Why isn't there much of a path into PE from AM/ER?
Maybe a dumb question. When I started learning about finance, I was surprised to hear that investment banking (and consulting) was basically the only "standard" path into PE. My reasoning was that the skillset in public market equity research would be pretty similar to PE work. After all, you're analyzing companies / industries from an investing perspective in both cases, it's just a question of whether the market is public or private. Why isn't there more skill transferability between ER and PE, then? Is the dealmaking portion of PE that fundamental?
PE is half process management, deal making, portfolio management which has greatest overlap with IB. The other half is financial analysis and ‘investing’ or business quality assessment. That part has some overlap with public markets however the sources of information (public filings and expert calls versus a data room) are quite different and thus require different styles of thinking. Bankers are most accustomed to churning through data room files. Bankers are used to pulling 100 hour weeks during diligence while producing flawless work, and ER/AM analysts are not. Lastly there is a belief that the strongest candidates are from IB, and that public markets investors only focus on the near term.
Agree, there is a big part of the role in PE that is transaction and asset management- neither of these skills (from what I understand) are required in ER. Hence why IB and MC offer more transferable skills for those 2 elements.
Also, no offense intended, but the hours in PE are probably more demanding or more variable than ER.
Candidly, most of the top candidates from ER end up landing at top HF's. I think if you are a top caliber candidate and decide to pursue ER, you are more interested in public markets. Also, there is an infitessimally smaller amount of ER candidates compared to IB analysts. So, out of those that don't end up going HF, AM, or MBA the tiny few left end up getting looks at PE (although there are so few of them since the overwhelming majority exit into one of the 3 I just listed).
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