Best FIG Verticals for PE/HF exits?
I've recently started as a FIG analyst at a top bulge bracket (GS/JP) and wanted to hear your opinions on the 'best' verticals to work for assuming I am looking to transition to the buyside at some point.
I understand a lot of people on WSO parrot the 'FinTech is King' narrative due to potential optionality when exiting but it seems as though that there just aren't as many FinTech Mergers or IPOs considering they're are typically unlisted and disproportionately prefer venture funding over public offerings (due to fees).
Assuming high quality transaction exposure trumps everything, would it make sense to focus on insurance/banks as they are the most active verticals by far? I also find them personally very interesting, so won't shy away from the technicity.
In terms of PE/HF exits, which verticals would you say are the most 'demanded'?
Anything but banks for the PE side, as there is the 24.99 rule there. Insurance and specialty finance seem to do very well since that skill set is pretty unique. The techier side of specialty finance does better as you get exposure to balance sheet heavy and asset light businesses.
For hedge funds it won’t matter much. At some of the pod shops you may be a more natural fit for whatever sub-vertical you covered in banking, and some funds shy away from financials generally, but not much you can do there.
For PE it gets more interesting and depends where you want to end up. For MM/UMM buyout shops you’re probably going to be looking at payments, insurance brokerage, RIA roll-ups etc. Basically businesses with similar cash flow characteristics to a traditional tech/business services company. This is also probably best from a banking perspective as an insurance brokerage LBO model looks the same as any other industry, so probably gives you the most recruiting flexibility. Of course there are a handful of specialty FIG shops that will do balance sheet heavy businesses as well.
The megafunds are increasingly looking at FIG both opportunistically and strategically. Apollo is obviously the farthest ahead in this with Athene, but everyone else is catching on to the idea of buying insurance platforms to get permanent capital bases. So if MF is your preference having done liability driven insurance M&A might be beneficial, but these guys will also just give looks to a GS FIG kid because he’s a GS FIG kid so it ultimately might not matter much.
Hey I recently got placed into the insurance vertical at my bank (MM). My goal is either mm PE (tech focused or generalist) or GE- would I be able to recruit straight to those from my group or do I need to try to lateral first? I felt like insurance was a death sentence for non FIG-focused buyside opps but your post gives me hope haha. I definitely don't want to be pigeonholed into insurance (I don't have much interest). Anything I should be doing to try and best position myself?
Can confirm insurance is hot right now in the space
Could you update on insurance scene and why it's been attractive recently?
Does working in the banks subvertical of GS FIG limit opportunities compared to TMT/C&R/IND at a mid-tier BB or is the overall strength of the group/bank more important than the subvertical?
You want the sub sectors where EBITDA based valuation methodologies are used. Ie not balance sheet businesses. So avoid insurance carriers and banks. Focus on insurance broking, asset and wealth management, fintech and other “services to FIG” eg fund administration, payments etc.
interested
I’ll give m perspective. By way of background I did 4y FIG IB and 3y FIG PE (am VP now) though my fund is generalist.
No matter how much you like FIG, don’t pigeonhole yourself from the start. FIG is broad enough to include balance sheet businesses (useful to understand the implications of the cap structure of an LBO or, more concretely, what happened to Greensill for example) but also EBITDA-driven and capital light by businesses (which work like any other company). You need to get exposure to both, as you don’t know now what you will need later: it’s about building optionality.
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