20182019 Asia Pacific Private CapitalInvestment ProfessionalCompensation SurveyPrivate Equity Practice02 20182019 Asia Pacific Private Capital Investment Professional Compensation Survey20182019 Asia Pacific Private CapitalInvestment ProfessionalCompensation SurveyHeidrick no data relating to the identity of individual respondents or their employers is included in the following report.AcknowledgmentsThe author would like to especially thank Mohd Arsalan and Samantha Lassoff for their contributions to this report.A message from the authorMichael Di CiccoRegional Managing Partner, Asia PacificPrivate Equity Practicemdiciccoheidrick04 20182019 Asia Pacific Private Capital Investment Professional Compensation SurveyIn an online survey, we asked participants to provide their compensation data from 2017, 2018, and 2019, as well as their expectations for changes in compensation in 2019. All data collected is self-reported by private capital investment professionals and has been aggregated to evaluate trends in compensation packages, including base salary, bonus, and carried interest (carry). In addition to overall compensation data, we segregated responses by global versus regional funds and by investment strategy across buyout, growth capital, real estate, and venture capital.Responses from 215 participants are included in the survey results, covering compensation data for 2017, 2018, and 2019. We conducted the survey in the second quarter of 2019.In some compensation tables, we report the mean, lower quartile (25th percentile), median, upper quartile (75th percentile), and highest responses. Please note that the mean can be influenced by particularly high or low data points, especially in small sample sizes. Many firms that use compensation surveys set their compensation targets around or above the upper quartile (75th percentile).Carried interest is calculated using “carry dollars at work,” which is the expected return on total carry participation across all vehicles, based on achieving a net 2x return (above hurdle and after fees) in a vehicle charging a 20% performance fee. For example, 7 points (700 bps) of carry (out of a possible 100) in a $500 million fund with 20% carry would result in $7 million of carry dollars at work (500 X 0.2 X 0.07 = 7).All compensation figures in tables and charts are reported in USD thousands unless otherwise noted.While title structures vary according to firm, we have divided respondents into five groups based on level and responsibility.Managing partner: Most senior level at the firm. Typically, although not always, one of the founders.Partner/managing director: Proven investment track record. Experienced dealmaker and board member.Principal: Investment professional with experience originating and leading his or her own investments. Accomplished executive with board member experience.Vice president: Leads and manages deal execution for the firm, including managing service providers and due diligence.Associate/senior associate: Responsible for analyzing companies and business plans, conducting due diligence, and working with service providers under the direction of the vice president or principal.MethodologyA note on role definitionsHeidrick & Struggles05 Executive summaryThis years survey includes a review of 2018 private capital activity (defined as private equity plus venture capital) in Asia Pacific, our thoughts on the major hiring trends for investment professionals, a deep dive into what 2019 compensation packages for investment professionals look like, and indications of how investment professionals view opportunities in their market over the next year.Private capital: The big picture (pages 89) 2018 was a strong year for private capital in Asia Pacific (APAC).Aggregate deal value was $169 billion, down slightly from 2017 but more than double the $75 billion mark set in 2014.Venture capital deal value soared to a record high of $129 billion, from $89 billion in 2017, powered by $105 billion generated in China.Assets under management (AUM) in Asia Pacific totaled $883 billion, or 26% of global private equity (PE) AUMnearly triple the level in 2009, of 9%. However, several factors suggest that industry conditions may become more challenging in the immediate term. Those factors include Sino-US tensions, a slowdown of global economic growth, high prices demanded by investment targets (particularly in China), and a lack of exits, especially through capital markets. There is also increasing polarization between the large, established general partners (GPs) that are the regions biggest players and smaller, newer GPs that are finding it difficult to raise funds. Investment professionals: Hiring trends (page 10) We are seeing strong demand for investment professionals throughout APAC. Hiring is especially robust for principals and vice presidents. Sources of demand are increasing as pension funds, sovereign wealth funds, and a broader assortment of private equity firms are more aggressively seeking talent than in prior years. Firms are also moving beyond the regions traditional major economic capitals and opening offices closer to where deal activity is taking place. 06 20182019 Asia Pacific Private Capital Investment Professional Compensation SurveyInvestment professionals: Compensation findings (pages 1120)Cash compensation by seniority (page 11) Each of the five seniority levels of investment professionals we surveyed experienced annual gains in cash compensation between 2017 and 2019. In all cases, the greatest percentage gains were at the associate/senior associate (i.e., lowest) level and declined moving up the ranks to managing partner. Base and bonus (page 12) Base salary went up for 42% of respondents in 2019, a slightly lower percentage than reported an increase in 2018 but the same as in 2017. The percentage of respondents who received higher bonuses dropped to 45% in 2019 after soaring from 49% in 2017 to 59% in 2018. Compensation by firm AUM and current fund size (pages 1315) There was little correlation between total platform AUM range and total compensation. Unlike total platform AUM, fund size correlated with compensation: at most levels of seniority, the largest total compensation was paid at the largest funds.The Greater China premium is shrinking (pages 2325) Greater China traditionally has led the pack in terms of private capital compensation. This is beginning to change, however. The Greater China premium is growing smaller, our data suggests.Looking ahead (pages 2527)Base salary (details on pages 2526) Sixty-five percent of respondents expected their salary to rise in the next 12 months. Thirty-four percent expected no change, and just 1% thought they were likely to receive a cut.Market sentiment (details on pages 2627) Large groups of respondents in each investment strategy expected market conditions to remain unchanged: 38% in buyouts, 43% in growth capital, 51% in real estate, and 41% in venture capital. Viewed broadly, market sentiment among the regions within Asia Pacific was similar to the trend for strategies in that a plurality of respondents thought conditions would remain unchanged or improve.Heidrick & Struggles07 State of the private capital market2018 was a very good year for private capital in Asia Pacific. The aggregate deal value for private equity and venture capital transactions was $169 billion, down slightly from 2017 but more than double the $75 billion mark set just four Aggregate value of buyouts vs. venture capital deals in Asia, 20142018Fig 1Aggregate deal value ($bn)20145075264810658891788936107712015 2016 2017 2018Buyout Venture capital Total40129169Note: Numbers may not sum to total, because of rounding.Source: Preqin Pro1Ee Fai Kam, “The transformative effects of private equity in Asia,” Preqin, March 13, 2019, prequin.2Bain & Company, Asia-Pacific Private Equity Report 2019, March 2019, bain.years earlier.1At $883 billion in assets under management, APACs share of global private equity AUM reached 26%, nearly triple its 9% level in 2009.208 20182019 Asia Pacific Private Capital Investment Professional Compensation SurveyAPAC private capital investors now mirror other regionsFig 2Source: Preqin ProOtherBank/investment bankInvestment companyInsurance companyFamily of_f_iceGovernment agencyAsset managerWealth managerCorporate investorFund of funds manager12%12%10%27%9%8%7%7%4%4%Venture capital (VC) was particularly strong. VC deal value soared to a record high of $129 billion, from $89 billion in 2017, powered by $105 billion generated in China.3It was the first time Chinas annual VC deal value exceeded that of the United States, which totaled $98 billion. Another measure of the APAC markets health was the range of investor types participating in deals. Led by corporations (27% of the total) and banks/investment banks (12%), the categories of APAC investors were similar to those found in the United States and Europe. Other investor categories included investment companies, insurance companies, family offices, asset managers, government agencies (notably in Greater China, India, and Japan, but not in the United States), wealth managers, and funds of funds.4The immediate future may not be as rosy, though, as several factors suggest that rougher seas may lie ahead: Sino-US trade friction is affecting growth across Asia Pacific. Resolving this tension is likely to be a drawn-out affair and is itself only one part of a multifaceted process of redefining the relationship between the two countries. An economic slowdownglobally but especially in Chinamay well have a chilling effect on private capital activity across the region. General partners (GPs) have been buying assets at top prices, and the forces that have produced strong returns over the past decaderevenue growth and multiple expansioncould dissipate.5More than 70% of APAC GPs say competition increased in 2018, especially from regional and local PE firmsmaking it more difficult to find attractive deals going forward.Many also see a clear decline in proprietary deals.Most expect holding periods to expand, making it harder to achieve premium internal rates of return.There is increasing polarization between the large, established general partners that are the regions biggest players and smaller, newer GPs that are finding it difficult to raise funds.6This trend could potentially reduce competition and discourage smaller GPs from entering, or even staying in, the market. 5Bain & Company, Asia-Pacific Private Equity Report 2019, March 2019, bain.3Preqin, Preqin Special Report: Asian Private Equity & Venture Capital, September 2018, prequin.4Preqin, Preqin Special Report: Asian Private Equity & Venture Capital, September 2018, prequin.6Bain & Company, Asia-Pacific Private Equity Report 2019, March 2019, bain.Heidrick & Struggles09 Investment professional hiring trendsDemandAcross Asia Pacific, were seeing increasing demand for investment professionals, underscoring the industrys robust growth and indicating salaries are likely to continue rising. Hiring is especially robust for principals and vice presidents, which suggests that firms are looking to strengthen their middle ranks to position themselves for future growth. More sources of demand are emerging. New funds are entering the market, and traditional limited partners such as pensions, sovereign wealth funds, corporates, and family offices are steadily building direct investment units of their own. Firms are also moving beyond the regions traditional major economic capitals and opening offices closer to where deal activity is taking place. For example, in Southeast Asia, funds are increasingly opening offices in Indonesia, as well as beginning to open offices in Thailand and Vietnam, rather than solely covering deals in those locations with teams based in Singapore.Firms want their deal teams to be closer to where the deals are happening.More teams are locating throughout China, rather than basing their China teams in Hong Kong.Venture capital firms are expanding beyond China and India and into Singapore, which theyre using as a hub for activity in Southeast Asia. The range of investment strategies offered by significant platforms is also expanding, which is increasing demand for areas of expertise such as private credit and specialized forms of real asset investments.Supply There is a shortage of professionals with the specific expertise, networks, and language skills required for success in those local markets. The talent shortage should ease as APACbased firms mature and the industry becomes more institutionalized. Were seeing firms making greater efforts to create the next generation of professionals through formal training programs and promotion practices that emphasize homegrown talent.10 20182019 Asia Pacific Private Capital Investment Professional Compensation Survey