Pension/SWF/superannuation PE/direct investment
Why don't more people want to work in the direct PE arm of a pension/SWF/superannuation fund?
Seems like the same PE style work but with less hours/stress (and of course less comp too) - would have thought it makes a lot of sense for someone that wants better WLB and doesn't mind the associated paycut
What am I missing?
Not many roles, very little turnover.
Is that it though? So if you could get a seat like this it's a blessing?
Some of these places are equally as sweaty as other PE. The pay cut can be quite extreme if u come from MFPE. Also no one leaves so you can be stuck in as a principal/director for a very long time. Turnover isn’t as low as ppl think especially at the junior level as many do try to lateral to a GP (grass is always greener)
I'm in exactly one of those roles, I'll give some thoughts, which some hit on above:
1) Limited number of spots, especially beyond the SA / VP level - after AS, a lot of people have a much better idea of what they want in a job, and stay in the long-term. A lot of these teams aren't heavily staffed like a GP (given just run a lot less / not at all at direct, control deals, and have a bit more of a fiduciary duty to not spend rampantly on costs and headcount)
2) People self-select out - depending on the pension / SWF, the cash comp is actually kind of comparable at the junior level, but with no carry, it begins to widen materially at the VP-level and gets quite material at the MD / Partner level (i.e., best years of ~$1.5M, give or take, at a pension / SWF, versus multi-millions at a GP). Also, you can argue the work is less interesting as most of the pension / SWF don't focus on control majority deals, and thus the learning and exposure is at a lower level (nature of co-investments, so if you care about being operational and really getting into the weeds a lot more frequently, this is not it). The people that love the grind / max money / prestige / branding / learning will not come here
3) More bureaucracy / red tape - while you're joining the the PE arm of a pension / SWF, you're still joining a larger organization that exists to help its beneficiaries / citizens / pensioners, which is kind of pseudo-crown corp / public service. So there are a lot of larger organization policies that may hinder you more than being at a GP that is all about execution and returns (i.e., more DEI initiatives, a lot more approvals needed beyond an IC approval, people at your company in non-investment roles being annoying to deal with)
4) Lack of education / knowledge - there aren't many good pension / SWFs and the space isn't as well known as GP buyout or growth, so a lot of people just don't know about this option and therefore don't explore it
I'm biased obviously, but I think a pension / SWF is a great place if you no longer want to crank 70+ hours a week. There are some places that are sweatier than others, but I was burnt out from the grind and decided to move to one and don't regret it. Yes, I don't get paid as much as some of my friends at the MFs or even UMM, but I work around 60-65 hours on average while they're sweating it out at 80-85+, and I still get to look at interesting deals (arguably more diverse as pensions / SWFs partner with GPs on deals in co-investments a lot) sometimes with a lot of the leg work done by a GP. I always cared about pay per hour, and as a junior, being at a pension / SWF, that metric is actually greater than some UMM / MF on an after-tax basis, so it made sense for me
Thank you for taking the time to write such a detailed response! This is similar to what I was thinking - it seems like a great trade off. Direct PE at a PE fund seems great learning and pay and intellectual stimulation as an Associate but I can't imagine doing this for 20 years
Also from a SWF in PE and can confirm this is scary how alike the experience is. Keen to connect with you also if you can send me a DM!
which SWFs would you say are considered top (in terms of comp, deal activity, etc.)?
I'd probably highlight the Singaporean SWFs (Temasek, GIC) or Mubadala (UAE). All of them are pretty active in North America and they are probably the closest to MF/UMM PE in terms of deal activity / magnitude
At one doing direct growth and co control investment in tech - came from a large traditional GP. comp is higher in cash, and have phantom equity to match ~2/3s of my carry equivalent. Great perks and good culture. Hours are somewhat better when not on live deals but same when on deals.
The Canadian pensions also do plenty of direct PE
Less aggressive IMO compared to some of the SWFs
They've moved away from doing so in recent years. They're just not equipped, nor do they have the resources, to keep doing so. Returns are poor too.
SWF / top pension (CPP) are excellent roles in general, and a very sustainable path to making excellent money with much less stress (caveat I hear the Canadian offices of their pensions pay poorly vs. London/NYC etc.). I cannot express more strongly how stressful and how much time it takes / what a grind it is to raise funds, bend over backwards for LP's, incessant reporting, and don't even get me started on raising co-investment etc. The juice at a GP is really not worth the squeeze IMO - and I'm at a GP. There is so much more to life than being at the knife edge 70+ hours a week...
Very well said - the longer I stay in this job, the more I appreciate the saying "there's no free lunch". I'll never be a wealthy multi-millionaire and own a yacht / private jet, but I only work around ~60-65 hours on average (direct PE team at a SWF / pension), have a lot more visibility and respect from my seniors for my schedule, and am fine with capping out at around $1.5-$2M a year (unless you become group head and more senior). But if you want the ability to make $5-10M+ a year, you have to put in a lot more time and deal with more work and stress.
No right answer, just do what matters to you the most.
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