Megafunds starting associates 6 months earlier

Two kids that I know from college (non ivy target, but they were top students in top groups) that graduated in May 2016 so 1.5 years total as analysts at BBs/EB's have recently updated their LinkedIn to "Associate at 'Megafund'" Is this a new trend that is happening?

Comments (26)

Jan 23, 2018 - 12:53pm
mtnmmnn, what's your opinion? Comment below:

100%, do not work at a mega fund, but we would very likely be supportive of an incoming associate starting earlier if they get paid their bonus in December. The standard has always been for a 2 year contract and as an analyst, your bonus is definitely an expected part of you comp so if banks want to change the deal, they can't expect their analysts to stick around and work for free.

Jan 20, 2018 - 4:35pm
monkey_in_distress, what's your opinion? Comment below:

Same, though I do know of an analyst from my group 2 years back who signed an on-cycle offer contingent on finishing the analyst program and some time later was given the option to start ~6 months early. He ended up splitting the difference and starting in March/April of his second year.

Jan 21, 2018 - 12:18pm
HugLife, what's your opinion? Comment below:
Haven't heard about anything like this.

My contract said that starting at my place was contingent on me staying at my bank, but I can see why people want out

Would be interested in knowing how to do this... lol

Know of several kids that have done this. Depends what bank and what fund. PM me if you want

Jan 21, 2018 - 3:58pm
GridironCEO, what's your opinion? Comment below:

Are you/we sure that it is for Private Equity? Couldn't it be for Business Development, Investor Relations, Private Credit, Opportunistic Special Situations, which are all great jobs, but not nearly as prestigious or rigid of a recruiting/on boarding process as Private Equity? Those in my circle and network who have made the switch have simply been calling themselves "Associates" on LinkedIn as opposed to "Private Equity Associate"

We're not lawyers. We're investment bankers. We didn't go to Harvard. We Went to Wharton!
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Jan 23, 2018 - 9:44am
Quaneaser, what's your opinion? Comment below:

This is highly dependent on business need (i.e. situational), not necessarily indicative of funds shifting their start dates earlier.

Know of one person who was able to start at a MF after only 1 year in IB since they either had significant dealflow/one of their associates left and they had a need.

Jan 23, 2018 - 11:21am
heister, what's your opinion? Comment below:

It is likely purely situational/who you knowism. The amount of experience one would have at 1.5 years in is not really all that great in this industry. Sure someone with 1.5 years of BB IB experince is far more knowledgeable than some smuck with corp fin experience but in the context of the industry 1.5 years is not really all that great.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

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Best Response
Jan 23, 2018 - 6:46pm
APAE, what's your opinion? Comment below:

heister I think you are slightly removed from this process. I respect the insight you've shared across the past decade on this forum, but the sentence "The amount of experience one would have at 1.5 years in is not really all that great in this industry" shows how divorced your views are from the reality of the recruiting situation today.

There is such an absurd arms race among PE firms today that the formal recruiting process for summer 2019 positions for analysts who graduated in the class of 2017 commenced on the night of December 8, 2017. Assuming a July 10th start date, that's 145 days (less than five months) of total experience before interviewing for your next job. (Amusingly, that was documented pretty well in a popular thread here.)

It's become increasingly clear that firms put more value on not missing out on a potential strong performer than on securing a proven strong analyst with solid deal experience and a more demonstrably robust skill-set.

You're correct that 1.5 years of banking experience is not superb, but that's no longer the point. PE shops are not looking for people with tremendous experience; they're looking for safe bets on cogs for their machine.

Through work I've had to spend more time talking to guys at the partner/GP level in PE the past year or so. Even within the megafund bracket, I've heard various comments to the effect that they're frustrated finding good partner-track talent the past five years, so they're treating the associate class as more of a disposable talent pool and looking to the MBA or experienced hire scheme to get what they want. (Some of these conversations steered toward relatively explicit asks for me to sign onto their team.)

That confirms something I'd noticed anecdotally, where guys I knew who were happy in well-comped roles at good shops were jumping to another place after two or three years to collect a title boost and (what felt like) generous carry economics.

Either way, I am not surprised to see more associates starting after their bonus hits early in the new year. There is legitimately no incentive left for those final six months. If the bank wants to dick you out of deferred comp (let's be honest and call the 'bonus' what it actually is; no one is signing up to do that damn job for an $85 base) under the guise of 'aligning incentives and encouraging talent to remain within the firm', then analysts should feel equally free to dick them back by not sticking around for the final (unpaid) quarter of that two-year term.

I am permanently behind on PMs, it's not personal.

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Jan 24, 2018 - 12:09am
heister, what's your opinion? Comment below:

This is a short term talent squeeze. I seriously doubt this will continue for the long term. There have been a significant number of junior partners whom are figuring out that the PE world has a shit succession plan in place and are finding out that the seniors of the firm have no real desire to turn the reigns over like the industry has traditionally seen. We have seen an absolute massive growth in new firm foundlings and spin offs as the industry is going through two radical changes at once. The first is what I have discussed previously the second is a race towards specialization. Capital is moving to smaller specialized funds or groups. Gone are the days of large generalist funds, returns are lagging behind focused funds. I believe what we are seeing is a short term squeeze as the demand reaches an equilibrium with the supply.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

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Jan 24, 2018 - 9:39am
APAE, what's your opinion? Comment below:

That post sounds like you switched from talking about the associate recruiting scheme to addressing the secondary point I raised in my prior comment describing the partner-level talent shortage.

I agree that there are a lot of new fund launches. I also agree that the primary contributing factor is a bunch of guys waking up to the fact that it's better to own 100% of their own smaller-today carry pool (and future destiny) than 5% of some old dude's larger-today carry pool. I would point out a second major factor: the increased access to and democratization of information.

There is a tremendously lower barrier to entry today where people can learn so much more outside of a formal work environment thanks to the Internet (primers posted by service providers just sitting around on Google, free forums like this, webcast or video recordings of seminar talks, etc.). I know I've given away absolutely gold info on fund formation and structuring here, which I sometimes get a chuckle out of knowing that it's buried on some obscure thread that got zero traffic.

I disagree with you that we won't see the arms race over disposable junior talent continue interminably. The largest sign is that more and more funds are investing in their own analyst programs. Silver Lake was the first, they always took the best kid (sometimes two) from Wharton each year. BX has run a three-year analyst program for a long time, and KKR and TPG each formalized theirs 6-7 years ago. Now it's gone further; LGP and other MM firms are beginning as well.

I bet this will eventually get streamlined to the point that firms use headhunters to fill their 2, 4, 6 (whatever size they end up choosing to run) person analyst class the same way they do for the associate class now. It's more cost effective than maintaining an internal campus recruiting function.

This used to be done informally. I am not that old, I got headhunter emails doing my first summer in one of the 'big five' groups people used to idolize so much here asking if I'd considered an investing role directly out of college. Out of simple interest I took two of the coffee meetings: they were for MF PE analyst jobs, and I'm talking about Henkel / Amity / Oxbridge emails hitting me as a 20-year-old.

It certainly isn't the best way to get junior investment talent in the door, but it's an arms race, and when have those ever been sensible?

You raise an interesting point about the race towards specialization. While we have probably both seen a lot of the same data (that specialist funds outperform their generalist peers overall), I am still seeing a 'flight to quality' where the biggest guys are raising ever larger vehicles at an ever quicker pace.

Warburg is about to raise $13.5b for its 13th flagship fund starting in May, six months after they closed a $2.3b FIG-focused vehicle in December and only two years after raising $13.4b for flagship XII.

Vista is targeting $11b or more for a flagship VII ... after raising $11b last May. Thoma Bravo is targeting $10b for XIII ... sizing up after raising $7.6b a year and a half ago.

I have several friends in day jobs as LPs. It's amusing to see the disconnect; they all fight to get allocation in the big guys, but bitch and moan about not being able to get the allocation they want in 'emerging managers' while defining 'emerging' as Fund III or IV and refusing to back pedigreed guys on a small Fund I.

I am permanently behind on PMs, it's not personal.

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Feb 8, 2018 - 8:07am
NYC10023, what's your opinion? Comment below:

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