The Best Move For Your Career In Private Equity
While the cost of an MBA is high, the pros outweigh the cons by far: in many ways, the degree will pay for itself over time thanks to the improved leadership skills, enhanced network, and improved chances of working at one of the worlds top private equity firms.
Just remember to show your personality in the application to distinguish yourself from equally-talented peers by mixing in professional achievements with personal storytelling!
If that sounds difficult , consider hiring professional help. At Menlo Coaching, we regularly work with PE & venture capital candidates to help them find their story.
The Role Of An Analyst
Like investment banking, the entry level role for bright graduates in private equity is that of an analyst.
As a graduate analyst in private equity, your role will be to analyse the economics of companies and potential deals. You might:
- research new deals and investment areas
- prepare relevant documentation for partners
- coordinate the research and due diligence needed for a deal to take place
You’ll probably focus on projects in a particular sector area or industry and become an expert in that field.
Private Equity Career Overview
Private equity is a common career progression for investment bankers . Analysts in IB often dream of graduating to the buy side, where they are many advantages but hours are still extremely long and require extensive financial modeling work. Some roles in private equity are less client facing/sales oriented than investment banking, however senior principals at PE firms do a lot of fundraising, which involves a lot of relationship management.
Read more: buy side vs sell side
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Mergers And Acquisitions Experience
Another entry point is to gain M& A experience in a corporate role. For the most part, M& A transactions will be closest to the types of work you will be doing in private equity, and are therefore a good area to focus on. Private equity firms will not necessarily expect you to have closed deals at the early stages of your career. They will be looking for what you contributed to a deal, what you learned from it, and whether you were part of an unusual transaction.
In addition, you should try to polish your skills in research and due diligence, discounted cash flow , debt structuring and LBO modeling.
The Real Estate Modeling Test
The modeling test is often the biggest challenge for many candidates. Poor performance on the modeling test is often enough to derail an otherwise stellar candidate. But with enough preparation, anyone can ace these tests. The most common modeling test is 2-3 hours long and you can expect to:
Wall Street Preps Real Estate Financial Modeling Package covers all the key topics for a real estate modeling test and more.
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What Are Different Types Of Jobs In Private Equity
Jobs in private equity firms focus on accounting and management. In these positions, you may conduct financial research on companies, present reports detailing your findings to company executives, provide investment suggestions to help maximize returns, and analyze topics like the competitive landscape of a company you are considering investing in. Private equity jobs also often involve working directly with investors and managing multiple pools of money. Private equity firms typically have less separation between positions than other industries because they tend to hire a small, highly skilled group of employees. Some firms focus on the entire economy, while other companies specialize in particular sectors and may expect employees to have additional training or experience. For example, a private equity firm working exclusively with health care companies may prefer employees who were previously an investment advisor for a hospital or similar medical facility.
Typical Private Equity Salaries
|£200k £2m+||£400k £2.5m+|
A major part of the compensation package for private equity professionals, particularly at Vice President level and up, is the carry, or carried interest. This is a share of the return on the investment that is paid to the firm following the sale of the company that was bought at the beginning of the project. These payments are usually calculated in proportion to the level of investment contributed by the individual. For top performing, large scale investments, the carry can represent millions of dollars or pounds for high earners.
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Finally Is Private Equity A Good Career
As we mentioned at the outset, a career in private equity is quite similar to one in investment banking, with the main difference being that youâre investing for yourself instead of a third party.
That extra âskin in the gameâ may appeal to some.
It certainly gives you incentive to ensure the deal works long-term, as there are likely to be long-term incentives for good portfolio performance.
On this basis, private equity is an excellent career.
Similar to investment banking, it tends to provide more opportunities to be creative and to dip your feet in management far more than investment banking, with most private equity team members having some say in how portfolio companiesâ operations are run.
Thus, if you like the idea of investment banking with a slightly broader scope of responsibilities, private equity could be for you.
The Real Estate Private Equity Interview: What To Expect
So, youve landed a Real Estate Private Equity interview. If youre interviewing at one of the larger REPE firms, the process will be similar to traditional private equity. But typically, there are 3 rounds of interviews, although they tend to be less structured than investment banking or traditional private equity.
Regardless of your entry point , the interview structure is likely to be more or less the same. But, your entry point will likely inform where your interviewers are likely to push harder and where they might give you some grace. From my experience, the interview experience could differ in the following ways:
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The Real Estate Private Equity Acquisitions Associate Salary
Compensation structure is generally structured similar to traditional private equity heavily weighted towards bonus, though compensation within real estate private equity tends to be more highly variable than traditional PE.
At the junior level, base and bonus are all cash, while at mid-to-senior levels, compensation typically includes a carried interest component.
A first-year acquisitions Associate with investment banking experience should expect a base salary in the range of $90,000 $120,000 depending on location and firm size, and a year-end bonus that is approximately $100% of base pay, bringing the all-in compensation for most first-year acquisitions Associate will range between $160k $230k.
At many firms, base salary doesnt often increase meaningfully year-to-year, but bonuses can grow from 100% to as much as 200% in a few short years.
As you go further up their real estate private equity hierarchy, compensation grows similar to traditional PE:
At many firms, base salary doesnt often increase meaningfully year-to-year, but bonuses can grow from 100% to as much as 200% in a few short years.
Typical Day Of Someone Working In Private Equity
What most private equity professionals indicate is that the typical day involves varying degrees of internal meetings, calls and analysis.
This will include:
- Preparation of materials for an investor meeting
- Analysis of a particular market
- Analysis of the performance of a company and/or the performance of a fund
- Investment committee meeting .
- Strategy meetings
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Private Equity Vice President Job Description
In private equity, Vice Presidents are deal managers.
They need to convince the senior team members Principals and Managing Directors that they know what theyre doing so that the senior staff trusts them to manage deals.
VPs also lead and mentor others on the team, work more directly with clients, vet transactions, and lead due diligence and negotiations.
The VP role may sound similar to the Associate role, but it is very, very different.
Soft skills start to matter far more at the VP level, and you need to be a good talker and presenter to advance.
If you can prevent an important deal negotiation from falling through with some smooth talk on a conference call, that matters 100x more than being an Excel/VBA guru.
Very few, if any, professionals make it to this level with poor communication skills, but plenty of people with mediocre technical skills make it as long as they talk and present well.
Age Range: The likely range here is 30-35 because you must have already spent at least ~4 years in PE at the Associate levels, you probably did something before that, and you might have gone to business school as well.
Private Equity Vice President Salary + Bonus: The likely range here is $350K to $500K, with about half in base salary and half in the year-end bonus.
Carry becomes increasingly important at this level, which could boost your bonus a fair amount but you probably wont see its full effects unless you stay at the firm long-term.
Who Does What At A Pe Firm
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What Is A Private Equity Firm
Private equity firms control private equity funds and use this money to buy out or purchase a majority stake in a private company. They then sell the company or its shares for profit, usually after restructuring and improving its profitability.
Private equity firms often specialize in specific sectors, such as health care, technology, or real estate. Within the firm itself, there are limited partners and general partners:
- Limited partners are individual investors, pension funds, and institutional investors. Limited partners have majority ownership in the fund, but are protected from losing more money than they invested.
- General partners, or the firm itself, are the ones who make decisions about where, when, and how to invest capital from limited partners. General partners only own a small percentage of the fund, but they take on the full liability if their investment decisions dont work out.
Large Real Estate Firms: Blackstone Carlyle Oaktree Etc
The largest REPE firms think Blackstone, Oaktree, Brookfield and Carlyle have a standardized and predictable path of progression enabling them to hire entire classes at a time. They also have the resources to formally train junior hires.
If your goal is to work in acquisitions at a large name brand REPE firm, then your best bet is to secure a job in investment banking first. Asset management is less competitive and recruiting often happens directly out of undergrad.
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Private Equity Associate Vs Analyst
As discussed above, the Associate tends to be more involved with the entire deal process from start to finish, while the Analyst might only help with specific tasks the Associate cant get to.
The Associate is more of a Coordinator, and the Analyst is more of an Assistant.
Analysts are hired directly out of undergrad, while Associates join following several years in investment banking or a related field, such as management consulting.
Associates also earn more and are more likely to stay at the firm for the long term if theres a path to advancement there.
If there is no direct promotion path, Associates might complete an MBA or move into a different industry, such as hedge funds, corporate development, or strategy at a tech company.
Hear From A Successful Private Equity Applicant
Yawer faced a number of challenges in applying to the highly competitive US MBA programs. Menlo Coaching helped him present the best case for admission, and by the end of the process, his somewhat-standard private equity profile and international upbringing became crucial focal points of his application.
Find out how Yawer transitioned from middle market Private Equity to Harvard Business School.
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Real Estate Private Equity Investment Strategies
REPE firms usually specialize to varying degrees around specific characteristics related to their investments:
In cases where the firms themselves are not organized this way, their specific investment funds usually will be.
Many REPE firms organize themselves according to risk profile as their driving investment strategy. They will carve out a portion of the risk/return spectrum and focus on transactions regardless of property type and geography that fit the specified risk profile and return targets.
The most high profile types of real estate private equity fund strategies are called Opportunistic or Value-Add, and refer to higher risk/return types of investments than the more conservative Core or Core-Plus strategies. In the image below you can see the return profile targeted across these different strategies.
This is an effective way for REPE firms to organize themselves because it sets clear expectations for a firms investors and allows the manager to diversify risk across geography and property type.
When you hear terms like opportunity fund or targeting core investments, they are usually referring to risk profile and return targets.
REPE firms do not often constrain themselves when it comes to property type. In a scenario where they did, a firm would focus exclusively on one property type, hotels for example, and diversify their investments in other ways within the property type sector.
The Required Skills For Getting Into Private Equity
The most important skills for someone looking for a job in the private equity business are:
Networking skills: Having good networking skills is crucial for finding and getting a job in the private equity industry, but also for excelling afterward. Knowing enough people in the field is likely to help you identify any open positions, and your networking skills can also be useful after getting the job, as the role implies constant communication with fellow private equity professionals and with clients.
Cold calling skills: Being able to constantly make a large number of phone calls in a short period of time without losing concentration or enthusiasm is arguably the most important quality for those looking for private equity jobs. The reason is that the chances of you contacting a major private equity firm and getting a response from a senior employee is usually very low, so you need to be persistent and keep calling companies until you eventually hear back.
Technical skills: Knowing enough people in the field and staying focused while making large numbers of phone calls are crucial if you want to get noticed, but once you do you need to prove that you have the technical skills required to succeed in the industry. This usually implies having extensive knowledge on topics such as financial modeling, valuations, financial analysis, deal structuring, LBO modeling and other similar concepts.
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Career Outlook In Private Equity
Private equity is a career that will never stop growing as it is one of the oldest professions yes, the forms will change with time. There is no actual data that how far will it go in coming years but observing the market growth, there is no stop to it. As one of the siblings of private equity, algorithm trading is reported to grow from 47% current market capturing to 80% in the coming 7-10 years.
A Brief Introduction To Private Equity
Private equity firms acquire assets on behalf of their investors , improve the operational and financial performance of those assets, and then seek to divest that asset , returning a profit to the managers of the private equity fund and its investors.
The investors in private equity funds are typically pension funds, insurance funds, HNWIs, and even some other private equity funds.
Some private equity companies, among them Blackstone, Carlyle, and Apollo Global Management, have listed their shares on public indices meaning that even retailers can now invest in private equity.
Private Investing Career Paths: A Guide For Success
Despite market uncertainty and volatility in 2021, private investing firms were able to find success, leading to an optimistic outlook for 2022. In order to meet their organizational goals this upcoming year, firms are eager to onboard new talent. This means that if youve been contemplating a move into or across private investing for a while, now may be the right time. Before jumping straight into your job search, you should first determine which area of private investment you want to pursueand whether that means staying in one lane or diversifying your experience.
Many people who are looking to transition to the buyside, specifically private investing, are told they have to follow specific paths, says Eric Vaheb, a Director within The Execu|Search Groups Financial Services division. While these firms provide slightly different offerings, they have the same end goal to deliver growth solutions to companies. You can make the choice between private equity, private credit, and venture capital feel less daunting by understanding what area interests you and learning whats best suited to your skillset.
So, how do you decide which area of private investing is the right fit for you? Heres what you need to consider: