PE Secondaries Exit Opps
Hi all,
I have offers from two reputable PE secondaries firms ($30B-$40B AUM). I was curious as to the feasibility of lateraling into direct PE or even IB following an analyst program at one of these places.
I know the financial modeling training is not as robust, but these firms place a heavy emphasis on rigorous quantitative/statistical modeling techniques in the due diligence process; how marketable would this kind of skillset be to a buyout fund or a top-tier investment bank at BBs and EBs? What about a HF?
For context, I'm debating between taking one of these buy-side roles and accepting a return offer in corporate banking from a BB I worked at this past summer. I find the work done at the secondaries shops to be much more appealing and stimulating than what I did this summer, but I want to make sure I'm not shooting myself in the foot by taking one of these offers.
Once you go into secondaries, it will be tough to break into direct PE. Personally have never seen it happen (I have seen co-investments to direct, but not secondaries to direct). But I should note that those who are already in secondaries actually want to stay in secondaries for the rest of their career. Secondaries PE investing is the exit opportunity for some banking analysts every year, and if your fund is that large, you are kind of in the golden spot.
Do you mind sharing what the compensation (salary + bonus) expectation is as a first year analyst in a secondaries PE shop that large? I'm assuming it pays worse than banking and that is why you are so eager to get into banking / direct PE. But I know a couple people in the secondaries space and the money is still good (albeit not as good as direct PE) and the hours are generally much better. The work itself is also very interesting and you will learn a lot about structuring deals. I wouldn't shy away from taking the secondaries job. It's a great place to be in right now.
Can't speak to independent secondaries shops but BX Strategic Partners and GS PEG pay on par with IB at the analyst level.
But its important to add that they do co-investments as well
One of the two firms (the one I'm considering more strongly) is actually offering a little higher than most entry-level roles in IB, and certainly higher than my CB offer: they'd start me at 90k with a bonus figure between 20 and 50% of base.
I'm asking about direct PE (and by extension IB, which I see as a conventional stepping stone to PE) not because of pay but because it's closer to the actual portfolio projects/ventures/companies than secondaries, which is removed by a couple degrees of separation. While I'm certainly attracted to the quantitative analysis in secondaries, I think it would be more fulfilling in the long run to be situated lower in the investment value chain. Keeps things a little more tangible and concrete.
Excited nonetheless by secondaries. We'll see what happens.
As the first replier said, it will be hard to break out of PE Secondaries. The skill set in FoF PE is so niche and specialized - your abilities at least on paper does not translate well to other roles.
Most people who start or end up in secondaries tend to stay. Whenever I've seen professions in secondaries leave their current roles, they usually just hop to competitors, or from sellside to buyside and vice versa (it's quite common for secondaries professionals to move from buyside to sellside).
A lot of people on this forum overlook secondaries (probably because it's quite niche and less talked about), people get confused and think FoF and secondaries is the same but the skill set is very different. At some shops, secondaries is extremely technical (and at others are less technical). Places like BX Strategic Partners, Glendower, Morgan Stanley are all very technical roles that require modeling, valuation, and a f*** tonne of work and DD. If you're at one of these places you won't struggle to move into direct PE. I know people at places such as BX Strategic Partners / Glendower etc.. that left for direct PE and have said they find direct PE far easier and less challenging than their time in secondaries at their specific shop.
One of the reasons you don't see much movement from secondaries to direct PE is because those in secondaries tend to stay in secondaries as they enjoy the role.
Really? Who went from Secondaries PE to Direct PE and said they found it far easier and less challenging? I wish I could be proven wrong and find some who were able to pull off making such transition.
I also do see that those who are in secondaries tend to stay because they enjoy the role. But that's not the full picture - some stay because they all join at a mid/senior associate level type people (ie those who aren't going make many jumps at their stage of career/life)
Sure, on your first point I have a couple contacts who went from mega fund secondaries -> LMM / MM PE. Both said they’ve found the environment and nature of the work less challenging and stressful (me saying far easier was just me exaggerating) I.e in their secondaries role they had to dive into every single portfolio company and do in depth analysis on the markets, they had to think about the structure of the funds and get involved with restructuring I.e asset or fund recaps, strip sales, spin outs and all sorts of GP advisory aspects, they had very long hours (constant 2ams) whereas now they’ve made the move into direct PE, their hours have improved, they feel they’re able to focus their mind on target companies and monitor their portfolio rather than all the work they previously did in secondaries. However I’d like to reiterate what I said before about it being dependent on which shop you come from, these guys came from the top secondaries funds and moved to LMM / MM direct PE. Only a few secondaries shops operate like this and most others are more the plain vanilla purchasing LP interests type which would result in a different experience (which is why i said in my earlier comment some are more or less technical than others) so if they were at a different secondaries shop or moved to mega fund direct PE instead of LMM/MM they most likely would have had different experiences.
2) sure that’s a fair assumption, what I said was only one of the reasons
let me know if you have any other questions
Hello – thank you for doing this. What are your thoughts on someone coming from a bank’s Fund Finance group? It’s basically a group that provides NAV lending facilities to PE funds (especially to PE Secondary Funds) to help them boost their IRR. The collateral package to the bank is the LP interests and the underlying portfolio companies so the analysis is based on those underlying companies, although very high level and not nearly as detailed as an LBO analysis. Do you think someone with this background can break into Secondaries (either on the sell-side or the buyside, but assuming sell side is probably the easier path). Thanks in advance.
I did two years as an analyst at one of the big secondaries firms (e.g., Ardian, Lexington, Stepstone, etc.) but ultimately found the work repetitive, somewhat boring, and became frustrated with the inability to have actual say in operations of the portfolio companies, so knew I wanted to leave and go to direct PE.
Unfortunately, I wasn’t able to have any traction with even securing interviews with direct PE firms while in secondaries, so had to switch my strategy and go to the banking side for a year before I was able to then make the move again to the direct side. In my experience, the banks will discount your two years experience and offer you a position as a 2nd year analyst.
Looking back on it, I don’t think my transition to direct PE would’ve gone remotely as smoothly as it has if I didn’t have 1+ years working in IB, so I would suggest following that route before going to the direct side as you will learn a lot in IB that you haven’t in secondaries.
Hope that’s helpful
Curious how you transitioned from secondaries to banking and any thoughts on HL/Alpinvest in the secondaries space?
How did you explain wanting to go into IB from secondaries without saying it was a stepping stone?
Could you PM me?
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