Q&A: MM PE Vice President - Big 10 Undergrad - No MBA
Been on and around this forum for 5+ years and have changed user names (mostly because I lost passwords) multiple times. Figured it was time to give back in some way now that I have been around the industry for a while.
Background: Big 10 business degree, TMT analyst at ML, associate at small middle market sector focused fund, passed up business school to lateral to a well regarded larger middle market sector focused private equity fund. Recently was married to a girl who went through this entire process with me so social life questions are welcome as well...
I have only 1 question for you - What Big 10 School? Big 10 Represent!
Its a real big ten school. Not one of the impostor Big 10 schools like Northwestern.
LOL to whoever considers Northwestern a Big 10 school.
On another note, have you been TMT throughout? Banking, PE Gig #1, PE Gig #2?
Thanks for the thread and congrats on the nuptials.
Do you sit on any board seats? If so, how much involvement do you have?
Yes. I currently sit on two of our portfolio company boards -- both deals that I completed start to finish at the firm. My involvement varies. On one I speak with CEO/CFO daily given the roll-up strategy involved that usually involves figuring out how to continuously raise incremental debt to fund. On the other, my involvement is periodically checking in and attending 4 board meetings a year.
Love the Big Ten rep (most family is at PSU) and want to know how the process was transferring from small MM to Large MM fund ? Was there similar strategy or what the benefit you had over MBA ?
How did you prepare for buy-side interviews? What steps did you take to ensure that you would be thoroughly prepared for modeling tests and PE interviews (any specific books, guides, methods)?
Secondly, I rehearsed my "story". This is usually your first impression and the only question you know you will get in every interview. When someone says "walk me through your resume -- I wanted a concise and compelling story around who I am and why I am sitting in front of them.
Lastly, read technical guides to make sure I knew what they would throw at me. I am not sure nailing technical can get you a job -- but it sure and the hell will lose you a job if you don't know them cold. These were table stakes. If you don't know your technicals, you have no chance.
where do you see your career going in the long run?
do you plan to move up in your current firm or other MMs? are you trying to break into a megafund? or do you see yourself as a VP/CFO/CEO of a portfolio company?
Congratulations, both on your career and marriage!
What made you want to go the middle market route?
Thank you very much for doing this. My questions mostly apply to IB. 1. As a 17 y.o., what are the best ways i can prepare for internships next year and get a head start compared to other kids my age? 2. In your opinion, what is the most valuable thing on a resume for a summer analyst at a BB/MM? Cheers.
1) What do you think about the future of MM PE firms? 2) How tough is it to break into a decent MM PE firms these days as a Post MBA associate/vp from hbs/gsb? 3) As a MM PE VP, what are your main responsibilities? 4) How are the skills/personalities needed to succeed in PE different from IBD?
That is a tough question. MM PE's are hiring. That said, each take what...1-2 post-MBAs each year? That means they can be very selective and good grades, good IB job and sometimes even previous PE experience aren't enough. Network is important. Demonstratable value add is also important. Everyone can build a three statement model. What can you do to help above and beyond? Proving why we should share our economics with you (assuming you are now on a partner track) is vital. Its just a higher bar.
MM VP is in my opinion one of the hardest position because there is no one job I can point to and say that is my responsibility. The deal going smoothly and making the partner's/principals life easier is my job. Broadly - the diligence process is my job. I direct associates and senior associates on the analyses to complete. The model is my ultimate responsibility. If the numbers are wrong - its on me. Financing is where I spend a ton of my time. Working with lenders to best capitalize a prospective deal. I also am usually responsible for all third party diligence providers (QofE, consultants, legal, etc)
how does coming from a non-target background hurt PE recruiting opportunities, given that you earned your spot at a BB?
Can you explain what you mean by this? Do you mean you literally married a (current or former) co-worker? or do you mean that your wife also has a banking & investing background? Either way, congrats on the wedding!
Also, are you still based in Big 10 territory? or are you based out of NY/SF/Boston where the preponderance of TMT-focused funds are found?
LOL... Patrick or Andy with another great picture to compliment the post
Thanks for doing the AMA. I'm currently looking to go the same route as you and am staying on for a 3rd year at my MM PE shop as an associate. My questions:
How long were you an associate and was it a 2-3 year and out or was there the possibility for direct promote at the firm?
What role did your recommendations from your first PE job play in landing the direct promote? Was it done through a recruiter or intro via one of your bosses? Just trying to figure out the weighting of importance in (i) your experience / interview skills, (ii) recs from bosses, and (iii) recruiters, other, etc.
Anything you did to differentiate yourself from other associates to stand out?
Thanks so much!
Maybe I'm the outlier here, but I'm more curious about how your former gf/future wife handled your working hours. Is she younger than you? Older? How did the time commitment affect the relationship? Was it long distance at any point?
I know the consensus among the people here is "lol hookup with chicks forget relationships" but I feel like there are a few of us in the minority in happy/stable relationships with wonderful people, and it's hard to get good insight on these sorts of things.
Were there any strains on the relationship, things that made it difficult, etc?
Thanks
Do you still get to party after you are married?
First off Congratulations on getting married!!!
P.S- WSO is by far the best site for an aspiring, or even a current finance professional. The ability to read, and ask questions with people who have clearly made it into a very tough industry with very little time (All for free btw) is in-fucking-valuable...
My all in cash comp is $450K. Carry is in the mid-7 figures. note: when someone quotes the value of their carry - or at least when I do - it assumes a 2.0x on the fund. ex: If the fund(s) I have carry in ultimate return 2.0x -- I get the value I referenced above. I really have no idea where that compares to peers at mega funds. VPs surely make more at the mega funds. I'd imagine Mega fund VPs make $550-650 with similar carry numbers. Anyone have an actual datapoint?
I'd like to think they saw something in me, but its tough to say what exactly that is. I will say the guys I've seen that don't make it just could never make the jump from doing the analysis to interpreting the analysis. Developing judgment is critical and a soft skill that is tough to teach.
If you don't mind me asking, how big is your fund (I guess latest and total AUM)? This thread is extremely helpful by the way
props for putting your compensation out there like this -_-
Thanks for doing the AMA. It is very useful to hear candid comments. I have a couple of questions. Where did you do your IB job? And where is your PE job? Also would like to hear how many people are at your firm now?
Thanks again for the great answers, you would not believe how beneficial it's been for me because I'm hoping to follow a similar career trajectory, and I've got an eerily similar background (B1G represent, although I can't be too proud of my team given the last few weeks of football).
A question I've always wondered, and it's a bit tangential - you mentioned you did your IB stint at ML, so I imagine this is pre BofA-ML merger. Did the legacy Merrill groups do M&A within the specific industry verticals, or were they all outsourced to the M&A group like how BAML does it now?
Also, was Merrill a top TMT bank back in the day? I don't know too much about them, nor do I know how BAML TMT is nowadays, but I'm just trying to figure out how placement was for your group.
Also (and I don't mean to ask too many personal details), was location a deciding factor at all when you were looking to move across the country? Or was it more the firm that you ended up getting an offer from, and it just so happened to be in SF/LA?
And I guess the last question is, what would you recommend people do from day 1 (aside from knowing all of your deals through and through) of their BB stint if their ultimate goal is 2 yrs -> PE? Anything that people might not realize?
Thanks again, really appreciate it.
Thank you for this post.
Do you think not having a top MBA name under your belt will hurt you in the long-run? And how so? Also, do you think that people constantly judge you / see you differently for working in high finance coming out of a non-traditional, non-target school (i.e. Not HYPSM)
Great shit. I love the comment about ending up in the same position as others but with an "inferior" education.
My question: What qualities/characteristics/personality traits really stand out (positive or negatuve) when interviewing candidates?
hi, so my situation is a bit different. I've been in PE (top tier firm) for 5 years. BUT it was all overseas. My US network is zero (trying to connect in thru my b-school network but it is difficult). I'm not able to get much credit in US for working in PE overseas despite the firm's great reputation and as I have no network here in USA I'm not really able to so far to get any interviews. Any advice as to how to land the interviews in US, and how to bridge the gap over not having worked in USA? Apologies to all for the specific nature of my question which will not apply prob to many others here, but I did feel compelled to ask as I am quite stuck.
How many different projects are you on at a single time? I've found in banking that I'm often spread very thin and feel like I have very little time to critically think about an individual project
Could you tell us a bit about your working hours and lifestyle at the PE firms you've been a part of? How was it as an associate, and now VP? Avg hours per week? Weekends? Perks/benefits? Fairly predictable or unpredictable work days/schedules? What does your day in a life mostly consist of (can you maybe walk us through this? And lastly (sorry this is long), how often do you travel? Do you enjoy it?
Perks: Flying business/first only, gym membership, free healthcare, co-investment opportunity on individual deals, and others that would be too specific to name
Travel: I personally travel a fair amount. ~3x per month on average. I enjoy it. I am also lucky that I typically go to good places as a result of the industries I cover. Others in my firm are heading to Cleveland or Detroit. Travel is probably alot less fun for them.
What do you do in a downcycle? Fundraising dries up --> no money --> no deals to do? Spend your time working with portfolio companies instead?
Great thread. Thanks!
Out of curiosity if you are at $5m carry at vp level, how much carry do partners (excl. founders, i.e. owners) have?
Is this assuming zero hurdle rate (I.e. 20pc on all return)? Just surprised by the $5mm at vp level, given partner implied average is only $30m (and presumably founders take a big chunk of this so non founders could be closer to$10-15m).
So am I thinking about this right... $450k all-in now... going to what, conservatively $1m all-in 5 years from now? So you're averaging $750k/year cash all-in, plus $3m carry across 5 years, so ~$600k carry, you're at $1.35m cash+carry/yr?
Also, you did you mean the carry isn't paid out until the fund is fully harvested or the investment is fully harvested?
got it, thanks, that's very helpful.
Awesome thread. Congrats on your success!
Why exactly did you decide to not apply to b-school? Weren't you a bit curious to see if you could've gotten into hbs/stanford/wharton and leverage that to getting into a megafund shop or hedge fund?
Just wanted to restate a question I asked earlier but you didn't answer - How do the skills needed to succeed in PE differ from IBD? At VP+ level in PE, is it just like banking at senior levels where you just have to be good at being a salesman and maintaining relationships, or do you have to be a good investor and be "intelligent"?
Similarly, do senior bankers and PE Partners almost always have similar personalities? (extreme extrovert, aggressive, and etc)
Thanks for the thread! B10 represent.
Awesome thread man! I really appreciate how candid you are.
I'm strongly considering going to a top 15 bschool after a few year in corp fin to try to transition to high finance. Do you know of people, or is it possible, for people to break into PE after a top 15 MBA with corp fin experience?
I'm also a B10 alum. Unite! I'm sure you can guess which one.
Also, how long did it take you to make VP out of undergrad?
How have your two funds gone about the Associate recruiting process? Wondering specifically about the use of recruiters and what type of timeline you typically operate on.
Thanks for the thread.
I'm curious how no one has asked, but you mentioned how your now-wife was with you through the entire process. How did you guys handle the hours? It's a pretty strong team effort, but there has to be some difficulties that still come.
Would love to pm more about this if you don't want to put it all out in the open.
To the above poster- he's already addressed this in page 1.
OP, obviously you make good money... what do you plan to do with all that? Also, you said you plan to stay until you make partner and so on... how difficult of a feat is this across the PE industry? Do most PE partners stay on as partners until retirement, or have you seen them venture out to other roles (CEO, different PE firms, industry, etc.)?
Correct. Your carry percentage is your ownership in a particular fund (it can vary from fund to fund). From what I've seen this is by far the most common structure. I've also heard about firms that force you to invest actual dollars in the investments you make (above and beyond your general GP commitment). That ties your compensation a bit more to your individual deals.
Now that we are on it, how exactly are hurdle rates structured? Is it just if fund is below 6-8pc (or wherever hurdle rate is) then carry is zero, if above its 20pc (or whatever fee is set at) on entire return?
Are funds ever structured as 20pc is only charged on total return - hurdle rate amount?
The former seems like a pretty shitty deal for LPs lol
Carry is 0% until the hurdle is hit. Once you hit the hurdle there is a "catch-up" where 100% of the incremental returns go to the GP. Afterwards it is 80/20 (assuming carry is 20%).
Examples assuming an 8% hurdle rate and an 80/20% carry split: Fund returns 6%: LPs get all 6%. Fund returns 8%: LPs get all 8%. Fund returns 9%: LPs get 8%, GP gets 1%. Fund returns 10%: LPs get 8%, GP gets 2%. Fund returns 20%: LPs get 16%, GP gets 4%.
Very helpful, thanks Comp. +1
Comp, I was under the impression that the catch-up actually meant that once hurdle was hit it was virtually like there was no hurdle at all, i.e. if your fund's hurdle is 8% and you get a 10% return, everything after the invested capital, meaning the whole 10% return, would be shared 80/20. I understand that getting 20% of the excess return on the hurdle, in this case 2%, is the "non catch-up" version, isn't it?
1) First 8% to L.P.s 2) Next 2% to GPs (catch-up) 3) 80/20 there on out.
I've never heard of the concept that clearing the hurdle eliminates the impact of the hurdle altogether. Maybe others have structured it that way?
Cool thx good to know it's not just us on the HF side screwing clients with unjustified fees :)
So as a VP you got 100bps of carry? Nice.
Do you plan to have kids?
Have you ever felt at a disadvantage, or in the position where you felt you needed to prove yourself before being taken as seriously as your target-school peers, due to your Big 10 background - for instance when networking, talking to LP's/management teams, presenting investment ideas.
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