Q: Why do you want to be an investor? A:?

So I have an upcoming informational interview/informal interview with a VP in my banks Private Equity group which I am trying to lateral into in the coming months.

After speaking with an analyst in the group, he said one of the things this guy places a very high value on, is a candidates reasons for wanting to become an investor.

I am having some problems putting my thoughts together in a way I can articulate my passion to do this job and display some knowledge as well.

I was hoping you guys could give me some pointers on certain things you would want to hear from a candidate you were interviewing if you asked them this question.

I'm not looking for exact answers, although examples would certainly help, but looking more for points to touch on that would make you consider the candidate more seriously.

 
HedgeWhore:

Wait you want us to tell you why you want to be an investor?

If he does, he can just say "Because I heard PE guys are rich, meet mad chix yo, buy companies and have the power to control people, can run for pres., etc." or simply "Mitt Romney" right? Every VP would be cool if you said because you look up to good 'ol Mitt.
 

You want to really dive down into fewer companies and learn everything about them as the owner/investor rather than getting the higher level view of more companies/deals that you do as a banker. You enjoy combing through thousands of pages of due diligence and are very detail oriented. You enjoy talking to your attorneys more than your partner/spouse and friends. You'd like to work with lenders and learn how to put all of the pieces of a leveraged acquisition together on a granular basis.

Figure out the fund's strategy and say that's what you really want to do: financial engineering, operational improvement, bk/restructuring, platform with bolt-ons, growth, mbo, whatever. "I'm really interested in learning and being intimately involved in acquiring a platform company and rolling up multiple follow on acquisitions and being involved in the analysis and integration of those companies into the mother ship."

Stay away from saying things like "I want to learn how to operate a company" because even though that's a popular view of what you do in PE, you really don't operate companies (yes there are exceptions) and if you want to operate a company, you should work in industry and try to become an executive where you actually (surprise) operate a company. PE is generally Board level and high level strategy. Management decides how many widgets to buy for this or that market and what the optimal headcount is for this or that division. PE owners decide to sell off a division or leverage the shit out of a company to pay a dividend.

 
Best Response

mcl116 just wants some pointers guys, give the guy a break. I think it is a matter of structuring your thoughts and how you communicate; a bunch of us struggle with that. It is good not get get stumped on this question.

Reasons are preceded by key question anyone would think about when considering a new career:

  • Will I enjoy the work?
  1. Intellectually stimulating: Analyze top down macro analysis, bottom up company / division analysis, requires drive to continually improve and build upon your thinking and developing an edge over other market participants. You develop perspectives on the broader economy, capital markets, industries, private and public companies and most importantly people, through very close work with management (Hint: The response is a little nuanced, in that it cannot be fully applied to a hedge fund role - typically you do not work with management closely, unless you're working for an activist fund)
  • Can I build a career longer term?
  1. Longevity as a professional: It is not a job, it is a way of life, in that it is about refining your perspective about business and people and honing your judgement and toolkit continuously. Other careers typically do not offer that where you have a career for life (save medicine and few others), if you're good and effective of course. Additionally, network effects kick in, as in over time you develop a brand and a broad network in the industry which makes it hard to displace you. You can be an investor well past typical retirement age and over time you've developed these proprietary mental models that will help you succeed
  • Will I get paid for the effort I put in?
  1. Strong alignment of incentives: Tangible results drive incentives in this business. Few careers where incentives are strongly aligned across the ecosystem such as PE fund members, LPs, management, advisors and so on and to a large extent you as the PE investor is ensuring that optimal alignment. Any incremental dollar of EBITDA is theoretically incremental money in everyone's pockets, more or less
  • What else do I get?
  1. Ability to provide oversight early in career: Few careers where you can oversee management and provide them guidance this early in your career. Of course, this would be two-way lane. Through this oversight, you will develop quickly as a business professional
  • Will the skills be transferrable? (You don't need to get into this aspect during your discussion)
  1. Many possible exit paths: You've garnered a unique skill set and can apply it in a variety of contexts in the business world. Beyond the scope of this thread, so won't get into that
 

Well I met with the VP.

Very laid back, friendly guy. Had a great 45 minute meetin of mostly flowing conversation.

Wound up answering this without any prepared answer and just let my passion and desire come through.

The VP seemed very impressed and went as far as to say something along the lines of, "yeah, wow, you just nailed that on the head without me even having to ask you"

Definitely appreciate the more recent answers as I will be sure to incorporate this in future meetings/interviews.

And as messagevik said, I was just looking to get some pointers to help me gather my thoughts and articulate it as well as I possibly could.

thanks guy!

 

This post has a lot of great insight. This is the type of quality insight that I remember the OG WSO would have.

Now it's just "rank my pe firm on presteege"

 

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