A chief investment officer who works for a private equity fund earns an annual salary of more than 100,000 euros, yet their income from transactions is up to ten times higher than the annual salary.
"To get an idea of the annual income of a chief investment officer, we have to multiply 100,000 euros with a certain multiplier, which varies from one investment fund to another, and depends on the expertise and performance of the manager in question," says Francisc Bodo, former chief investment officer of GED private equity firm, which has recently entered consultancy services market.
The multiplier on which players on the domestic private equity market inquired by ZF agreed upon ranges from 2 to 4, thus taking the annual salary of a chief investment officer to 200,000 and even as much as 400,000 euros.
Chief investment officers in the private equity fund industry are paid a fixed salary and a percentage of the profit of the fund. "Tying" the CIO to the price and profitability of the deal is one of the most effective forms of motivation used in the private equity business. "Besides the fixed salary that may go to 100,000 euros a year, the chief investment officers of private equity funds get one to two percent of the profit the fund made when collecting its money from the exit from a company," explains Ulrik Sogaard Rasmussen, partner of executive research firm Pedersen & Partners.
More precisely, for a 110 million-euro exit from a company where the private equity fund initially invested 35 million euros, the profit of the fund is 75 million euros. Out of the 75 million euros, the CIO gets 900,000 euros, in addition to a salary of more than 100,000 euros a year.
A chief investment officer concludes up to six deals during an investment cycle that may be up to ten years long, depending on the fund and the investment sectors.
The end of an investment cycle is the most eagerly awaited moment of the entire career of a chief investment officer because this is when they actually collect the money from the profits of the fund. If the chief investment officer attained the fund's targets during the ten years, which most of the time are to multiply the money invested by a factor of four, he or she stands every chance of a becoming a euro multimillionaire.
Whereas investment bankers are the most sought after individuals by private equity funds to become chief investment officers on Western markets, chief investment officers in Romania have technical backgrounds. For instance, Francisc Bodo graduated from the Chemical Engineering Faculty, while Cornel Marian, chief investment officer of private equity Oresa Ventures graduated from the Faculty of Physics. In addition, they later took MBAs and strategic management courses.
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