Private Equity Chiefs Outearn Bank Titans — Growth, Power & Risks Rising

The recent Barron’s article underscores a marked reordering of financial power: private-equity and alternative-asset firms are not just catching up to legacy banks, they’re surpassing them in compensation, influence, and reach [1]. The data from Equilar reveal that named executive officers (NEOs) at PE/alt firms have earned on average $2.3 billion since mid-2000s vs. $331 million at major banks. Even after removing prominent outliers—Schwarzman, Kravis, Roberts—PE executives still exceed $1 billion. The median compensation gap (PE/alt vs banks: ~$376 million vs ~$133 million) further reflects broad-based outperformance, not just elite exceptions [1].

Economically, PE/alt firms also make up a significant share of U.S. economic activity. According to the American Investment Council (AIC) with EY, private equity-backed businesses directly employ approximately 13.3 million workers, paid ~$85,000 in average wages and benefits, generated $2 trillion in GDP in 2024, and represent ~7% of U.S. GDP. Those figures signal that PE is no niche, but a major sector with widespread downstream impacts [2].

Yet with growth and rewards come growing structural pressures. According to McKinsey’s “Global Private Markets Report 2025” and other sources, limited partner (LP) dissatisfaction is rising: exits are difficult in a high-rate environment, traditional IPO/Aggregate exit channels are constrained, and innovators are resorting to continuation funds or selling assets internally—practices that may exacerbate agency conflicts or opacity [3]. Furthermore, regulatory oversight is thin for PE firms operating broker-dealer, insurance, and credit activities, placing them in “shadow banking” territory that could pose systemic risks [1].

Strategically, this transition means traditional banking firms must not only compete for talent and compensate similarly, but also reckon with PE/alt firms’ encroachment into businesses once dominated by banks (credit, underwriting, advisory). Legacy banks enjoy regulatory scale advantages in some areas, but may be squeezed in their core fee streams. Meanwhile, for investors, endowments, and stakeholders, there’s a trade-off between the upside from exposure to PE and the downside from rising leverage, liquidity constraints, and valuation risks.

Open questions include: How long can PE/alt firms sustain the compensation premiums given macroeconomic headwinds? Will rising political or regulatory pressure follow financial crises caused by shadow banking exposures? And can LP returns justify allocations in the face of rising fee scrutiny and reduced transparency?