I don't understand why any PE fund would hire an analyst our of college. Analysts have to be trained to do a job well, but at a PE fund, they're a cost center, not a revenue generator. I understand that in consulting or banking it makes sense to have them--you need someone to handle the grunt/BS work AND you can bill them out to a client, so they're a revenue center.
But in a PE fund, if I have an analyst under me, all I can think of is that I'm going to have to take extra time to train them up, correct their mistakes, etc. and then watch them jump ship to some other fund. Now I've got my workload AND the workload of training some kid that's there because... why? DEI? Daddy has money? It's not like their work is going to be bulletproof for at least a year, end even then, there's something about client services that injects a heavy dose of reality into professional careers
I just don't get it. Why not just hire Associates? You didn't have to pay to have them cut their teeth, and it's not like there's a dearth of people looking to go into PE. If I had an Analyst, I don't know how I'd be able to give them proper time and management, and I'd hate to be the guy that refers to them Google or YouTube to learn stuff all the time.
What's the big idea?
So you don’t have to hire as many associates
Funnel talent in early, cheaper than associates, hedge against churn in associate class, keep talent via greater switching costs versus banking/consulting, execution in the way you’d like, etc.
Only makes sense for certain hungry individuals that can narrow the gap between analyst and associate OR folks at larger funds that want to lock in talent early.
Analyst (1.5 yrs in) at my fund is already better than some associates in my class.
.
Which class was that do you remember? It seems interesting and I might want to take it.
bump
Buyouts and acquisitions i think
Hiring on cycle is not easy. You basically end up taking the kid from the good bank and good school who memorized how to put together an LBO the week before.
It’s the same reason that banks hire interns even though they don’t bring much to the table - it’s way better to evaluate someone over a longer time and seeing how they work vs just hiring someone after a few hours of interviews (that probably took place at 3am) and hoping for the best.
No idea about conversion at most of these MF analyst programs but I’d imagine most get promoted to associate, though I’m sure you get pushed out if you don’t have what it takes.
Also at some sourcing heavy shops, analysts are huge cogs in that machine. Someone needs to hammer emails to every single CEO in the country and make sure that’s all getting tracked in a CRM. Analysts are great for this
Also...its the associates that are wasting their time training the analysts and checking their work. An associate working longer hour costs nothing to the top so there isn't any real cost from a partner perspective.
For earlier stage / growthy funds analysts are cheap labor for sourcing as one of the comments above describes.
Aside from sourcing what I was told when going through recruiting for later stage buyout firms is that they are looking for kids who can be at the level of a starting asso in their second analyst year with the hope of retaining them for the associate stint and potentially longer. From the firms perspective if they don’t have to deal with on-cycle and are getting the quality of a associate by the second year from an analyst who is already experienced in their execution style etc. it seems beneficial. I agree the first year analysts are probably going to be barely value add, but they will at least be able to take some of the meaning work load (taking notes, admin work, etc.) off the associates plates.
This all sounds great in theory but when you look at retention of analysts, that tells a different story. If you look at analyst programs across Blackstone and silverlake, most of their analysts end up leaving to hedge funds and you end up having to hire assiciates anyway. So whats really the point?
That is a very valid point and my comment is probably more reflective of slightly smaller funds. Potentially for larger funds there is an element of advertising having an analyst class offers and then also the diversity component.
In what world are IB analysts revenue generating? MDs are revenue generating, analysts are not.
“Analysts are a cost center”
So are you dumbass
He MS’ed both of our comments as “inaccurate” because he doesn’t know what cost center means lol
We tried it at my old firm and it worked mediocrely and I've seen firms that do it really well and those that don't. As folks said above the main reasons tend to be cheaper labor, better pipeline than fighting to recruit Associates on cycle, more control over skillset, and at certain GE/VC/PE firms, they're important in sourcing.
You attitude isn't uncommon, which is why most PE firms don't take analysts. Most PE professionals aren't good managers, mentors, or teachers they'd rather just toss work at someone who theoretically knows how to build a model or do whatever analysis you want. The problem is, it's kind of a 50/50 as to banking analysts really know how to do this, some get good training in banking, others don't. Plus, given how early recruiting happens nowadays, you're basically hoping that you'll hire an analyst after 6 months on the job and that they'll take an offer and use the remaining time in banking to build a PE skillset. I talked to a partner a while back at a well known MM firm and he said that even with a top end recruiter, taking folks from the top banking groups, etc that 50% of the Associates are still pretty bad year in/year out.
So if you hire your own analysts, yes they're greener, but if you can build up enough of a process/training program for them, within 6-12 months, they can probably be better than most Associates, plus, they know exactly how to do the work the way you want it. Plus, PE is an apprenticeship at the end of the day, so the more time they spend around deals, the more concentrated of a PE experience they're getting, vs the bankers who spent most of their time year building powerpoints anyways.
Neither is better/worse, but I do think there is merit to hiring a good analyst class and training them, but it takes a concerted effort to want to build out this type of a program. As I said, I've seen some analyst programs that are really good and the analysts are basically associates after 6 months. On the other hand, I've seen some firms that hire analysts, sign them up for a modeling course, have them source all day, kind of just expect them to learn/do whatever is asked of them, Associates/VPs like yourself don't want to bother with them, and then everyone is surprised when the analyst program isn't yielding good results.
Could you share your thoughts on Bain Capital/Bain Capital Credit’s Analyst program?
The fund I interned at (UMM) was considering hiring me as an Analyst, but ultimately decided against it for various reasons. Their rationale was that they could offload some work from Assocs (fund was rly sourcing-heavy and did a lot of buy-and-build/M&A in portfolio) and also assist on the admin tasks (industry research, portco reporting, intern recruiting etc.)
I think it depends on the fund strategy, from my view it would have made sense for this particular fund, but may be different for others. Ultimately, the partners decided against it (despite the junior team pushing for it) and would rather hire another assoc…
.
Cupiditate voluptas fuga dolor. Rem natus ea odio autem doloribus. Debitis deserunt et deleniti. Rerum aspernatur dolores ex inventore qui nihil. Adipisci adipisci repellendus non eaque. Et vel magni consequatur aut ut delectus.
Et cumque autem nisi esse. Dolor odit incidunt eius optio nulla iusto molestiae. Hic deleniti eius est delectus qui sit sit.
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...
Inventore fugit quia ipsam. Ea rerum fuga et cupiditate magnam omnis. Consequatur culpa ducimus quo ad consectetur est sit. Aut quia sint et distinctio sapiente earum.
Rerum laboriosam corporis et illum atque. Laudantium magnam temporibus fugit ipsam atque et pariatur aut. Asperiores ut animi dolor et exercitationem nam minus. Fugit tempora maiores iure sit adipisci possimus consequatur. Ut officia est perspiciatis est consequatur dolor velit.
Assumenda cum quas dolores. Cum in ut quod neque molestiae aspernatur nihil reprehenderit. Amet quis ab delectus pariatur officiis eum. Vel magnam in dicta non.