PCA Insights?
I’ve recently been learning more about PCA and am wondering if anyone can provide larger insights. From what I’ve read I generally understand primary vs secondary, but if anyone had further insight on what exactly that looks like it would be appreciated. Also, how does the GP/LP side differ in terms of day to day? Can someone be a primary LP or a secondary GP analyst etc? Insight into hours, comp, progression? Is it separate from product/coverage?
Anything helps!
When diving into PCA (Private Capital Advisory), it's essential to understand the nuances of primary vs. secondary markets and the roles of GPs (General Partners) and LPs (Limited Partners). Here's a breakdown based on the most helpful WSO content:
Primary vs. Secondary PCA
GP vs. LP Day-to-Day Differences
Can Someone Be a Primary LP or Secondary GP Analyst?
Hours, Compensation, and Progression
Is PCA Separate from Product/Coverage?
Yes, PCA is distinct from traditional product or coverage roles in investment banking. While product teams focus on M&A, ECM, or DCM, and coverage teams specialize in specific industries, PCA is more niche, focusing on private equity fund transactions and advisory.
If you're considering a career in PCA, it's a fantastic way to gain exposure to both the buy-side and sell-side of private equity, offering a unique blend of relationship management, technical skills, and strategic thinking. For further insights, exploring WSO's Private Equity Interview Prep and Financial Modeling resources can be invaluable!
Sources: Private Funds Group (CS/UBS etc), GP vs LP - Which is better, Effective LP oversight of GP, GP vs. LP Day
Going to go a bit broader because when you say GP/LP side, that's typically another distinction versus primary and secondary.
Primaries
Primaries refers to advisory work supporting GPs raise their funds. Usually banks will have these mandates under a separate team to anything secondaries related. Fundraising mandates can take up to 2 years, and the work is far less transactional. Most advisors will only take on funds that have already held their first close (i.e. a meaningful amount of existing investors have already committed to the new fund and thus a low chance of not meeting the fund target), while some will also take on mandates before a first close (higher risk). Fees can range anywhere from 100bps to 500bps of capital raised, depending on the geography, asset class, and market segment. Primaries can be a very attractive career but you have to understand the work is quite different. In any case, I would not focus on what sub-segment of the industry to get into - do what you are best at - as each one can prove to be extremely lucrative financially.
Secondaries
Secondaries are transactions whose primary purpose is generating liquidity for limited partners, mostly for older funds nearing the end of their term that have seen lower-than-expected distributions. The reasons for this lower DPI is a whole topic on its own, so I'll leave that for now. Within secondaries, there are so-called GP-led secondaries and LP-led secondaries. GP-led secondaries are fund restructurings - a sale of assets into a new vehicle also managed by the same GP. An LP-led is a single LP seeking to cash out of a wide portfolio of their commitments to various funds. GP-leds are by nature a lot more complex, and the closest to what you would understand as M&A-style work. LP-leds are more process driven and there is no analysis involved from the advisor side. In a GP-led, there are numerous structuring and conflicts considerations - in my opinion, what makes GP-leds a very dynamic industry to work in - as well as analysis, more on a fund level but you also have to be an expert on LBO modelling, albeit less intense than a traditional M&A role. Most advisors have their juniors work on both GP-leds and LP-leds whereas some of the largest banks in the space, such as Evercore, already have dedicated Analyst tracks. Fees in GP-leds are more M&A like (up to 300 bps), whereas LP-leds are all about volume and so there is fierce price competition.
That's the high-level. Hope it helps.
Super helpful thank you so much.
Do people recruit into primaries OR secondaries? I was told people primarily place into secondaries and then transition into primaries because the work is more complicated?
Some smaller boutiques do both. PFG is the group at BBs that cover primary
I would avoid recruiting into primaries. You can join a primaries team afterwards from any other banking role but basically impossible to do the opposite since there’s no company level analysis or modeling going on in primaries.
lol, why do you have to be an expert on LBO modeling to be in a PCA team? No one is hiring the PCA team to evaluate individual investments
You'd be surprised how many managers out there do not have projections for their companies beyond what management supplies. A lot of the time you are tasked with building the models. This is outsourced to sector teams at a BB/EB but not possible at boutiques. Correct, no one is hiring any M&A banker to evaluate an investment. But you have to provide the buyside with a functional tool.
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