Bonus Time: Half a Billion for Leon Black, Apollo Global Management

The founders of the four largest private equity companies in the U.S. will take home an eye-popping $2.5 billion in profits and dividend income, according to a report in the Financial Times. Leon Black, head of Apollo Global Management, is on the top of the list with a $546 million compensation package. The founders at KKR, Carlyle, Blackstone and Apollo have earned the big paydays due to the Federal Reserve’s easy money policies and a flood of money that has poured into private equity funds in 2013.

Equity markets in the U.S. skyrocketed 30 percent last year, showering the heads of these companies with financial rewards that totally dwarfed compensation packages usually reserved for Wall Street bigwigs.  Black, Josh Harris and Marc Rowan, Apollo’s founders, led the equity compensation parade with a payout that totaled more than $1 billion. Records show that Black earned $177 million in profits from investments poured back into Apollo and another $369 million in cash dividends. Black had a base salary of $100,000. Another $187,000 was guaranteed for expenses. Harris banked $275 million while Rowan earned $258 million.

Steve Schwarzman at Blackstone added $374 million to his personal bottom line. At Carlyle, founders David Rubenstein, Daniel D’Aniello and Bill Conway shared a pot totaling $750 million. Over at KKR, the co-founding team of George Roberts and Henry Kravis combined for a $327 million payday.  These hefty payouts will likely rekindle debate over the 20 percent or less rate of taxation that is paid on carried interest for private equity honchos. The majority of these payday sums were the result of shareholding dividends.

The spectacular compensation packages were also generated by investors pouring cash into private equity funds. Bain & Company reported that private equity firms are sitting on a pile of cash that totals more than $1 trillion. That’s creating pressure to find great investment opportunities for their clients.  The Bain Global Private Equity Report said that the number of buyouts fell by 11 percent in 2013 because equity funds are having trouble finding bargains due to high asset prices. Companies now appear to favor flotations rather than private equity to raise cash.  Nonetheless, investors are shoveling piles of cash into the private equity sector, allowing the total equity pot to rise 12 percent last year. The current $1 trillion total is now higher than it was before the financial crisis hit. Much of this total is fresh cash, lessening the pressure to find suitable investments now.

Back at Carlyle, it’s reported that two of the partners are preparing to sell a potion of their holdings. The plan is to raise $435 million. SEC filings indicate that shares will be offered at $36.27, resulting in a total payout of $42.8 million for each partner.  Going public has generated interest among other equity firms to follow this path and reap a fortune. The payouts at Apollo are a result of the firm’s outstanding performance. Apollo has more cash than any equity firm. The company’s previous fund returned 27 percent to investors. Do you think it is a good time to move in private equity?


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