Life in small PE funds (less than 300 million in AUM)

Interested as well

Similar situation, also interested.

A little confused as to how you can graduate and still be eligible for an internship, but I just wanted to address one thing:

"I have an FT offer to join a shop with 200-250 million AUM,(last fund (150) raised 5-6 years ago)"

If you intend to be here long term, this could be a bit of a red flag - have they started raising new capital? Do they intend to? Most funds have a 5 year investment period so they should be really be raising new $ already. If they do not raise new money, your investment experience (as opposed to portfolio mgmt experience) will not be great.

Bear in mind I have no FT experience, but I think you'd probably have to be pretty confident in the fund to make that choice. The BB role will likely give you opportunities at bigger more reputable funds with better comp.

There's no one size fits all when it comes to lower middle market PE. It depends on location, culture, where the founding partners came from, etc. Experience-wise, you're still doing deals, working with portfolio companies and getting the right experience, and it's certainly possible to move up market (moving from LMM to megafund is probably tough without business school in between). One caveat for smaller firms is they tend to be get ready for it smaller in personnel so culture and office politics actually becomes much more important than a larger firm with multiple silos. If one of the partners doesn't like you, you should pretty much start recruiting yesterday.

But in your case, you also need to consider the value of a PE ANALYST (which is what you'd be without a banking program) vs. going the traditional banking route. Check out other posts here on this subject but a lot of people (myself included) feel that getting the traditional banking skill set then moving to PE is the way to go.

The fact that they haven't raised a fund in 5-6 years is concerning, esp given their small AUM. I would try to find out more (how much have they invested, are they in fundraising mode, etc.).

That said, I started at a smaller PE fund after IB. Culture was good and work-life was great. But the growth wasn't there so I lateralled to a much larger MM fund. That said, in general, it is tough to move up-market. Going from megafund to upper MM / MM fund is much more common.

Just have to get lucky and network if you want to move up.

Thank you for your responses, good points raised. I will meet up with one of the partners and discuss the questions I am wondering about in regard to joining the fund.

PE is my end goal, and the fund is located in another European country, which is more suitable for my private life. Another point is that the BB analyst position is not 100% as I will still have to convert, but that is another issue, I am interested in hearing about these smaller funds and experiences relating to them.

Thank you for your comments, appreciated.

I work at a small PE fund here in the US, around the same size as the one you're talking about. Here are my key takeways:

There will be no formal training program, so you'll pretty much have to learn a lot more on your own/from the rest of the team. Make sure you're( and by you I mean the firm you're joining) willing to put yourself through a modeling/powerpoint/finance boot camp either prior to joining or early in the process. Even if you don't become an LBO expert, you need to have some foundations. At the BB they'll do all of that for you, in PE they will not.

If your goal is a Megafund, starting off in PE won't help much. The upside is that if the fund you work for is on a god trajectory, you might be able to stay for a while, not have to go back to B school, and just work your way up in the firm. The dream for PE is partner and you'll have a better shot at a small firm than at a big firm. With that being said, you have to make sure the fund you're at has good future prospects. It's odd that they haven't raised in the past few years. At the lower levels of AUM, most firms try to raise a new fund every 3ish years or so. At a high level, not raising either means they're not finding deals to invest in or they are on long holds on their investments, meaning they haven't invested that well and are waiting out the portfolio companies in hopes that they can hit returns. I'd take time to understand the performance of the fund and who their LPs are.

You'll do more interesting work at a PE firm than at a BB. Deals will be more scarce and you don't get the repetition you get in banking, but the lifestyle will be much better and the quality of work will be higher, even at a small firm.

If they're giving you a good salary, you have confidence in the fund being around for at least another few years, and you don't have aspirations to work at KKR or Apollo then it's a pretty good gig.

Otherwise banking will be safer.

Actually, here's a question for WSO -

How do small PE firms raise capital? I'm dead serious.

I started at a small PE fund in the UK and worked on Growth & Special Sits with some SME financing thrown in.

In broad strokes… a BB will give you narrow and deep experience through repetitions of a small number of tasks, often in a specific industry. This is group, bank and work flow dependent of course. The banking experience is pretty much what it says on the tin, you get a brand name and experience that is easily recognisable to recruiters.

Small PE is highly variable and fund specific. You're experience will depend a lot on the fund strategy, your managers / partners and deal flow. Personally, I loved it. Ended up with a good split between investment and operations exposure and a boss who was an exceptional mentor. However, it could easily been horrible with shit exposure. Luck of the draw.

Be realistic about the ways in which coming from a small fund (Vs. a BB) will limit you. Banking affords an exceptionally wide variety of exits, Small PE is, once again, experience dependent and your exits will depend a lot on the exposure you get, how you sell it and whether you load up on some qualifications to make up for the brand deficiency (many small PE firms tend to love ACAs as half the battle is getting to the 'real' numbers).

Another thing to think about is that if you start in small company world, you’re better be happy with it, because whilst the climb up the ladder is possible it isn’t particularly easy (on the investment or operational side). Small companies have a lot of quirks and it’s a space where an investor can genuinely add value.

R/E compensation it is WILDLY variable (as in £35 - £70 variable).