Why the hell is anyone chasing buyout PE?
Caught up recently with a mentor who posed an interesting idea – if you think about the job market as akin to the stock market, you’d expect it to be largely efficient. In theory, information is widely available, people can observe outcomes, capital (human talent) flows to where returns are highest, and supply/demand dynamics should equilibrate. If a role is structurally advantaged, under-the-radar, or mispriced, you’d expect talent to flood in until the excess returns get arbitraged away.
In a similar vein, buyout PE feels overbought, given that everyone wants the job. Sure the PE industry isn't likely to go belly-up, but for an individual career seeker, the number of seats with opportunities for upward mobility are dwindling, returns are trending down, and there are undeniable structural headwinds. Risk/reward is off-kilter.
When investing, you'd look for businesses with structural tailwinds, so why aren't young people doing the same for optimizing their careers? For example, lots of complaints about funds not returning capital. Why aren't people flooding into secondaries? Complaining about MFs becoming capital aggregators - why aren't people gunning for the insurance / FIG acquiring teams unlocking this capital? I.e. Apollo FIG etc. And NAV lending, fund finance, GP stakes, etc. - lots of "weird" or overlooked types of investing out there
Skate to where the puck is going, not where it's been
Congrats on striking out!
Congrats congrats!!
Funds aren't returning capital, so let's buy the stakes of those funds that aren't returning capital because eventually someone will buy my stake 10 years down the line and I will make 9% IRR. Dude you're a genius.
The returns in NAV lending and fund finance are probably so fire, if only I worked at MUFG's fund finance team for those commitment fees.
Think there’s a part of this about actually doing what you’re interested in and not just chasing what is doing very well right now.
Most people going for buyout are making the bet that 1) they will get a good investor skillset , which they can parlay into a public or private markets role or 2) PE as an asset class (not necessarily MFs) will pick up in performance and be a meaningful place to have a career
Maybe a lot of people are interested in buying and building companies? PE ownership is very hands-on and you touch almost every aspect of a business over a cycle.
Or you can aspire to be a lender or secondaries investor. They are entirely different careers.
Buying yes, building...lets be real here. No one in MF is close to "building" the business unless you mean sitting in a board room quietly observing the actual operators and supplying cash for organic / inorganic growth as needed. And at Apollo scale you certainly aren't building them my guy. But i do agree with your sentiment and think you are able to observe all aspects of a business, but just as an observer
always get a good laugh when people think we actually build anything
I guess we can just ignore the several scaled platforms we created out of whole cloth (assembled assets, hired a management team, and provided the initial capital). But I’ll concede your point is true at least 75% of the time.
what do you understand by "build"?
the role of any CEO, which I guess in your view would be the ultimate builder of a company, is a capital allocator role. You call the shots on what to invest/where to push next/etc., instead of going down the factory and operate the machinery that builds the actual [insert here product of choice] you're selling. Gathering a group of people to build something is again a capital allocation decision as it states that "x product/service/etc. might be in demand, we need to develop it, so i am ready to engage in a J-Curve type of activity that will pay off later on"
Fast forward to PE, we're watchers over the way in which resource are being allocated based on our relationship as shareholder (principal) and CEO (the agent). We do not intervene unless we are dissatisfied with how those resources are allocated, which overall, means that management has free reign to do their work without our intervention. Sometimes we do come with novel ideas or interesting transactions, but we aren't operators because that's not our interest. We are ultimately dealmakers that do a deal and then try to reap the fruits of it.
If you want to put it differently, our role is more akin to being part of a Board of Directors than some Head of Development/Operations.
because end of the day, what type of retard enters private equity (read: shareholder stakes in mature companies) and thinks about itself as a "builder"/or expects to learn something about building anything lmao
What is Apollo buliding or most MF's for their portcos? It's an asset aggregator model at the larger deal sizes, simply not a lot of white space relative to amount of capital chasing it. This isn't even my opinion, it's Marc Rowan's who does not view PE as much of a growth factor for the firm. Apollo is also the firm most known for financial engineering, so bit of an ironic take.
Agree in broad strokes but clear you don't know what you're talk about with Apollo.
Apollo seeded and built out Athene from the ground up into the largest retirement solutions business in the world, which has literally redefined how all of the major PE funds are thinking about asset allocation.
Take a look at a name like Atlas SP which Apollo owns. Literally carved out a structuring desk from Credit Suisse as it was burning out, installed management, installed entire back-office etc. and is now a standalone company it owns.
Likely for long-run optionality. You can do basically anything across the investing landscape with a solid PE background, or stay in PE, or move back to banking, or go corporate, etc. Also, while competitive, equity seats tend to comp more than secondaries or credit.
Realistically, most people choosing are like 22. Would say it’s better to go into PE where you can then shift over to a SM or investing coverage of choice rather than join credit or secondaries for lower comp, lower prestige, less optionality, etc. Also life is too short to not do something you find interesting, most people just aren’t interested in these boring investment strategies/asset classes.
Boring is subjective. There are people out there who find the idea of selecting managers more interesting than direct investments (co-invests), thinking like a credit investor more interesting than equity one (PC), etc. Different strokes for different folks.
Who cares. You do you
I think the fundamental thing is that what this industry (alts, and all invmt mgmt broadly) really boils down to is “you need to get onto the list of people where at least some set of capital allocators won’t get fired for giving you money, regardless of the outcome of the investments.”
PE remains the best “second thing” to do after IB to continue on a path to make that happen. Even if you stay an employee your whole life the closer you are to the above the better your life as an employee.
I’m a strong believer in the fact that the future of PE will be run by firms that are focused on operational improvements and organic growth over simply hoping financial engineering and multiple expansion will create value. Firms that maintain a tight focus on their niche with smaller fund sizes and specialized teams will succeed. Bain recently did a study and found that the top quartile returns have a significant component of margin expansion and organic growth to the value they created.
https://www.dealedge.com/insights/creating-value-in-private-equity-moving-beyond-multiple-expansion/
Isn’t this already consensus in 2025? It’s odd to present it as if it’s new.
Nearly all serious PE shops prioritize operational improvements now. With a matured asset class, high dry powder, tighter financing markets, and reduced debt quantum, you just can’t engineer returns like you could in the 80s.
I was just giving a counterpoint to the doom and gloom that I felt was coming from the main poster. I know it’s the consensus now, but many PE firms are in different places on the curve towards this shift. I’m just trying to emphasize that PE is here to stay, it will just look very different in the future. PE is still a great place to be, and the experience gained will likely get more valuable as more PE firms dive into the operational weeds
Adding to this I think actual operators will be the next wave, where the operating partner model is already going out the window as they aren't incentivized nearly as much as they should/could be. The best funds raising capital right now are people who have actually run businesses in a specific industry and actually understand the dynamics of said industry. Anyone can do a model but actually running a business day to day requires a real skill set.
Yeah I’ve heard it’s very tough to hire good operating partners right now.
Trying to do that right now post MBA but have no idea where to go after consulting =/. I guess I need to find the recruiters in the industry I like that covers portco managment / operating partner hiring for PE firm.
No set path on breaking into this space, have spoken with quite a few operating partner / C-suite folks at portcos in recent years. No two stories were ever the same (these folks worked at LMM / MM portcos, so less structured operating groups like KKR Capstone etc.).
People have been saying this since I started my career ~15 years ago. It’s definitely true that pure financial engineering is already pretty capped out at the portco level, but most firms have been heavily leaning into operational improvements for decades now.
The ironic thing is that the GPs that have made the most money for themselves over the past 15 years have capitalized the most heavily on financial engineering at the GP level - selling GP stakes, selling portco’s to CV’s, NAV loans and capital call lines, expanding their firms into diversified asset managers w a host of non PE strategies, etc.
Maybe if you're going to work 60+ hours a week for 30 years, you'd rather choose something you're interested in vs. what pays the most money.
It's like asking why would anyone want to be a teacher if you can make more as a truck driver or garbage man? Maybe they want to be a teacher...
For people who want to stay in PE: because there are still MM and LMM funds that are doing very well returns wise and creating generational wealth for people (both co-founders and early joiners) as they scale up. The big difference between now and a few years ago is that the number of funds doing this is less. The other big things are: 1) optionality into corporate careers / MBA's/ startup land / HF's, etc. 2) just learning experinece from thinking like an investor. I think most people going for MF PE acknowledge or understand it's not going to be the highest returning platform or somewhere you are likely to get to partner, but if you can get to partner or close to it there or an older MM platform, you are still getting really solid risk-reward return with the caveat it's very difficult hours and a lot of hard work.
Am an An2 going to a more growth-y investor MF with no plan of staying no longer than the 2 years. I fall in the camp of wanting to learn how to think like an investor and then go into operating or creating my own thing. Just wanted to address in case the MF PE simps come in and try to dismiss this by saying someone struck out.
Because of the golden rule: "The one with the gold makes the rules." It isn't the other way around, otherwise everybody would actually just go out on their own.
Why does a dog chase the postman?
The stock market isn’t largely efficient
What is the hesitation with private credit? Heard similar pay
This was previously a dumb comment that made no sense once I read it.
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