Hi all,
Been working at a GP for 3 years, now have 2nd round interview with an LP (funds, direct and co-investments) coming up.
Can anyone share any insights in terms of types of questions, case studies etc.? Expect LP interviews to be less focused on LBO modeling and more focused on fund metrics (DPI, TVPI etc.) - what else?
Thanks.
I can't tell you much about case studies since I joined fresh out of school (plus I'm a consultant) but it would not surprise me if they asked you more stuff on the funds side. This would be much more qualitative and strategic and involve a lot of thinking. I'm sure they will be confident that you can put together a deck and model since you've been at a GP (ie. for co-investments). They might give you some documents on a fund and say, "OK what do you think about this fund? Good? Bad?"
So regarding returns (DPI/TVPI/Net IRR - all if available, if not gross) you can look at how they have done overall, how old the fund is (TVPI might look good, but if its an older fund and DPI is low, then the TVPI valuation could have issues and there will be pressure for them to sell and pressure on IRR), look at concentration of deals, (returns from a number of deals, or like 2?) differences in returns from Funds. Comparison with benchmarks (US MM buy-out, or all US buy-out, S&P 500 etc). Potential peers in the space and how they have done. Fundraising cycles.. Team.. Who is there and has been there and how long? How is it structured? How is comp structured (eg.carried interest split)? Has anyone left? If so, why and what are they doing now? What is the firm's origin? How did these folks get together?...strategy. What is it? What's different about it? What is their edge? Sourcing? Speed? Execution? Exit? Negotiations? What have they done well? What have they not done well? How have things changed as a result over the course of time? What is the GP's commitment (how much money have they put in?)... terms. what are they? Fees? carry? Hurdle? Are deal fees etc offsetting the management fee? How is distribution? Is is European or US waterfall? If the former, is there an escrow set up? Does the Firm offer LP co-investments? At what terms? Historically how much have they offered to LPs? How have those deals done? Are they fobbing off shady risky deals to LPs to syndicate out risk or are they doing it for big deals that the fund can't do due to sizing restrictions, but have done well?
My view might be different since I sit out in Asia, where a lot of it is strategic and people-driven, but generally the critique I hear from many people here when they recruit is that direct investing and banking types are way too in the woods for a funds job and haven't developed the ability to think at a higher level (ie. strategically, look at motivations etc) and don't have the people skills. This is NOT MY CRITIQUE; I've never hired anyone, so take it with a grain of salt. Funds involves a lot of people interaction...
Personally I feel investing is investing and that a lot of what a banker/directs person learns can easily be applied to funds and vice versa (with a small adjustment period for both) but it appears that many in the market disagree with me...
Hope this is a helpful start.
Good Luck
Good answer. +1. You have to look at how money is employed from an allocator perspective rather than an investor's view.
...That being said, I had beers with an LP buddy of mine (they're a BIG shop) and he mentioned that they do give out a 3 hour LBO/modeling test and case study. He did mention that he was shocked at the number of folks who come out of banks and some PE shops that can't do that stuff well...
Anyhow I hope the above post helped as a good guideline.
Good Luck
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