Would PE VPs be competitive candidates for HFs?
To get to the punchline, I am wondering if having too much experience in the private side is a negative for public market positions. Would PE VPs be considered no longer malleable enough to mold into a public investor?
To provide more context, I am currently a 3rd year associate with a career track track at a large cap PE fund (i.e., KKR, BX, Advent, CD&R, H&F, etc.). However, public market has been my passion for quite a bit. I've wanted to explore HF opportunities for some time but frankly have had no time to actually test the water as 1) PE gig work/life balance has been absolute shit (people have recognized me as being one of the busiest/most staffed associate in the firm's history) and 2) I've had life milestone events.
Now, I am on the verge of VP promotion but know this is not the lifestyle nor the style of investing I want to continue for long. I am now starting to prep for HF interviews but am seeing prominent funds freeze hiring. Given where I am at with my current firm, I have a desire to be very selective on the HF I am willing to jump the ship for. However, I am concerned that 1) I may no longer be as attractive of a candidate for HFs once I hit VP and 2) I will not be getting credit for incremental PE experience. Would it be smarter for me to make any type of jump sooner rather than waiting for the ideal opportunity?
Thank you
It all comes down to value (your stock picking ability) vs. price (how much you want to get paid right away on the HF side).
Yes, it would be smart for you to make the jump sooner.
Thanks. Value-price framework is actually very helpful. What would be the value (i.e., 3 YoE at HF, etc.) you would expect from a candidate asking for all-in comp of $500k+ (taking minimal pay cut)?
Hard to answer. You likely have to gun for funds above certain AUM to start with. If I were a PM (which I have never been so take it with a grain of salt) at fund of such scale, I expect some level of autonomous alpha idea generation from you on top of competently assessing names / coverage I assign you.
Then it comes down to two points: 1) do you have that ability right now? (the transition from PE to public is not as straight forward as "deep diving a company inside out and buy it") 2) can you convince a PM that you do, if you believe it's yes to question #1.
To make that kind of money, you need to add a fair bit of value to a big book upfront. cost will be your biggest limitation on finding a seat bc the comp model is so different: most PMs are very willing to pay well for analysts, but it depends on contribution and that’s will be an open question on you.
Thanks. If I were willing to take a haircut upfront but have some sort of framework for quick progression in comp depending on actual performance, would that be an approach that might resonate?
I've recently heard about the synergistic value between private and public market investing that exist at large hedge funds (BAM Elevate, Two Sigma Ventures, SIG growth equity). There's a ton of opportunities there, and it's continuing to grow. Maybe that might be something you're interested in? It might also be your “value add-on.” I personally have no experience with this area. I've only heard it in passing, so take my word with a grain of salt.
My advice for you would be to get plugged into the on campus MBA recruiting flow. The funds who post on there are looking for your exact experience level and background (broad strokes 2+2 IB/PE). Have your buddies forward you all the details and then just cold reach out. I suspect you’ll get some good looks and can at least get a better sense of who is hiring
You probably aren't going to get any credit for the incremental VP PE experience. Now is the best time to get looking - 3 years of PE experience at a top PE fund is valuable and you'll get paid around that range at the HF so long as it's one with some AUM scale. Obviously a $500mm HF is not going to pay you that much most likely, but a $5bn+ or maybe even slightly smaller one will.
Lifestyle aside why would you move a job with guaranteed $MM upside over multiple years to join a team to make much less (most likely) with a non zero chance of being fired every year?
IMO - because PE is the ultimate paper pushing job
Maybe because life is more interesting when you're not just pushing paper around 24/7/365.
For me, it's probably more so fundamental questions around what type of investor I want to be and resilience of the PE industry. Lifestyle is certainly a part of it but I know HF will also be a grind and while you may work less hours, there's probably more stress (net, net, not too much difference in overall work/life balance).
IMO, the game itself has been changing quite a bit as velocity concept is increasingly pervasive (particularly in the large cap space) in the private side. There are asset accumulation machines that are just gobbling up capital and deploying at unprecedented pace/valuation as they view their mandate to be deploying the capital allocated to them vs. investing for alpha (to a certain degree, they almost don't care about absolute returns and think from the lens of broader relative returns of PE/private market). This has led to intensifying competition where 1) prices are sky high and 2) diligence allowed is minimal (people pre-empting + process design) >> funds taking more risk (perhaps not even knowing what risks they are taking) for lower upside. I am often in conversation where we describe opportunities as "it's not that attractive but it's a good opportunity to deploy $1+bn of capital with limited risk of capital loss and a way to eek out 2x MOIC over 5+ years" - I think this says a lot about how the game has changed (particularly for the growthy side) and it's not the form of investing I gravitate towards. Furthermore, you don't take any risks until you are partner and you will be an "execution" guy with little autonomy for a very long period of time.
To add on to the above, I am actually somewhat skeptical about the resilience of the PE industry... PE is still such a young asset class that's only really lived through a period of perpetual low-inflation, easy monetary policy and declining rates. The past 40+ years have been a great period to be in PE but I am not sure if that's sustainable, particularly in today's environment. That's also giving me doubts about whether there actually is a guaranteed $MM upside staying in PE as most of the $ come from carry and if the fund underperforms (or broadly the PE industry), it's all paper $ that may never materialize.
With all of this considered + my passion for public markets, I just see myself more closely aligning with HF but what you say definitely are variables I am considering...
You can, but why would someone leave a $500k-$600k cash comp job and $5mm+ of carry to potentially get fired after 1 year as a hedge fund associate?
Above poster is right, you won't get any credit for extra years in PE. It may actually hurt since you're too trained in running processes and deals.
Something to keep in mind: if you ever decide to return to PE or a related role (IB/Corp Dev/etc.), you’ll be infinitely better positioned if you had been promoted to VP before leaving your current firm.
This is a really good point. There is no downside to getting promoted as long as you’re willing to take a pay cut to leave PE as a VP if you find that is what you want to do.
Thanks. Definitely a consideration as well for optionality.
For sure, just be aware you'll be taking a pay cut in the near term. Negotiating term sheets has no value add into the public markets. It's about what you're passionate about and will enjoy day to day and year after year. The money will come in either field, more depends on what you'll enjoy the most along the way.
Animi sed iusto consequatur et dicta. Sit dolorum sit non est natus. Delectus et laudantium ab illum quis accusamus.
Et fugit aperiam id quo quia ipsa voluptatibus. Sint et sint distinctio voluptas iusto repellendus. Sapiente dolor dicta sint non illo nihil. Quia voluptas accusantium inventore fugiat expedita. Voluptatem eaque et voluptatem suscipit nam. Sint facilis soluta autem id eligendi officia quia. Enim occaecati illo eos nemo veritatis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...