Traditional Private Equity vs. Sovereign Wealth Funds

I'm currently a senior associate at a MM PE fund that is looking to lateral, largely due to the industry focus and value investment strategy of my current firm. Its a great job market so I'm see a lot of different opportunities and wanted to get peoples' thoughts on lateraling to traditional PE vs. a sovereign wealth fund in their direct investments arm.

Though both are investment roles in private companies, I've come to understand how different a role would be at a traditional PE vs. SWF. It seems like a SWF has significantly better WLB / flexibility (given higher level diligence from co-investing rather than leading) and actually better comp (base + bonus) but with no upside (no carry / equity). 

Anyone have any thoughts on comparing these roles at a mid-level role (senior associate / VP)? Would also love to understand perception and potential exit opps at a SWF role vs. traditional PE

 

A few things you might want to consider

  • ratio of direct vs co-investment. Higher direct may mean your WLB isn’t as good as may think
  • delegated authority can be frustrating if everything has to go through head office
  • caliber of team that you will work with
  • restrictions on what SWFs can invest in
  • promotion path, especially if you are not a national of the SWF
 

One point to expound on for WLB at a SWF. The reason may not be that there is more co investing vs direct. There are many other factors, including that time is in your hands to control (not all situations), internal processes can take longer, and you may often hire a bank, etc. Am at a SWF and in the 3-4 deals I’ve closed or will close in the coming months, only 1 was co invest and we led everything. The others have been direct and we hired and coordinated all the advisor work, including bankers. Having bankers on board has made a huge impact on WLB because you can offload most of the time consuming work to them while still being 100% involved in the thesis formation and final deliverables. Just a couple thoughts as I think the view that all SWF are only passive co investors is false (where I am). 

 
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As someone who made the switch, I can paint the picture this way. I'll try to be candid. 

2020/21: I was a first year associate doing buyouts at a firm on border between UMM/MF

  • Around 300k TC
  • Worked 90 hours a week (15 hours * 6 days)
  • Took 5 vacation days for the entire year
  • Churned through 1-2 IMs/opportunities every week, i.e. I built a model and went through it with someone to see if it's worth it to spend more time
  • Went to first-level investment committee on average once every 2 weeks, meaning full deck buildout
  • I signed 1 deal in that entire year, didn't even stick around for closing though
  • Invest in relatively large deals which would make some sort of news
  • Everyone around me was "sharp", laser-focused, "live to work" type mentality
  • Every level of the firm is regularly poached by competitors

2021/22: Second year associate doing growth equity at a SWF (100% direct). 

  • Still at 300k TC, so taking implicit paycut since I'm a second year, inflation, and my old firm raised to 320k
  • Work around 50-60 hours a week, almost never get bothered with real work on weekends, just occasional email
  • Used around 20 vacation days. I took 10 straight days off during Christmas, 5 days during Summer and 2 days off during my birthday. Zero anxiety in asking for days off. 
  • Go to investment committee once every month or so. IC here is way chiller and easier to please. Admittedly the investment process is less detailed, you receive less scrutiny but from more people. Most of said people are not as shrewd as the partners in my old shop. But they also have better hairlines and healthy relationships with their kids lol.   
  • My deals would receive almost zero regular news coverage (e.g. NYT) but are pretty high profile in stuff like TechCrunch. 
  • I've closed 4 deals in my first year here, am board observer for all 4.
  • No meal or ride allowance
  • Everyone around me is "work to live" mentality, including my bosses
  • At the principal/VP level, it gets quite hard for people to leave, so they end up staying because of the lifestyle but also because not many pure-play PE firms would take them. Only other sovereigns. Plenty of people lateral in and out at the associate level though. 

If you ask me it's definitely been worth it, and will never go back to traditional PE again. The only places in PE which would let me get away with the lifestyle I want would be no-name places with no infrastructure, and tiny funds, doing deals nobody cares about. SWFs are a great balance between high-profile transactions, buyside mentality, lifestyle/perks, and decent brand recognition.    

Also growth has been way more satisfying for me than buyouts. 

YMMV depending on SWF. 

 

100% agreed. So far it's been totally worth it for me. Still super interesting work, solid deals, get to work with advisors/other funds/investments across the globe. 

And now I actually have time for so much outside of work. I've resurrected my old hobbies and considering new ones, all the while being way more active in my personal investing (which was hugely lacking before). On that last point, I think people overstate total comp and understate investing. Someone who invests actively but makes less than a banker (many of which hold cash because no time) may very well end up better in the long run. 

Overall very happy with the move, although there definitely have been trade offs that not many are willing to make. 

 

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