PE Oversaturated?
All of this talk of PE has obviously drawn the attention of many 2nd year IB analysts in NYC. It seems like everyone out there wants to get in this industry but there has to be a threshold of how many the private world can handle. I realize that only a few actually get in the top firms, but a whole bunch go to MM PE funds. My opinion is that the industry is going to get too large and the returns will get squeezed. It is the new "hot" place to make a quick buck, and anyone who follows the market knows that these methods have a drawback eventually.
That leads me to my second topic. If PE gets squeezed, where will the next great place be? I am thinking that structured finance may become a popular place to go. That is pure speculation though.
Let me know your thoughts.
Well, PE has been around for a while. I remember people expressing their concerns about an imminent PE bust at least over a year back. So far the deal flow has been pretty strong. Although the current interest rate situation is putting pressue on the PE guys and they are getting cautious with their valuations. However, I believe the proverbial "too much capital chasing too few deals" still applies.
As to what the next big thing will be - hard to say. If anyone knew, they would already be there :-). Why do you think structured finance is going to take PE's place?
If any area is overheated right now, it would be hedge funds, not PE.
Hedge funds are playing a huge role in the eventual private equity bust because they are starting to play around in that industry. I work for a PE fund and am seeing the affects of this. There is way more money in the industry then people are talking about right now. It may not happen for 5 years, and it probably won't be a full out bust, but there will be a significant drawback. With the multiples deals are going for it will be hard to receive the traditional IRRs unless a perfect scenerio takes place. Also to respond to your comment about deal flow, yes deal FLOW is good right now but that doesn't mean that the deals will generate returns 5 years down the road. They get done to please investors but no one will know how good they are for at least a few years. Then there are issues like management getting sick of the due diligence involved with going public, back private, the public again. That being said, there are many other things people should be thinking about in this industry instead of just deal flow.
The reason I see structured finance becoming a big item is that after the hedge and private equity funds start to fall-out of the picture many people will look for less risky ways to invest. Asset and mortgage backed securities or even mezz. debt may have the risk/return investors look for. Who knows though? Like I said, it is pure speculation and just a conversation starter.
There will be plenty of PE and corporate assets that are going to be in trouble in the next couple of years or at least hit up against their covenants, and when the markets dry up, and companies can't finance as easily as they can today, there will be opportunities to buy into the capital structure or the whole company at attractive valuations. Ofcourse, this field has a lot of players, people, and money that has poured into it also
Competition for PE Jobs (Originally Posted: 09/08/2009)
A quick question for those of you who are in the middle of / just finishing up recruiting for PE after a few years in banking. I know that the typical path is 2 years in banking/consulting then on to PE, but I wanted to hear what the competition has been like.
Did you see a lot of people who were interviewing who fit in to the following groups:
-Recently (in the past year) laid off bankers -Already working in PE and moving to a different fund -Third-year analysts who stuck around to try and better position themselves
All of the above, as well as other types and more! You'd be surprised at how many people are chasing PE jobs. People start coming out of the woodwork.
~~~~~~~~~~~ CompBanker
Competition for PE Jobs (Originally Posted: 09/08/2009)
A quick question for those of you who are in the middle of / just finishing up recruiting for PE after a few years in banking. I know that the typical path is 2 years in banking/consulting then on to PE, but I wanted to hear what the competition has been like.
Did you see a lot of people who were interviewing who fit in to the following groups:
-Recently (in the past year) laid off bankers -Already working in PE and moving to a different fund -Third-year analysts who stuck around to try and better position themselves
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