Family offices are showering higher pay and juicier performance incentives on their VC-focused investing staff


 Family offices are staffing up in order to get access to direct investments, and they're willing to pay more to poach talent from Wall Street and Silicon Valley.

The average compensation for principals of venture capital teams at family offices that pay bonuses increased by 17% from $310,000 to $363,000 from 2020 to 2021, according to a new survey published by Silicon Valley Bank and Campden Wealth. The average salary grew modestly from $234,000 to $245,000, but bonuses jumped from 32% of base salaries to 48%.

Demand for family office talent is soaring and pushing compensation upwards. More than a third of family offices surveyed by UBS in 2020 said that salary costs were rising.

Salaries can vary widely, as noted by the SVB and Campden Wealth report, and depends in part on the number of assets under management – the average in the survey was $989 million – and the complexity of the portfolio. Compensation for principals on venture investment teams ranged from $75,000 to $650,000 with bonuses anywhere from 10% to 110% of base salary. Despite the wide range in the sample, SVB's Shailesh Sachdeva believes from the quantitative and interview data that both base salaries and bonuses are trending upward.

"There is a significant shortage of talent," Sachdeva, managing director of the firm's family office practice, told Insider via email. "Family offices are moving towards the kind of packages that are required to attract high-quality talent away from their many options."

Recruiter Neil Kreuzberger said that compensation has increased over the past several years, and demand for family office talent is at an all-time high after a brief pause at the beginning of the pandemic. He doesn't see it slowing down as Americans are expected to transfer an estimated $68 trillion in assets over the next 25 years, and Baby Boomer family office leaders are retiring. Further, a new class of wealthy entrepreneurs created by a robust stock market is less likely to balk at paying staff more.

"Younger wealth owners, especially if they are in touch with the hedge fund or VC world, are more apt to be open to increases in compensation that are going on," Kreuzberger told Insider. "It's harder if you have a first-generation business owner who has been frugal and shrewd throughout their whole life."

Principals and chief investment officers had an average carry – or share of profits – of 11% and 7.3%, respectively. There can be a long wait for payouts as family offices typically have a long investment horizon. Tayyab Mohamed, president of family office recruiter Agreus, has seen family offices get creative with compensation structures in order to keep investment staff happy.

"They might try to incentivize talent based on the current valuation of their portfolios, and maybe having a formula where it pays out every three years," he said.

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