PE feels like a compliance job?
Disclaimer: not bashing PE sector as a whole, just looking for other people's experiences on this matter.
Currently nearing 3 years at PE firm and had the idea (illusion?) that after several years, the work would get inherently more interesting. However, after having had the great experience of working on 3 declining portcos, my last 3 years turned out to be mostly inward focussed (lots of bank meetings due to covenant issues, internal memos, discussions with auditors, constant additional analysis on virtually every metric imaginable just to show some kind of underlying stability). On top of it, the declining portcos receive so much additional attention / pessimism, it completely hampers motivation. Sure, you learn a lot but the zero added value of all these processes feels like a complete waste of time and resources.
At this point, I am wondering whether this is daily life for other people in PE as well, or that it is firm specific. Like the title says, it just feels like I am doing mostly compliance work and defending the portcos at every meeting. Of course it is well paid but it feels so far from what sparked my interest in the sector.
yea ive spent 5 years in PE and i found it much less interesting than I thought it would be. to your point, its all process and compliance. very little actual investing. why im leaving
Where would be better, special sits and secondaries?
no im looking at HFs for next few yrs and then tbd. I do think that its all going to move fully to quants but isnt there yet. after that, cant predict the future!
Pretty much yeah. There's so much process that adds nothing to the actual investing acumen that interest fades. Like Chimp127273, that's why I and many others are looking to leave traditional PE.
Where are you looking to go post traditional PE?
HF or holdco/permanent capital model. I want the majority of my time spent building either the investing or operating muscles.
Why holdco/perma cap? Just same process less pressure kinda thing? I suppose makes sense.
Reason for asking is that European CVC guy recently just announced his retirement from PE and is looking for a traditional services business to acquire to scale and operate. - would you consider something entrepreneurial like this?
More entrepreneurial (i.e. more creds earned with other owner/operators), across the board less of a headache because the attitudes of LPs are different (they're not going to be breathing down your neck every quarter looking for updates on DPI expectations) + selling a company is honestly the hardest part of PE (buy & hold over the long-term typically outperforms due to compounding anyway), generally doesn't have the same type of politics as senior jockeying for carry (bureaucracy is inevitable as it scales, but if you're an early guy at a holdco with equity that's pretty straightforward + you can hold onto it into retirement without people getting butthurt + it generally has no clawbacks), the list goes on.
PE was THE place to be when rates were near-zero or regulations hadn't sucked out a lot of the creative financing opportunities, but now? I don't think PE is going anywhere as an asset class but it's definitely a fraction of what it used to be and potential LT earnings has taken a dive.
i think you have a very rosy idea of the holdco model. it faces the same issues as trad pe and ends up chaining people to dying businesses. too many shitcos being slapped together under a decentralised model with very little ability to generate value. everybody wants to become the next constellation but i haven't seen a single holdco do it right. the ones that have been around since 2015-2017 still look like shit and their committed capital from PE sponsors is creeping up on them to stab them in the back now. they're all going to the dogs.
source: have a friend who works at one. it's hilarious because he called himself a private equity investor for the longest time until someone pointed out that he actually does corp dev.
Then may I ask where would be the promised land?
I would have to disagree, I don't have a rosy idea of holdco life because I've already done it once before moving to PE at one of the more successful holdcos out there. PE is what I gave an overly rosy assessment to, likely in part because I never did banking and didn't appreciate how mind numbing process scut work could get. With respect to some of the holdcos that have been around a decade or so, every asset class is going to have its lemons (particularly when they were formed on the basis of near-0 rates), and being one of the teams that raise their capital from PE literally defeats the purpose of making this move because then you don't even have the joy of working "in" PE but "for" PE. Yuck.
I know and am indirectly connected to multiple senior folks who are starting/have started their own with varying amounts of capital (~$50m-100m typically) in recent years and some are already showing success in generating consistent 25%+ IRRs by focusing on specific niches vs the avg. software shitco rollup. Those are who I want to target.
Your friend should get the chip of his shoulder, PE isn't all it's cracked up to be and adjusted for hours he probably makes comparable or even better comp as a junior than most. Source: been in PE almost 5 years at 1b+ fund size and know multiple people from UMM/MF funds that share the sentiment.
You must be Belgian - hit me up so we can go for a coffee :)
Yup - it is very process heavy. Makes you realise all the BS admin you do vs. just day trading on public markets.
But also - at most MM funds teams are lean so you end up having to do the garbage for longer.
Chiming in on the MM side - you discover true boredom and reevaluate your career when you're stuck doing the NAV reporting and other accounting/valuation BS for the fund because the GP is too much of a cheapskate to hire a dedicated FT back-office.
That does suck.
Not yet in PE, so wdym by update cap table post bolt on. Is this just basically refinancing debt or restructuring the cap table specifically post acquisition. Or was that non chronological and could it be something more like issue dividend recap?
Not always linked to acquisition, but could very well be after acquisition (e.g. do bolt-on shareholders retain a stake in the combined company, do you fund it by raising equity). Not sure how it works at other PEs, but bringing in additional managers for the sweet equity usually also requires some minor updates to the cap table more paperwork. It is usually not the most time consuming bit, but add all the above points together and it becomes a "substantial" part of the job
It was non chronological of all the random shit the day to day involved
PE is honestly just investment banking with one less step. Instead of sourcing/building a buyer's list in a traditional sell-side process, your buyers are the LPs. Everything else is basically pretty much IB then basically monthly performance report and quarterly review decks.
This guy gets it. Sourcing is your alpha in private markets. Execution provides no value.
Good execution still matters, but if I had to choose b/w S-tier sourcing vs deal execution, of course i choose sourcing every time. Deal execution matters if you are in competitive processes or trying to close complex deals (e.g. carveouts) where the deal inevitably becomes a shitshow.
Markets are efficient, there’s very little prospect of ‘proprietary’ deals or if they are, there is a reason they are (because they’re riskier)
This, excellent execution is the expectation and anything less is danger zone
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