Why do REPEs hire from undergrad and not from Investment Banks?

Based on the most helpful WSO content, here's what you need to know:

1. Recruitment Trends:

   • Traditional Private Equity (PE): Typically recruits from investment banks. This is because candidates from investment banks usually have the necessary financial modeling skills, deal experience, and a strong understanding of corporate finance.
   • Real Estate Private Equity (REPE): While traditionally less common, some REPE firms are starting to recruit directly from undergrad. This trend is growing, but it is still relatively rare compared to traditional PE.

2. Reasons for Recruiting Undergrads in REPE:

   • Developing Talent In-House: Some REPE firms prefer to mold and develop talent from the ground up. By recruiting undergraduates, they can train them according to their specific methodologies and company culture.
   • Cost Considerations: Hiring fresh graduates can be more cost-effective compared to hiring experienced professionals from investment banks who command higher salaries.
   • Specialization: REPE firms might look for candidates with a specific interest or background in real estate, which can sometimes be found in undergraduates who have tailored their studies and internships towards real estate.

3. Challenges and Considerations:

   • Skill Set: Undergraduates may lack the immediate technical skills and experience that investment banking analysts possess. This means REPE firms need to invest more in training and development.
   • Networking and Relationships: Positions at boutique REPE firms often rely on relationships and networking, which can be a barrier for undergraduates without a strong professional network.

4. Examples of Firms:

   • Blackstone: Known to have an REPE analyst program that recruits undergraduates.
   • Warburg Pincus: Another example of a firm that recruits undergraduates directly into PE roles.

In summary, while traditional PE firms predominantly recruit from investment banks, some REPE firms are increasingly open to hiring undergraduates to develop talent in-house and potentially reduce costs. However, this approach requires a significant investment in training and development to bridge the skill gap.

Sources: Do private equity firms hire undergrads?, Ask Me Anything: REPE Investment Professional, Why do so few go into Real Estate?, https://www.wallstreetoasis.com/forums/qa-hf-out-of-undergrad?customgpt=1, Why do so few go into Real Estate?