I am a second year IB analyst at a MM firm. I'm actively trying to move back to my home city and was denied by my #1 and #2, but was fortunate enough to receive an offer from my #3. While I really like the firm's investing principles and the personalities in the office, I have some reservations regarding exit opportunities should I decide to explore my options in a year or two. I asked for fund performance over the last two to four vintages and was disappointed to see the fund under perform (averaging mid-teen IRRs). Recently, they failed to reach their hardcap for their newest fund and nearly had a down round.
I don't have a strong grasp of what funds look for when hiring a lateral beyond the usual: recommendations, brand of last employer and responsibilities. The group has a solid regional reputation - plenty of contacts have said good things about them.
Will IRRs of the fund impact my recruiting efforts should I want to move upstream in the same geographic location? Should I be worried that recent performance hasn't been up to par?
What are the average sizes of the funds that have raised in the past? How do you know they couldn’t raise the full amount and it wasn’t just them re-evaluating and raising a new amount?
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I don't think that fund performance is that important when looking to lateral to another firm. Your actual experience and deals worked on is more important.
I'd be a bit more concerned about fund size not increasing. If the firm has another flat fundraise in 4 years, it will cause structural issues. Without an increasing mgmt fee base, its hard to promote ppl and give them raises.
Can you elaborate on why relatively flat fund sizes is cause for concern? I was under the impression that some funds deliberately keep fund sizes consistent to underscore their strength and expertise in deals of a certain size.
Consistent, yes, but they'll still increase fund size by +/- 10%, you can still do the same types of deals. But if your fund size is flat to down, then revenue at the firm is constant. How are raises and promotions being paid if revenue is flat.
Are you asking from the angle of someone looking to do 2 and out or career track? If 2 and out, I wouldn't really worry about it. If career track, I still wouldn't really worry about it that much. For one thing, you can't really just say 'mid teens IRR = mediocre fund'. You kinda have to look at where they are relative to other funds of similar vintage/size/strategy, and you also don't really know if they are conservative or aggressive in their valuation methodology.
Also I am a little confused - your title says you are "weighing PE offers"... I don't see any other offers, so like it or not, it kinda seems like this is it, no?
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