This might seem like an odd question, but with recruiting in full swing, we are getting a couple of emails per day for various firms. Every email is a sales pitch, praising top quartile returns and great raises. So my question is this: what is the best way to judge how good a PE firm is? And this is all through the lense of an incoming associate, looking for a firm that will place well into business school and post-business school. Is fund size a pretty good indicator? Backgrounds of current analysts? Backgrounds of senior guys? How old the firm is?
I'm at GS/MS/JPM, and I want to be sure I don't sell myself short by going to a PE firm that's "a step down" if you will. With banks, reputation and brand are usually strong enough that we can tell how they stack up, but with these PE firms, they are super small teams, but I've never even heard of a lot of them even though they manage over $1bn in many cases, so I'm just trying to figure out the best way to assess how "good" a firm is. On top of this, what size fund generally constitutes a "big" mm pe fund? $5bn? $1bn? Thanks in advance.
Would also like to get an opinion on that.
From an LP perspective, I mainly judge by performance. Things get more qualitative from there but it's then various things around the quality/cohesion of the team and how much sense the strategy makes given the macro environment.
If you have questions about specific names, feel free to post / PM and I'll offer up my opinion. I know a little about a lot of firms and probably have decent color on any name that's reasonably well-known.
Pretty sure Zyzz Capital Partners has the largest AUM for a firm that specializes in the Aesthetic Sector (400 bn).
.
When you get an offer, you'll have met enough people at the firm to have a sense for if you'll get along and work well with them. Since it's only another 2-3 year stint, I'd argue exits (be it b school or otherwise) matter more than actual fund performance (in addition, it's very difficult to compare apples to apples performance numbers from the perspective of a candidate - you don't know if numbers are gross or net and even if you did, you wouldn't know what one GP is including/excluding relative to others), and perhaps more importantly, whether they've raised any capital in the past few years - i.e. do they have dry powder?
From a UK perspective, you don't typically have the MBA exit with PE funds in the UK, so you want to be somewhere where you can progress internally. Personally think US PE will eventually shift towards that model in the same way that US IBD is doing at the moment.
I'd judge a PE opportunity by: fit (which works both ways), opportunities for progression (ask about the background of the mid-level and senior guys - how much internal promotion is there?), fund performance (including success of capital raises), and if it's a MM fund, how quickly you get carry.
If you're really only planning on 2 years then B-School, and you're at the lower end of your stated range (1-2bn fund) one thing that hasn't been mentioned yet is simply where the firm is in the fund lifecycle. Did they just fundraise last year and you're going to get to put $ to work? Or are they 5 years in and you'll spend a bunch of your time doing sell sides and/or fundraising? As a junior person trying to grab experience it's a HUGE difference
How about for hedge funds?
I think a better way to look at is whether or not there is a "good fit" rather than figuring out if the PE firm is "good" in terms of relative performance. When you realize that there is an alignment of interest in terms of investment criteria, stage, industry specialization, region (i think this is pretty important and underrated), etc. that fund may be the best choice.
If you really need to look at something concrete, looking at the portfolio of current and past investments should give a good gauge. I think you can see success in the number/quality of exits a fund has made.
If you're young go join the best PE firm you can find (reputationally) with the smartest group of investment professionals. Your goal at this stage in your career is just to learn as much as you can in the shortest amount of time.
Fit should be a secondary concern in my opinion. You can always go to a better "fit" place down the road. Yes you might be a great fit at TPG (which does have a very good culture) but their fundraising has been disastrous, their portfolio a mess, and their investment style too cookie cutter. Better off going to a Silverlake or Apollo and getting crushed for a few years.
How do you judge reputation if the firm is not a MF, by just looking solid consistent returns and size of fund?
yes but what if you do banking for 3 years, get crushed and want to ease it up a little bit but still work at a great place to fits you? I think if the fit is wrong, I find it hard for most people to actually do the best job they can do. How do you expect a guy interested in doing growth equity in the tech sector but doing mega retail company buyouts to do the best job possible?
Eos velit eum dolor laudantium delectus beatae magni reiciendis. Necessitatibus velit odit harum error omnis qui. Facere temporibus ipsa doloremque neque porro earum. Dignissimos voluptatem qui ad quaerat exercitationem. Consequatur et praesentium quia eveniet quia aperiam aut. Aliquam et alias distinctio aliquid repudiandae. Maiores tenetur id voluptatem aut sed perspiciatis ipsum aut.
Tenetur saepe voluptatibus architecto exercitationem explicabo est. Ipsam nemo iusto odio adipisci ut occaecati. Ut maiores dolorem maxime adipisci. Voluptatem culpa aliquam esse excepturi quaerat. Fugit quia voluptatem sapiente aut natus est vero et.
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...