Advice needed: Long-term career prospects in Co-invest/Secondaries
Currently a 2nd year mm-IB analyst that is sitting on an offer from a decently sized FoF platform (HL, StepStone, Adams Street, etc.) within their private credit group. The role is apparently weighted toward the co-invest/secondaries side and should have better hours than banking, but I am a little concerned with the skillset/ long-term career outlook now that I actually have to pull the trigger, and hoping that WSO community can help me out.
What kind of skillset does this type of role bring and is it valuable? I understand moving to the GP side is almost impossible, but are careers at F500 companies also off the table (and if not what role would you even be qualified for)? Would this type of role be good for MBA admission-> career switch if needed?
I got interested in the role because I wanted to avoid banking 2.0 at traditional buyouts in terms of WLB, but would appreciate anyone who can give me on advice on if the skillset is too qualitative / complacent long-term. Thanks in advance for the help!
Bump
I'll add my 2c (solely focusing on co-investing), as I'm someone that started off early on in my career with a brief stint at one of medium sized co-investment platforms before moving to a middle market growth oriented firm. The people were truly amazing and the WLB was as great as advertised. Essentially no weekend work (unless catching up on work or the one-off quick turnaround for Monday). I will say that pay was significantly less across the board as compared to typical buyside roles until you reached the Principal / Partner level and were receiving a larger portion of economics. Even then, Partners at these big FoF platforms are living very comfortably but nowhere near their traditional PE counterparts, but that's the trade-off.
I won't really focus on fee compression as that's commonly talked about but still a serious concern. First, every LP and family office is asking for co-investment these days. To the point where most GPs are building out structured processes to manage this to the point where as a junior member of these teams you don't even feel like you're investing. GPs no longer view co-investors as partners, but instead as a spoon taken out of their own mouth, and you will receive information as such in a transaction. So you can have a structured IC process and break down the pro and cons as a team, but unless it’s a first time vehicle or horribly performing fund, no LP in their right mind is turning down a semi-attractive co-invest opportunity in this market or second guessing their sponsor relationship. It's just impossible to hone your skills as an investor when the only reason you'd turn down a deal is due to over allocation to an industry. Some people really enjoy taking a more macro view in this way but it just wasn't for me. This is slightly negated for the Harbourvest and HLs of the world because they are so massive and see so many opportunities, but still a problem.
Second, the longer you stay in the industry the harder it is to truly pivot. Because you're never truly digging deep on opportunities and are primarily piggy-backing off the work of others, it's hard to really gain any hard skills that are attractive to future employers or recruiters. I don't think this is such a big problem at the Analyst level, but the higher up you go the more silo'd you'll be.
I'll end by saying there are still a ton of very talented and smart people in the co-invest / secondaries world that could work at other competitive buyside firms, but put a higher value on family life and coaching their kids youth teams. There are also some absolute idiots that can't even walk through the basic mechanics of an LBO.
Do you think the secondaries hype is real?
Seems like it's the shiny new toy that everyone and their dog wants to get into now.
Hey OP here, really appreciate your response! Is there anyway I can PM you? Would be great to pick your brain a bit more about this
Same would be interested to hear more. Recently joined a co invest shop and trying to DD the space more
on that last note, do you actually need to build LBOs for co-invest and secondaries? under the impression that co-invest and secondaries you're essentially just piggybacking off of sponsors work so really just overlaying your own assumptions perhaps
Yes, that’s the right way to think about it
It’s a mixture of both, and ultimately depends on the sophistication of the coinvestor and whether they are actually co-underwriting a transaction or just participating in a syndicated process. Based on this, you’re more likely to build your own LBO and be “in the weeds” of a deal alongside another GP at one of the larger coinvest shops that have their own dedicated coinvest funds and groups separate from other investing strategies that can support a full co-underwrite a deal during a sale process
the only thing I don't understand is, do you have an offer in the private credit group or in co-invests/secondaries? I know that some groups lump the latter two together (usually with primaries) or all four together, but then it wouldn't be called the "private credit group".
I’m at a FoF with secondaries / co-invest and our associates get paid similar to mid market funds from what I heard, lower than UMM though
What do your associates get paid?
All good things said so far. One thing I'd note is if you're trying to avoid banking 2.0 at traditional buyout firms, I'd suggest to consider going to the direct PE groups at the SWFs, like GIC, CPP, etc. You get a bit of both worlds where they do look at deals themselves, but also some co-investments, so its a nice in between phase between a pure GP experience and a pure co-invest only role
Do the direct groups at these places hire advisors for their DD and drive the seat for legal docs too? I know CPP / GIC always co-sponsor with a GP so how is it really different from pure co-invest?
Depends on the deal. I call direct investing as purely without a GP, so those deals they have their own advisors and drive negotiations themselves. Not true that all SWFs don't do any deals by themselves - example: https://www.cppinvestments.com/public-media/headlines/2016/cppib-ascot-…
Co-investing however you'd be right that even if it is close to 50/50 in check-size, a lot of time the GP still leads investments. I'll caveat this by saying every GP is different. For lots of co-investments, we're essentially in the backseat and the GP leads everything and packages it for us after (co-syndicate). But sometimes with different GPs we'll be working side-by-side, initial calls with management teams, working sessions with consultants and advisors, in the weeds together, etc (edit: co-underwrite).
Hey thanks for the reply-- I definitely considered the SWF route but just didn't see any open spots when I was applying. Do you think the private debt coinvest/secondaries role would make a transition to something like that more difficult than IB? Just trying to get a sense of how pigeon holed I am if I accept the offer.
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