WALL Street’s top brass spent months grousing about how they were struggling in the war for talent before doling out the biggest bonuses in years.

       Goldman Sachs Group Inc just lost another top dealmaker to private equity, with Jennifer Davis moving to Bain Capital.

       Now, fresh data on pay at big private-equity firms appear to justify the banks’ complaints – though under the surface things aren’t so clear cut.

       The biggest listed private-equity firms – Blackstone Inc, Apollo Global Management, Ares Management Corp, Carlyle Group Inc. and KKR & Co – paid average compensation per employee just shy of US$2mil (RM8.4mil) for 2021.

       In comparison, the average pay at the five biggest US investment banks was a miserly US$232,000 (RM971,000). In executive suites, the differences are greater.

       The 2021 pay of Blackstone co-founder Stephen Schwarzman hasn’t been published yet, but there’s a fair chance it’ll outstrip the US$611mil (RM2.6bil) he got for 2020 – of which US$524mil (RM2.2bil) was dividends on his Blackstone shares.

       Goldman chief executive officer David Solomon and Jamie Dimon, his counterpart at JPMorgan Chase & Co, each got about US$35mil (RM146.5mil).

       Whether the elbow grease and know-how of Schwarzman is really worth so many Solomons or Dimons I won’t attempt to answer here.

       But the truth is that the average pay for private-equity people, first reported in the Financial Times, isn’t a good comparison with the average pay at banks.

       The first thing to note is that 2021 was a big year for private-equity pay – unusually big.

       At Ares, 2021 pay was 1.7-times the previous year; at Apollo and Blackstone it was about 2.7 times bigger. And at all these firms for which the numbers have been reported consistently, pay in 2021 was mostly more than 1.5-times larger than any of the previous five years.

       Also, a lot of this money is shared profits on investments or carried interest, some of which is only paper profits until a fund has been fully wound up and all the profits returned to its investors.

       Carried interest is the performance fees earned on the returns to investors.

       It can be realised and paid out to the private-equity managers when portfolio companies are sold, or refinanced.But much of it is unrealised and unpaid – and might not be paid for years, or ever.

       Much is based on the latest valuation of companies owned by a fund.

       For example, at Blackstone, US$3.8bil (RM15.9bil) of the total US$8.4bil (RM35.2bil) booked as compensation costs for 2021 represents unrealised carried interest.

       To demonstrate how big a year 2021 was in marking up the value of private-equity investments, that US$3.8bil (RM15.9bil) exceeds Blackstone’s total compensation bill for all types of pay in each of the previous four years.

       Unrealised performance bonuses can be paid to managers in some funds, but they can then be clawed back if the returns of the fund at the end of its life fail to meet the returns that were expected when the money was paid. It is rare, but it happens.

       The last thing to note is that the profile of the workforces at JPMorgan and even Goldman aren’t comparable to those in private equity.

       JPMorgan employs more than 270,000 people and many of these work in branches or administrative jobs.

       Goldman employs nearly 45,000, and increasing numbers of its staff are involved in technology, consumer finance, or asset management.

       Fewer of the people at all the big banks are sharp-suited bankers, jet-setting here and there to strike monster takeovers, or hard-nosed traders constantly trying to cut the sharpest deals in stock and bond markets.

       Apollo and Blackstone, the biggest of the five private-equity firms, both employ fewer than 4,000 people each and a greater proportion of their staff is involved in the day-to-day management of companies and funds.

       Neither US banks nor private-equity groups publish the fine detail of how their pay is split among different groups of people on different levels of income.

       At the biggest banks, it seems likely that there is a growing disparity between the highest earners and everyone else: Goldman has said that the vast majority of its staff are paid like most company employees, not like investment bankers.

       Without knowing the specifics, it is hard to judge just how much more lucrative it is to be a dealmaker in private equity than banking – whether in a huge year like 2021, or any other time.

       All we can be sure of is that it makes a big difference for those at the very top. — Bloomberg

       Paul J. Davies is a Bloomberg Opinion columnist covering banking and finance. The views expressed here are the writer’s own.