If you’re an analyst or an associate in an investment banking division (IBD), you almost certainly want to move into private equity. Given private equity funds’ notoriously long interview processes, you may even be interviewing already in preparation for a move in 2018.
Be warned, however. Junior bankers who’ve already broken out into PE say the industry isn’t all that it seems.
Take working hours. They are not always better in private equity. They can sometimes be worse.
Most big banks have introduced measures curtailing juniors’ weekend working hours. However, the largest private equity funds still demand absolute commitment – all the more so because they’re usually staffed by principals and partners who cut their teeth in the bad old days of banking. “Working for a big U.S. fund like Carlyle or KKR is going to entail very long hours,” says one Italian PE professional, speaking on condition of anonymity. “If you want shorter hours, you need to move to a smaller European fund,” he advises.
Small European funds are no guarantee of a perpetually easy life though. One ex-banking associate who now works for a fund in Europe, says long hours are simply part of the private equity model. “People who move out of banking have the misconception that you’ll be doing things on your own terms in private equity because you’re the client,” he says. “But this isn’t the case. When a deal comes around you’re still working to someone else’s time timetable. Processes are tight and you can’t prioritise your work-life balance.”
The good news is that you won’t be doing deals all the time, creating opportunities to catch up on life and sleep. But this too can be a disadvantage. Just as banking juniors are ground down by incessant pitches for deals that never happen, so private equity juniors say their time is spent searching for investments that rarely come off. “We actually execute maybe one deal a year,” says another PE junior. “It gets quite demoralising when you’re looking at a range of deals that never go ahead.”
And then there’s the issue of personality. While banks like Barclays and Goldman Sachs have taken concrete measures to curtail the power of their managing directors by allowing juniors to review MDs’ performance on a continuous basis, some private equity funds – particularly smaller ones – operate like personality cults.
“Everything here depends on the mood of the managing partner,” says one PE junior. “When he’s happy, we’re all happy. When he’s not happy he shouts at people and we tiptoe around for fear of upsetting him.”
Another PE professional notes that there’s, “nowhere to hide,” in small funds. “In banks there are so many people that you can usually find someone senior you get along with,” he says. “In a small private equity fund you don’t have that choice – you need to get along with everyone.”
This means that it’s unwise to move into private equity unless you’re an accomplished charmer. All the more so, because it’s not just your colleagues you’ll need to navigate, but also the personalities in the firms you’re investing in. “People who come to private equity from banks underestimate the importance of being able to read and judge management teams,” says another ex-banker. “Almost anyone can build financial models and analyse a deal. The alpha in private equity is really generated from forming strong relationships with management teams. This is far harder to achieve.”
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