Co-invest / Secondary vs PE?

After some reaching out on LinkedIn and personal research, I feel a career in secondary PE or co-investment is slightly under-appreciated on this forum. What's the comps ceiling for secondary in your experience and how risky is a career in it after IB? (ex. Like coverage group vs ECM? Where it's harder to get promoted in ECM and the skill set is less transferable outside of it?)

I am kind of a lazy person (compared to my hardo co-workers) who doesn't want to spend all time thinking of finance after work. I used to have passion about finance and investing, which has been consumed after 1 year in banking and missed on cycle PE. Is secondary or co-invest likely a good fit for me long-term? Want to do something quasi investing but don't hustle as much.

Comments (10)

 
  • Prospect in AM - Other
Feb 15, 2021 - 10:31am

johnnydoe123

i work in a multi-manager doing primary, secondary & co-invests. lifestyle is pretty ok but hours can get nasty during deals, but nowhere near direct teams. Still figuring out exit opps...

What are the exit opps you are looking at?

 
Feb 19, 2021 - 5:57am

I agree LP roles offer better lifestyle though with lower comp. As far as I know Canadian pension fund or SWF roles offer some of the better compensated roles. 

From a career point of view, it is more difficult to switch from an LP to a GP role (unless you work in direct role). But it sounds like you are not interested in this type of role. 

Given the portfolio you are likely to manage is much larger and usually working alongside either well known GPs and / or good level of information on the underlying asset, think the risk is slightly lower than a pure GP role.

One think to keep in mind if you are trying to optimize for lifestyle is that syndicated co-investment is likely better than co-underwriting or secondaries. 

 
  • Associate 2 in PE - LBOs
Feb 19, 2021 - 10:25am

I (along with other colleagues) considered a few of these roles while buyside recruiting. Even as someone who isn't a finance hardo myself, I ultimately decided to pass on some of these (in the realm of APG, AlpInvest, Coller-tier roles) since I got the sense that it's hard to switch out of into traditional buyside/attractive corporate roles without taking a lower position.

The skillset you develop seems pretty specific to GP-networking and even the more "interesting" work involved on the co-invest/secondaries side is mostly just copy/pasting the GP's due diligence/LBO model and clearing it internally. By no means an unattractive role, and if you have good relationship building skills I think it could be extremely lucrative, but I think it would be wise to consider if this particular role is suitable to you long-term.

 
Feb 19, 2021 - 1:37pm

Yes, it is hard to switch out to more traditional buyside roles. I would not recommend going into Secondaries to later join buyside down the road. Can it be done? Yes of course, and I know personally people that have done it, but its not typical.

Also, I will say this, if an interviewer sniffs out that you're joining Secondaries to later jump to more traditional buyside, you will most likely get dinged. 

Your second comment is pretty off base, at least from a secondary perspective. Yes, primary FoF is GP-networking, Secondaries is not. Secondary modeling can get quite complex, particularly if you're looking at a large portfolio of funds with dozens of companies in each fund. There is no "pasting GP diligence" in a secondary deal, I think you're referring to a coinvest. A GP doesn't really care if you do a secondary or not.

 

 

 

 
  • Associate 2 in PE - LBOs
Feb 19, 2021 - 2:14pm

That comment was specific to co-invest and mistakenly conflated secondaries.

Highly doubt any socially aware candidate would flag their alternative longer term plans. That is basically the same as coming into a job interview indicating you have no interest in sticking around. 

 
Feb 20, 2021 - 9:36am

I work in a co-investment analyst role. I guess in the end the work you're doing all comes down to the type and size of deals the firm is doing. For small ticket syndiciation deals you probably want to be efficient and quickly rebuild a more simpler GP LBO model to run your own assumptions and try to high level understand the merits and the risks of the deal. When we're working on a 80m+ co-underwrite/direct minority deal we will do a bottom-up LBO, have management meeting/calls calls with DD advisors etc. We would work on the deal for several weeks/months. So I think it's important to figure out during hiring process what type of deals the firm is doing. The attractiveness of co-Investments to me is the high deal flow and the variety of opportunities/industries you're seeing and learning about, great work environment with overall okay-ish hours (50-80h with weekends mostly off) and good compensation. Lower than IB in the first years but definitely higher in the long-run. In the end it's probably a role you would do for the rest of your life given the pay and the work-life balance.

 
Feb 20, 2021 - 2:42pm

Second the point on seeing a wide variety of deal types and GPs.

To add, from a pension/SWF/endowment point of view, co-investing is more about asset allocation. Why doubling down on an exposure makes sense for the fund you work for.

Advisors that offer co-investment funds are more thoughtful about portfolio construction as well.

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