Direct Invest to FoF/Co-Invest?
Hi All,
I'm an incoming post-MBA VP at a MM PE firm. As I think about my long-term career, I know I like investing (pre-MBA IB/PE background); however, the one part that scares me is burnout. I'm also aware that making the jump from VP >> Principal/Director is quite challenging; I can put in countless hours to make that jump, but it might never happen.
One option I'm looking to learn more about is the FoF/co-invest path. I figure that this path would still allow me to get exposure to investing without making the same level of lifestyle sacrifices (both in hours, and maybe in comp too). I've researched some things on WSO but wanted to either (1) ask questions I couldn't find responses to or (2) confirm what I've read, as some of the info was dated. What I'm looking to understand is:
- Is it possible to move from a MM PE VP role to a FoF/co-invest role? At what level is a lateral move possible for a MM PE VP?
- Are there any shops that focus almost exclusively on co-invest? It seems like most places are intertwined with FoF/co-invest/secondaries
- If these shops are split amongst the three strategies above, how much time is spent on each? I.E. do VPs at these firms find themselves spending a large majority of their time on just secondaries? Alternatively, are there places where investment professionals specialize in just one strategy?
- What are lifestyle and compensation like? I've seen reports of 50-60 hours including travel. I also don't know what mid-level investment professional compensation would look like
- If I made the jump to FoF/co-invest and didn't like it, what could I do? I assume a jump back to MM PE would be possible (though challenging), but what other options exist?
Happy to elaborate on any of the above if my questions are unclear. Still very new to the whole FoF/co-invest world. Thanks!
Bump
Bump
Bump
I'll take a stab at these since it's just been bumps so far, with the disclaimer that my answers could possibly be a bit outdated.
Absolutely. In fact I think you'd be at an advantage as I haven't seen that move commonly as most folks are always trying to do the opposite. And the example or two I can think of, have done very well for themselves. I think Sr. Associate / VP is probably a good spot to do it, but a common theme in my answers here will be the non-committal "it depends."
I'm sure a few exist but not to my knowledge, but will depend on the structure. Most places at least have dedicated teams within where you will focus on one of those areas. Some firms are structured where you work across those three strategies, or some where two are combined. Example of the latter, I know a firm where co-invest/FoF are grouped together but secondaries are separate. I think this also answers your next question as well, just will depend on the firm.
Those hours definitely seem directionally correct, +/- 5-10 depending on activity. Comp is another one of those it depends answers; for VP I'd ballpark it in the 300-400k range.
Given your background before entering the FoF world (banking, VP-level PE experience) I'd think you could definitely make the jump back if you crafted your story well. I think that would be the biggest hurdle, from a "well you already left a role like this once, why come back? How do we know you won't leave again?" angle. I also think you'd be really well positioned for a non-investing role at a fund like on the BD or IR side. Or a similar type of investing/asset allocation role in-house at a pension or endowment.
Feel free to PM if you have any follow-ups that may be a bit more specific to firms.
Hi, not the OP but since you seem pretty knowledgeable I figured I’d ask a question.
How often do you see people make the jump from a FoF/Co-invest role to an endowment/foundation asset allocation type role? I fIgure the skill sets are pretty transferable. Is this an easy move to make?
And on a more unrelated note, not sure if you’ll be able to answer this, but do you think working in direct PE makes you a better FoF investor/asset allocator down the line? Or could one make the jump directly from IB to FoF/Co-invest if they knew asset allocation is what they were interested in long-term?
Thanks!
I haven't seen it personally but I'd imagine it's a fairly common exit. One thing that makes the move tough in general is that institutions like that tend to have pretty lean teams (which is why they outsource a lot of work to FoFs and LP consultants). Some endowments may only have a CIO and a handful of investment professionals compared to the much larger teams at big LPs.
I'd imagine having direct PE experience would be really advantageous simply because you'd know the investment process well and be able to "talk the talk" better when meeting with potential funds you're evaluating (which is why I think OP is really well positioned to make this move if he chooses). Moving over from banking should be sufficient too as you'll still have the technical experience for co-invest/secondaries (though for the former, most of the heavy lifting is done by the lead sponsor) and pure FoF investing isn't technical at all so should be easy to pick up.
I can't speak too much to a pure allocation role where you'd be deciding on portfolio construction or anything like that.
Definitely possible. Have seen this happen a few times. Direct skillset moving to FOF/co-invest is a downgrade in skillset so its easy to move. Have seen it both on the buyside and sellside. I have even seen moves being made at the MD level.
Yes. I believe if a fund is large enough then there are dedicated teams for this (eg. Ardian).
Really depends on the fund's mandate hard to say.
Yes, this is what I have observed too for the hours. Compensation I believe would be in line with pension funds since they do FOF too? I can PM you pension funds salary information if you want.
Can't advise on this. I am someone trying to move in the opposite direction haha. I would kill for your spot mate. Why would ya wanna come over? It's tough getting pigeon-holed man into FOF.
Thanks for this! I welcome any additional insights from those who are in the industry or have made the direct investing >> FoF switch themselves.
To answer your question as to why I'd want to make the switch - I think it's really about lifestyle. PE can be quite the grind, and I think about my longer-term family planning, I'm not positive I want to maintain these hours. I know the lifestyle gets better as you advance up the ladder, but the travel gets more intense, and I do still feel like you are on calls/checking your email constantly.
PE FoF/co-invest seems like an attractive path that enables me to focus on investing (either via co-invest or in fund selection) without a dramatic haircut in comp. It feels a bit more cushy - and I think I might be optimizing for that a couple years down the road.
Def be careful of the promise of "the grass is greener" and thinking a secondary / FoF role is automatically pretty cush. Depending on the actual shop, lifestyle can be horrible. I definitely work more than I did in banking now, although that's because the new guy they brought in to lead my team completely destroyed the culture.
Keep your head up and/or get out of there man.
Ha thanks dude, actively trying, we'll see how things shake out.
Thanks! That’s a good point. I’m mainly looking for a broad strokes picture of what lifestyle looks like in the industry.
Understand things will be fund specific, just as they are in PE. If I am to seriously recruit for a role, I’d be doing plenty of diligence to make sure I have an idea of what I’m signing up for.
Sounds good, and agreed but want to point out that diligence won't always save you. See Nuclear Penguins' example above where he joined a great shop, but afterwards a new manager came in and ruined things.
Good reminder as we all consider lower-paying (supposedly cushier) jobs
I would honestly look at corp dev/strategy or credit investing over FoF. If you like IB/PE and being close to the transaction details/operations, there's a real chance you won't actually like FoF due to the high-level/qualitative investment approach. I did a pre-MBA stint in FoF/co-investing after IB, and while I liked looking at deals from an investing perspective, the actual day-to-day associate work wasn't very stimulating/analytical relative to my previous investment banking stint.
At this point in your career, you would need to be very certain that FoF is the right move - there aren't really any exit ops from FoF, especially at the post-MBA level.
Aut quo eius error eveniet at quam qui officiis. Vero dolore et blanditiis corporis voluptatum dignissimos ea.
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...