought-after talent pool, though demand has slightly softened due to a slowdown in deal activity. At the same time, the private fundraising landscape, which has experienced a significant contraction in aggregate capital raised, is driving a sharp uptick in demand for fundraising professionals. As firms strive to expand their investor bases and optimize fund-raising strategies, this shift in focus highlights the increasingly dynamic nature of talent acquisition and deployment in private markets.

Key takeaways from chart

  • Investment Team Talent Remains the Top Priority (64%):

    • Despite a slight decline from 68% in 2023, investment professionals are still the most in-demand talent.

    • This reflects the core role of deal teams in executing transactions and managing portfolio companies, even as deal activity slows.

  • Sharp Increase in Demand for Fundraising Professionals (15%):

    • Demand for fundraising talent has nearly doubled, rising from 9% in 2023 to 15% in 2024.

    • Firms are pivoting resources to address a challenging fundraising landscape, with aggregate fundraising declining from $1,634bn in 2022 to $1,409bn in 2023.

    • Attracting fundraising talent is critical to expanding LP relationships and securing new capital.

  • Broader Shift in Hiring Trends:

    • While hiring remains robust overall, 23% of firms expect to hire at a slower rate in the next year, up from just 8% in 2023.

    • This reflects a cautious approach as firms adapt to economic uncertainty while maintaining focus on critical growth roles.

  • Compensation Trends Highlight Junior and Mid-Level Priorities:

    • Junior- and mid-level roles saw the largest salary increases (8%), emphasizing their growing importance in executing operational and strategic initiatives.

    • Senior- and executive-level roles experienced smaller increases (6% and 5%, respectively), signaling a measured approach to higher-level compensation amid market challenges.

  • Evolving Workforce Strategies for Competitiveness:

    • Firms are increasingly aligning talent strategies with operational needs, emphasizing roles that drive immediate value, such as fundraising and investment.

    • The emphasis on expanding teams reflects the industry’s optimistic long-term outlook, with private market AUM projected to grow to $23.5tn by 2029.

JM. (2024). Top 5 Talent Trends in Private Equity for 2025. https://jmsearch.com/blog/top-5-talent-trends-in-private-equity-for-2025/?utm 

1. Gaining Industry Expertise

Building a competitive edge through industry knowledge continues to drive differentiated returns. Leading investors are finding innovative ways to integrate impactful expertise into their teams. By engaging former CEOs, industry leaders, or external advisory boards, firms can gain deep functional and sector insights. This expertise can inform thesis development, build standout Boards of Directors or Advisory Boards, and strengthen executive teams to excel in competitive markets.

2. Expanding the Operating Partner Role

The role of Operating Partners is set to grow in prominence, with 82% of them already involved throughout the investment lifecycle. As PE firms continue investing in value creation teams and adopting more sophisticated, data-driven processes, Operating Partners will play a pivotal role in addressing operational challenges and driving leadership teams toward performance milestones.

3. Leading in a Hybrid Workforce

The hybrid workforce is now a reality for over 50% of businesses, and leaders must adapt to this evolving environment. Rigid return-to-office mandates have led to higher turnover rates, slower hiring, and prolonged vacancy periods—disrupting value creation cycles. Successful candidates for 2025 will require strong interpersonal skills, technological expertise, and the ability to manage both in-person and remote teams effectively.

4. Hiring Tech-Savvy Executives

Technology’s influence on business operations is only increasing, with over 70% of firms utilizing AI in at least one functional area. To thrive, executives must possess not only technical literacy but also the capability to evaluate and integrate emerging tools in areas like sales, HR, finance, and operations. Firms seeking future-proof leaders must prioritize candidates with a strong grasp of technology.

5. AI-Enabled Recruiting

Artificial intelligence is revolutionizing recruitment processes. AI tools are now essential for driving efficiency, from predictive analytics for evaluating candidate fit to automating communication and scheduling. Incorporating AI into talent acquisition strategies will be crucial for identifying, assessing, and securing top-tier talent in an increasingly competitive market.

Salaries in PE

The chart showcases median salaries (base + bonus) across various PE roles, providing a clear perspective on the financial rewards of advancing in the industry:

  • Analysts start with a median compensation of $125K, offering a strong entry point for recent graduates or individuals transitioning from related fields.

  • Associates earn a median salary of $225K, typically transitioning from investment banking or management consulting.

  • Senior Associates see a marked increase, with compensation reaching $325K, reflecting their growing influence in deal structuring and execution.

  • Vice Presidents (VPs), who often lead critical aspects of deals, earn $425K, reflecting their strategic value.

  • Principals take a leadership role in investment decisions and firm strategy, with median compensation hitting $650K.

  • Managing Directors (MDs) or Partners, at the pinnacle of the hierarchy, receive an impressive median compensation of $1.35M, underscoring their responsibility for driving firm performance and investor returns.

Talent Sources in Private Equity

PE firms primarily recruit professionals with experience in:

  1. Investment Banking (IB):

    • Around 29% of new hires in PE come from IB, leveraging their expertise in financial modeling, transaction structuring, and capital markets.

  2. Management Consulting:

    • Approximately 6% transition from consulting, bringing strategic and operational expertise to improve portfolio company performance.

  3. Hedge Funds and Asset Management:

    • While only 1% come directly from hedge funds, their specialized skills in investment analysis are highly valued.

  4. Corporate Finance and Industry Experts:

    • Professionals from corporate finance or industry sectors (e.g., healthcare, technology) account for 6%, providing sector-specific insights and operational knowledge.

  5. Other Professional Backgrounds:

    • MBA graduates (9%) and individuals from public accounting (6%) also form an essential talent pool.

Growth in US Finance and Insurance Employment with Private Equity Insights

Overview

The financial sector in the US has seen consistent growth in employment over the last three decades, as illustrated in the chart. The Finance and Insurance industry, along with broader Financial Activities, has demonstrated resilience and expansion, even during periods of economic uncertainty. This growth reflects the increasing complexity and integration of financial services into the US economy, with Private Equity (PE) emerging as a key player in driving both employment and industry innovation.

Key Insights from Employment Trends

  1. Consistent Growth Since 1990:

    • Employment in Financial Activities has steadily grown, reaching nearly 9 million employees by 2024.

    • Broader Financial and Insurance employment also shows an upward trajectory, crossing 8 million employees in recent years.

  2. Recovery After Economic Crises:

    • The chart highlights the resilience of the sector during downturns such as the 2008 Financial Crisis and the COVID-19 pandemic. Although dips were visible, recovery was swift, showcasing the stability of financial services.

  3. Expanding Opportunities:

    • Employment in Finance and Insurance has outpaced broader Financial Activities, driven by increased demand for specialized roles in areas like technology integration, compliance, and investment management.

The Role of Private Equity in Employment Growth

Private Equity has played a critical role in shaping employment dynamics within the Finance and Insurance sector:

  1. Investment and Job Creation:

    • PE firms are not just major investors in businesses; they are also significant employers. They directly hire talent for managing portfolios and indirectly drive job creation through their portfolio companies.

    • In the last decade, the PE industry has expanded its workforce significantly, with a particular focus on hiring professionals skilled in financial modeling, deal structuring, and operations.

  2. Demand for Skilled Professionals:

    • Private Equity draws talent from diverse sectors such as investment banking, management consulting, and technology, offering lucrative salaries and rapid career progression.

    • As of 2024, PE firms continue to be a magnet for highly skilled workers, particularly those with expertise in digital transformation and ESG (Environmental, Social, Governance) investing.

  3. Support for Innovation:

    • PE investments in tech-enabled solutions have created opportunities for tech and finance professionals alike. For instance, PE-backed fintech startups and insurance tech firms contribute to the broader employment trends in the Finance and Insurance sector.

  4. Geographical Influence:

    • While traditional financial hubs like New York and Chicago remain dominant, PE firms are increasingly expanding into secondary cities, fostering localized employment growth.

The Increasing Cost of Human Capital in Finance

Introduction

The cost of human capital in the finance and insurance industries has steadily increased over the past few decades, as highlighted by the two charts. These trends reflect growing wages, higher demand for skilled professionals, and the evolving complexity of the financial landscape. Organizations face increased competition to attract and retain top-tier talent, driving up compensation costs.

Wage Growth in Finance and Insurance

The chart, which tracks wage and salary accruals per full-time equivalent (FTE) employee in the finance and insurance industries, reveals a significant upward trajectory. Here are the key insights:

  1. Consistent Wage Growth:

    • From approximately $60,000 in 1998 to over $150,000 in 2023, wages in the finance and insurance sectors have increased by more than 150%.

    • This reflects the industry's commitment to compensating highly skilled workers in roles such as investment management, risk analysis, and compliance.

  2. Acceleration in Recent Years:

    • After a stable growth rate pre-2010, wages have accelerated significantly in the past decade, driven by demand for technology integration, ESG expertise, and data-driven financial decision-making.

  3. Global Competition for Talent:

    • Finance and insurance companies compete with sectors like technology for employees skilled in data science, artificial intelligence, and cybersecurity, further inflating wage costs.

Rising Employment Costs

The chart, illustrating the Employment Cost Index (ECI) for private industry workers in management, business, and financial roles, complements the wage accrual data:

  1. Steady Increase in Total Compensation:

    • The ECI index, set at 100 in 2005, has risen to approximately 180 in 2024, indicating a steady annual increase in total compensation (including benefits and bonuses).

    • Compensation growth has outpaced inflation, underlining the increasing value placed on professionals in the financial sector.

  2. Drivers of Rising Costs:

    • Beyond salaries, firms now offer comprehensive benefits, including stock options, flexible work arrangements, and wellness programs, to attract and retain employees.

    • The rise of remote work and hybrid models has expanded the talent pool globally but also introduced new logistical and operational expenses.

Key Factors Driving Human Capital Costs in Finance

  1. Technological Advancements:

    • The integration of technology into finance, such as blockchain, AI, and fintech solutions, requires specialized skills, pushing compensation higher for qualified candidates.

  2. Regulatory and Compliance Demands:

    • Post-2008 financial reforms and ESG mandates have created demand for experts in regulatory compliance and risk management, further driving costs.

  3. Private Equity and Specialized Roles:

    • Private equity has intensified competition for skilled workers, offering lucrative salaries and career advancement opportunities.

    • Specialists in deal structuring, portfolio management, and operational improvements are particularly valued.

  4. Shortage of Skilled Talent:

    • As demand outpaces supply, particularly in areas like data analytics and cybersecurity, finance firms must offer competitive packages to secure the best talent.

Implications for Firms

  1. Rising Operational Costs:

    • Increased human capital costs are driving up operational expenses for finance and insurance firms.

    • Smaller firms and startups face challenges competing with established companies and private equity firms offering premium compensation.

  2. Investment in Talent Development:

    • Many firms are now focusing on internal training programs and upskilling initiatives to address talent shortages.

  3. Geographical Expansion:

    • To mitigate costs, firms are exploring talent hubs in lower-cost regions while maintaining headquarters in traditional financial centers.

Finance Recruiting / Hiring: Key Market Players

Conclusion

The rising cost of human capital, particularly in finance and private equity, highlights the critical need for effective hiring strategies. 

For private equity firms, hiring the wrong talent can lead to substantial financial and operational consequences. With compensation in finance roles consistently rising—now exceeding $150,000 for many mid-level roles and upwards of $1M for very senior positions—the cost of replacing or underutilizing talent due to poor hiring decisions can significantly impact a firm's bottom line.

To navigate this, private equity firms should prioritize strategic hiring practices:

  1. Define Role Requirements Clearly: Ensure a precise understanding of the skills, experience, and cultural fit required for each position.

  2. Outsource Hiring to Experts: Partnering with finance and private equity recruitment specialists can optimize the hiring process. These experts have access to niche talent pools, streamline candidate screening, and reduce the risk of costly mis-hires.

  3. Leverage Data and Analytics: Use talent analytics to identify top candidates who align with long-term strategic goals.

By outsourcing to professionals and implementing targeted strategies, private equity firms can secure high-performing talent, reduce turnover, and align workforce capabilities with portfolio growth objectives, ensuring long-term success in a highly competitive industry.

Sources & References

DealRoom. (2024). The Private Equity Career Path: How to Get into PE. https://dealroom.net/blog/private-equity-career-path 

JM. (2024). Top 5 Talent Trends in Private Equity for 2025. https://jmsearch.com/blog/top-5-talent-trends-in-private-equity-for-2025/ 

Private Equity International. (2023). Private Equity Firms vie for Operating Talent. https://www.privateequityinternational.com/the-war-for-operating-talent/ 

U.S. Bureau of Economic Analysis, Wage and salary accruals per full-time equivalent employee: Domestic private industries: Finance and insurance [N4457C0A052NBEA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/N4457C0A052NBEA, January 23, 2025.

U.S. Bureau of Labor Statistics, All Employees, Finance and Insurance [CES5552000001], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CES5552000001, January 23, 2025.

U.S. Bureau of Labor Statistics, All Employees, Financial Activities [USFIRE], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/USFIRE, January 23, 2025.

U.S. Bureau of Labor Statistics, Employment Cost Index: Wages and salaries for Private industry workers in Management, business, and financial [CIS2020000110000I], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CIS2020000110000I, January 23, 2025.