Why African Investment Professionals Earn Less: The Role of Fund Size and Operating Costs

The African investment sector is growing, but professionals in venture capital (VC), private equity (PE), and impact investing earn significantly less than their global counterparts. A recent Dream VC & A&A Collective report found that:

• African investment analysts earn an average of $21,000 annually, while their global peers earn $28,000—a 33% gap.
• At senior levels, principals and investment managers outside Africa earn $40,000 more than those in Africa.

The Core Challenge: Smaller Fund Sizes & Lower AUM

Investment firms make money primarily through management fees, a percentage of assets under management (AUM). African funds are generally much smaller than those in global markets, leading to lower revenue and tighter budgets.

Comparing Fund Sizes (AUM) in Different Regions

Sources: Dream VC Report, AVCA 2023 Private Capital Report.

Africa’s median fund size of $50M is far below global averages. In contrast, Asia’s VC funds manage over $324M, while U.S. firms handle funds well into the billions. With smaller AUM, African firms generate lower revenue from management fees, making it difficult to offer globally competitive salaries.

The Role of Management Fees in Salary Gaps

Most VC and PE firms globally charge a 2% annual management fee on AUM. This means:

• A $50M African fund earns $1M annually to cover salaries, rent, legal fees, and other expenses.
• A $500M U.S. fund earns $10M annually, allowing them to pay much higher salaries.

Breakdown of Management Fees vs. Operating Budgets

This simply means that smaller operating budgets directly limit how much firms can pay employees.

The Ripple Effect: Talent Drain & Fewer Senior Roles

Due to low salaries, many African investment professionals migrate abroad for better-paying opportunities, causing a brain drain that leaves the industry dominated by young talent—73% of professionals are under 34 while only 6% hold principal roles and just 4% are directors, creating a leadership gap that hinders firm growth and perpetuates the cycle of low salaries and small fund sizes.

Can Africa Close the Investment Salary Gap?

To offer competitive salaries, African investment firms must raise larger funds by attracting global investors to increase AUM, diversify revenue streams beyond management fees through performance-based incentives, retain top talent by introducing carry (profit-sharing) similar to U.S. and European firms, and leverage local expertise, as global investors rely on African professionals for cross-border market insights.

Finally, the African investment salary gap is not about talent, it’s about fund size, AUM, and operating budgets; Africa’s investment ecosystem is young but growing; raising larger funds and offering carry can make salaries more competitive; as Africa attracts more global capital, salaries could improve in the next decade.