The people who used to pitch private equity as the promised land are now the ones getting outbid.
The Summary
- Investment banks are projected to increase bonuses 39% from 2022 levels, outpacing wealth management (29%) and hedge funds (24%), per Johnson Associates
- Private equity bonuses expected flat to up just 5% as fundraising slows and exit timelines stretch; private credit could see bonuses decline 2.5% to 7.5%
- M&A, equity underwriting, and trading units driving bank performance while PE's carried interest paydays get delayed or vanish entirely
The Signal
The shift isn't subtle. Major banks' M&A, equity underwriting, and trading desks are thriving while the private equity machine that minted millionaires for a decade is sputtering. Alan Johnson, who runs the compensation consultancy tracking this, puts it plainly: "One of the stars for a long time was private equity. The big compensation opportunities, which come through carried interest, have been delayed, or in some cases, may never happen."
Carried interest is the whole game in PE. You take a slice of the profits when you sell a company. But when companies stay private for longer and exits dry up, that payday never materializes. You're left with base salary and maybe a modest annual bonus. Meanwhile, investment bankers are looking at 10% bonus bumps year-over-year, with some hitting 39% increases since 2022.
"They were clearly the lead, and now banks and others have kind of caught up some or all the way."
The private equity slowdown has two causes:
- Fundraising is down as institutional investors get pickier
- Portfolio companies are staying private longer, delaying or eliminating exit events
- When exits don't happen, carry doesn't pay
This matters for anyone thinking about where to build a finance career. For years, the playbook was simple: grind at Goldman or Morgan Stanley for two years, jump to a PE shop, collect carry, retire at 35. That path is clogged. Private credit, the newer asset class that was supposed to be the next gold rush, is also cooling, with expected bonus declines of 2.5% to 7.5%.
Meanwhile, the big banks are winning on traditional strengths: dealmaking, underwriting, and trading. Not because they invented something new. Because the fundamentals of capital markets are humming again and they control the infrastructure. When companies go public or get acquired, banks collect fees. When markets are volatile, trading desks make money. PE firms, by contrast, are playing a longer, more illiquid game that doesn't pay when the music stops.
The Implication
If you're early in a finance career, the calculus just changed. The PE exit is less golden than it was five years ago. Banks are back to being not just a stepping stone but a destination. That shift has second-order effects. Junior bankers might stick around longer, changing the culture and career pipelines. PE firms will need to compete harder for talent without the pay advantage they once had.
For the agent economy angle: watch how banks deploy automation and AI while still increasing headcount compensation. If they can raise bonuses 39% while also building AI tools to handle grunt work, they're not replacing people. They're augmenting them and paying for the leverage. That's the Web4 bet playing out in the least likely place.