Secondaries advisory vs Infrastructure investing
Hey everyone,
For a bit of context I have just finished up my first 2 years in IBD doing M&A at a MM generalist firm and have recently received two offers:
-
To join a secondary advisory group at a boutique (think Evercore/Jefferies/PJT)
-
To join a European-based infrastructure investor (AUM < 5bn) looking to deploy approx 1bn that they have raised over the next two years typically invests in core / core+ assets
Was looking for any points for / against either option to help make a decision. Anything regarding exit ops/hours per week/first-hand experience in either career would be useful.
Appreciate they are quite different careers but at a bit of a crossroads so any thoughts would be very useful.
Thanks!!
So Secondaries or Ancala - if Ancala, i would be wary. Worked opposite them and they were a bit shady. Seniors in my team also didn't rate them.
Hahah not Ancala but a similar firm to them. But essentially secondaries vs Ancala-like firm
Beware that both paths you laid out are more specific/niche than what you’ve been doing at your current bank and either choice will steer you towards a different trajectory.
Secondaries advisory is… advisory. You’re still chasing clients and your long-term success is correlated with your ability to sell. Generally, secondaries advisory tends to be a tradeoff between lower hours (vs. classic IBD) and lower pay/bonus. Nothing wrong with that. If you’re drawn to this position because of the bank’s overall prestige, you’re doing it for the wrong reason.
Infrastructure PE is a buy-side job; that alone should give you a hint at different day-to-day responsibilities. One thing to note about infra is that you’re often (or, depending on the fund, even exclusively) looking at assets - toll roads, airports, ports, telecom networks, electricity grids, you name it. The infra space is growing at an astonishing pace and there’s a clear tendency to take on more risks; what would have been a value-add asset 5-10 years ago is now often considered core or core+. A lot of the growth happened in the past 10 years, so it will be interesting to see the space will adapt to a new interest rate regime. From a junior perspective, beware that financial models often capture the full operational period of 30+ year at a very granular level. Throw in some debt structuring (e.g. sculpted debt profiles) and it’s easy to see why you’ll spend a lot of more time in the model than you would at a typical generic PE fund. Some people love it, some hate it.
I have spent a lot of time in the broader infra space, starting out in classic infra, moving to renewables and now some metals & mining, so I am clearly biased when I say it’s an exciting space. However, your decision should be driven by your personal goals and interests first and foremost. Both choices are too specific unless you’re genuinely interested.
Really helpful colour and would agree with most of the points made.
However, I would push back on your commentary on Secondaries - the space is booming and the Secondaries teams at the top places (PJT/EVR) are some of if not the highest paid bankers in the firm.
That's fair. Coincidentally, I had a conversation just yesterday about this through a mutual friend and I indeed had some misconceptions about these groups. I stand corrected.
OP, please ignore my comment on secondaries above. However, I still stand by my remark that the EVR/PJT name is not a good reason to join a secondaries group. It's a different trajectory than classic IBD (or RX, fwiw).
Would you say that sell-side infra/renewables space is as interesting or are you biased to the buyside? Also any tips for breaking into buyside infra/renewables (PE, SWF, etc), coming from sell-side m&a in the same space?
Personally, I like the sell-side and would (and actually did) choose it over many buyside gigs. That's mainly because I don't find buy-and-hold strategies terribly exciting and I'd rather see different transactions, structures and situations. Note this is subjective and YMMV.
If you're in a such a team, you're in a good spot for buyside recruiting but many infra/renewables funds are open to alternative backgrounds as well (e.g., developers). My main advice is to understand the fund's strategy (risk tolerance, buy-and-hold vs. operational improvement,...) and practice your modeling tests. For example, when I interviewed for a Tier 1 infra investor, they threw a 3-hour modeling test of a construction stage asset in a HoldCo/AssetCo structure for which they wanted the cash waterfall and debt structure. Without preparation, you'll never finish on time IMO.
Thanks for the advice, appreciate the very thorough answer. What are the exit ops for secondaries advisory roles I guess normal exits in terms of LMM/MM PE and then maybe not HF/VC. Whereas for Infra would I be segmenting myself to a career in the space for the foreseeable
You're generally not going to exit to LMM/MM PE from Secondary advisory. Its not impossible, but its rare. Your main exit path would be to move to Secondary investing.
Okay didn't realise. Just in terms of learning is it more useful to have a secondaries skills set / doing direct infra?
I think a good way to look at the two opportunities is if there is a possibility you would be happy with staying in one strategy focus (infrastructure) for the rest of your career. If you're still not ready to make that choice, the secondary advisory role is the better route. This is overgeneralizing, but secondaries advisory is emerging as another product group (like ECM, DCM, Lev Fin, M&A, etc.), which could expose you to different industries and many general partners (and their respective strategies). On the other hand, focusing on infrastructure is also an attractive route, especially as more limited partners and investors are looking for infrastructure investments (longer investment periods with more stable cash flows).
tl;dr - if you're not ready to focus on one strategy, go secondaries advisory.
I think as a lot of other folks have pointed out/ you have deduced... the big difference or question is... do you want to be an investor or a middle man? The jobs are very different....
However, I would say that beyond those overall directives.... infra investing is awful. The amount of diligence required to do a deal in the current environment is horrific. I've been a part of $2bn deals where infra PE firms spent $5-$10mm on DD alone. Diligence calls with 100+ people. The value add becomes coordination and just checking the box. IC meetings are tear down sessions where you must account for every single black swan event imaginable. All of this just to eke out a 10-12% levered IRR. Would also say that comp is well below traditional buyout PE.
On the flip side, secondary advisory is growing 10%+ every year due to sponsors loving certain investments but needing to provide liquidity events to their LPs. I've also heard that because it's a nascent market, M&A bankers are able to come in and walk all over the existing competition.
I clearly have a bias in all of this, but would highly recommend you continue talking to folks in both industries about i) their long term plans ii) their day to day live and iii) their comp
Lol this is garbage. US infra PE does not pay a large discount to regular PE.
theres 3 reputable secondaries IB teams in the US - doubt they’re paying above street for IB comp or near PE / infra comp
Evercore PCA is actually the highest paid team at the firm lol
Advise you stay away from Ancala if it is them, sounds awful from grapevine
Quisquam ratione nulla placeat quia culpa et eos. Corrupti dolor nulla totam deleniti qui illo. Et fugit a ut cum molestiae veritatis sapiente.
Qui eos facilis atque est corporis impedit. Dicta rerum aspernatur iste officiis dolorem voluptas. Quo odio tempore sed nostrum est.
Quam earum vel aut deserunt perspiciatis nostrum inventore. Omnis cumque dolor vel eum minima illum. Officia minus architecto consequuntur necessitatibus vel porro. Consectetur voluptatibus quod dignissimos ex nisi assumenda fugiat.
Ut ipsum non amet ut et. Aliquid rerum eveniet est earum. Rerum delectus quia dicta cumque adipisci. Libero cum iusto est qui aperiam. Dignissimos nihil et fuga aut et assumenda sint. Nesciunt et ut voluptates nobis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...