Fund Manager Career Path
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Fund Manager Career Path
As of early 2020, McKinsey estimates that private equity firms globally have more than $4.1 trillion in assets under management.
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Firms like Blackrock, Carlyle and KKR don’t stay out of the conversation these days when mega deals happen, making them an attractive destination for graduates and professionals who often work in investment banking.
In this article, we look at careers in private equity in some detail, discussing the industry, how to get your foot in the door, where you might fit in, what your routine will look like and how you’ll do it. Progress
Undoubtedly, you will notice some similarities to an investment banking career, but the specialty of a career in private equity will appeal to you more.
Private equity firms (often called ‘GPs’ or ‘General Partners’) acquire assets on behalf of their investors (also called ‘LPs’ or ‘limited partners’), improve the operational and financial performance of those assets, and then searches | Save these assets (‘an exit’), return a profit to the manager of the private equity fund and its investors.
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Investors in private equity funds are typically pension funds, insurance funds, HNWIs and other private equity funds.
Some private equity firms, including Blackstone, Carlyle and Apollo Global Management, have listed their shares on public indices, meaning private investors can now invest in private equity.
Private equity firms are essentially funds founded by individuals or teams – almost always with at least some experience in investment banking – who have enough knowledge, experience and (this part is important) reputation in the investment community to decide to start investing in the company. which can provide above market returns
We note the importance of reputation, because everything in private equity depends on reputation – if investors do not have it, it will be difficult for them to raise the funds needed to buy the company.
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That said, over the past decade a number of highly paid bankers have left blue chip banks with enough money to start their own PE funds.
Before starting a PE firm, its founders are likely to have a good understanding of the opportunities they want to exploit (eg, an underinvested market, a market that is highly fragmented, where they have good management relationships, etc.).
From here, with enough cash, the private equity firm starts investing in attractive opportunities based on the strategy it has set.
They typically bring with them new management at companies willing to partner with a PE firm to deliver the strategy, one of which is likely to be incorporated.
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Over time, if successful, these moves will see the company’s EBITDA improve, allowing the private equity firm to sell the business for more than it was originally bought for.
With a well-bolted acquisition strategy, it is not uncommon for PE buyouts to sell for double-digit multiples within a few years.
In the case of more fundraising for private equity (PE) funds, the goal is usually to put together an investment note for the financing round.
It will describe the private equity firm’s strategy, its management experience, how its most recent funds have performed, and what kind of returns investors can expect to achieve.
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Analyzing potential future deals is exactly what it sounds like: PE firms will approach company owners who want to sell one or all of their companies, or they will make their own approach to companies by analyzing a specific market.
However, there will be continuous analyzes of individual markets to be aware of where opportunities are likely to arise
Past transaction performance is typically done with peers (eg, PE managers) who set budgets and investment targets for companies that PE funds have previously acquired.
Sometimes it will also involve the portfolio company’s management team, who can give feedback on how the company’s operations are developing (or otherwise).
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Private equity analysts are traditionally hired straight out of college, but competition for the positions means that many have at least taken an internship at an investment bank.
They are essentially junior associates – less experienced members of the team who are expected to work on deal origination, contribute to investment tasks, conduct industry analysis and assist in the fund’s fundraising process.
Depending on their skills, they may be involved in complex financial modeling and aspects of a due diligence process, such as interviewing a portfolio company’s stakeholders.
An associate is a step up in seniority from an analyst, and that is reflected in the breadth and depth of their responsibilities.
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Associates, alone or in small teams, can handle transactions from origination to closure. They are expected to wear many hats at once – customer contact, financial modelling, origination and deal closing – essentially making them project managers for private equity funds.
The gap between analyst and associate is significant, with attrition rates similar to investment banking at the analyst level, as private equity firms try to figure out who has the chops for complex transactions.
A senior employee has all the same responsibilities as an employee, with perhaps some additional benefits – often bonuses and carry.
The difference between the two is usually due to the length of time spent in the company, the likelihood of moving up to VP level and some other KPIs. It is also common for companies to require employees to obtain an MBA before reaching senior associate level
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– When you reach VP level, you are a skilled player in private equity. Basically, you can start a fund yourself (and many end up doing this).
A typical VP will have dozens, and in some cases, hundreds of closed deals under their belt At this stage, their role is to bring their expertise to large deals, deals that are close to closing but incurring a significant loss, and provide strategic insight into portfolio companies managed by private equity firms.
Communication and interpersonal skills are most important for a VP He is responsible for raising money – talking to potential investors about why they should invest in the PE firm’s latest fund over others – and what they can expect to do in return.
Managing director (MD) or partner: The managing director (MD) or partner of a private equity firm is its figurehead. Fundraising usually depends on their reputation in the market
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At this stage there is almost no technical work to do the MD spends all his time addressing the concerns of the LP and selling them the benefits of the last fund It also comes with a significant amount of “we didn’t hit the target this year because…” discussion.
By the time a private equity analyst gets to MD, the concern is that they will have made enough to put some of their money into a fund, showing investors that they have “skin in the game”.- His success. Overall success for the fund
Private equity attracts so many investment bankers from their six-figure salaries that there must be something attractive about a career working with a general partner.
The prestige attached to private equity – especially at the top where companies such as BlackRock, KKR and Blackstone operate – means their positions are oversubscribed.
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This means that the quality of the applicants is higher, and it usually means that they can hire from the cream of the crop.
If you don’t fall into one of these categories, your chances of getting hired, especially at a large private equity firm, increase significantly.
But all is not lost Follow the advice outlined in “How to Get a Job in Private Equity” and you will increase your chances of being hired.
As noted in a previous article on careers in investment banking, the banking industry is dominated by certain personality types, even after investment banks have taken late steps to diversify their workforces.
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Since it draws many of its employees from investment banking, you might expect private equity firms to have a similar culture.
How to get a job in PE and get into private equity without banking experience? Let’s get into the context and see if this is possible
As mentioned above, the emphasis in hiring in private equity firms is generally on experience rather than pure educational background.
But that means it’s harder than it seems to get your foot in the door at a private equity firm First, there are fewer jobs in private equity than in investment banking
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