Future of Private Equity
How do you view the future of private equity? Is this still an industry worth getting into?
If you could do it again would you still do PE or find something else like wealth management or entrepreneurship?
https://www.wallstreetoasis.com/forum/private-equity/future-of-pe
stop being lazy plz
Relax big dog. Asking in comparison to other careers like wealth management. Not the IB vs PE debate that has happened a million times.
I’d probably still go back into private equity. Just with slightly less romantic notions about it than I had a few years ago. Cheap debt and ever-higher multiples simply don’t carry you along quite so comfortably these days. And you can see, after all, how long some assets have been sitting in portfolios simply because the exit isn’t working out. Bain now has an average holding period of around seven years and some 33,000 private equity investments that haven’t yet been sold.
For me, that wouldn’t be a reason to write off PE, though. It just means you realise more quickly whether a fund can do anything other than financial engineering.
Industrials is a pretty good example of this for me. The sector is much broader than it initially sounds anyway. Automation, components, power, data centre stuff, services, and so on. And with some companies, you can also see relatively quickly where you’d even start. Pricing, perhaps, the aftermarket, an add-on, or some operational issue that needs addressing. At PwC, the situation for Industrials looks much the same at the moment.
In any case, when it comes to selecting funds, I’d take a much closer look these days. It does make a difference to me whether you’ve spent three years mainly looking at platform deals plus add-ons, or whether a messy carve-out suddenly lands on the table. Just having ‘PE’ on your CV wouldn’t be enough for me these days.
To be honest, I don’t really see wealth management as an alternative either. It’s simply a different job. Entrepreneurship is more of a possibility. But then you’re on the operational side yourself and bear completely different risks.
I don’t believe that PE is somehow disappearing either. I’m more inclined to think that returns won’t be handed to you on a plate in future and that you’ll actually have to do something with the companies. And particularly when it comes to power, data centres and the whole AI infrastructure sector, there’s certainly no shortage of private capital.
If I had to start all over again today, I probably wouldn’t cling so much to the PE label. I’d be more interested in what I’d actually learnt in the fund after three years. If the answer in the end is simply that I can put together an LBO model more quickly, that wouldn’t be enough for me these days.
Thank you, this is very helpful.
I would push back on your views on wealth management though, as I feel like you are able to control your own destiny more in that industry.
However, my situation is a bit niche. After some time in IB, I have accepted that I am not the most analytical guy and will not be a good investor. However I am very strong on the social and relationship management side.
I am weighing wealth management, PE investor relations, and entrepreneurship. How do you view each path’s tailwinds and ability to monetize social skills?
To be honest, I wouldn't dismiss wealth management quite so quickly anymore. If you really enjoy the topic of relationships, I certainly wouldn’t downplay it. Especially if you've already realised that you prefer dealing with people to this desperate desire to be an investor.
I’d definitely look into investment relations at a private equity fund if I were you. You’d still be close enough to the fund, but a big part of the job depends on how you get along with LPs. You're obviously not completely out of the organisational side of things with that, though.
Regarding wealth management, I see your point about control. Once you have your own portfolio, much more depends on your relationships. However, a book like that doesn't simply stand still after two years. At the beginning, it's likely to involve a lot more sales than it looks like from the outside.
With your own business, the people aspect would probably help you even more. However, charisma alone won't get you very far if the other aspects aren't up to scratch. On top of that, you need to consider product, sales, people, cash flow and a hundred little things.
I wouldn't give much weight to current tailwinds in all this. I’d look more at where that genuinely forms part of the job rather than being just a nice bonus. Based on what you describe, IR or wealth management seems much more plausible to me than classic PE investing anyway.
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