Do you consider your Private Equity job intellectually stimulating?
I have heard on some threads here and in general that PE jobs can get stale and boring, of course every job has its shit days but the nature of PE is long term concentrated investing. Do you consider your job in PE interesting and intellectually stimulating?
I work on the LP side as an Analyst. Definitely very stimulating. I get to see companies all across the spectrum in terms of their business model. Direct investments are lots of fun but funds are also pretty interesting. I recall just a few months ago a hedge fund/PE funds tossed me a deck on life settlements which I had no idea there was even a market for. Naturally after I hear about it, the understanding of how that business model for the fund works got me really excited for it. Of course I think that's just my inner nerd and I think I just really enjoy seeing new ideas which get all the brain juices flowing.
What do you think about life settlements so far?
It's pretty interesting. Not sure if my company would have the desire to go into the business tbh ... I have a feeling ppl would feel the business would be a bit on the sketchier side of things and that would kibosh the deal from the get go (kind of like we were taking advantage of people in distress ... to be fair, the people that are getting life settlements are getting way more than the cash value of their policies so really you're not ripping anyone off and you're really providing a value-add).
From a purely analytical stand point, the returns are extremely attractive ... as long as your modeled mortality/payoff schedule works out and your underwriting processes don't have any deficiencies in it, you're getting a fantastic risk-adjusted return. The numbers I saw were like returns in the low teens with volatility/std dev substantially lower than pretty much any equity index (which make sense since death shouldn't be correlated to the economic cycles ... unless shit really hit the fan I guess)
More often than not, I find what we do to be intellectually stimulating. We invest in healthcare companies, so I get a little bit of fatigue from seeing the same violently sharp hockey stick growth curve over and over again when I'm looking at a younger company's materials. But when I see an opportunity that I start to believe in, it's hard not to get excited.
I think the thesis-building is my favorite part. Trying to conceptually build the distribution of outcomes of the business and deciding if it's in a risk & reward band that makes sense for the fund is endlessly fascinating, and trying to support that thesis empirically is like a game you can't lose (either you support your thesis, and you win, or you find out the thesis is weak, and you avoid a bad investment, which is also a win).
Honestly, the deal-making is probably the least interesting part to me. Not that there isn't plenty of value to be created and allocated during the days between winning exclusivity and close, but it just doesn't capture my interest the same way. More of a process step that's a means to an end than the thing that gets me up in the morning.
The least intellectually stimulating part of the work is when, as a junior guy, you're tasked with driving forward a deal you don't believe in. Nothing sucks the life out of me faster.
Nailed it. +SB
However fatigue can also set in if your IC is being particularly hard-headed about a certain deal/market/thesis (entrenched bias, either positive or negative). In that case, you need to come in with a lot of empirical ammo but also "play the man", which, depending on personalities, can be pretty taxing over time.
Layne Staley how did you land a job in PE within the healthcare niche? I am trying to better understand how to locate PE firms specialties. Based on your post above I assume that this is not your first PE job. What did you do to make yourself standout?
This might help:
https://www.wallstreetoasis.com/forums/ama-my-journey-from-the-lab-to-m…
Wow, glad you linked that, I never saw that before. Going to read that on the plane this afternoon.
I feel like at time it can be quite exciting - when you really start to get conviction about a potential deal, the structure is working out, you've been accepted into the final rounds, and there is strong momentum towards a close. Having said that, and I'd love to hear some other folks opinions......the tedious, deep, literally zero-value-add (from my perspective), "into the weeds" diligence is so far away from interesting or captivating, I dread it every process. Nuanced diligence above and beyond, just for the sake of diligence, is the absolute worst thing ever. My 2cents
When I was in IB, I used to hate PE guys that would send over a 400-line diligence request list that was more or less a stock list. I'm still sensitive to that now that I'm on the other side-- not that I'm afraid to have people do work, I just don't want to distract management or other providers from getting deep on the really key items if they also have to worry about a million other minutiae.
My self-reminder is to ask the questions that change my answer.
As a VP yourself, I think that is a great mindset - focus on the high priority items relevant to the process. Unfortunately for me, my VP chooses the path of "lets get every item and analysis at every level of detail and run X Y Z for IC deck and model". The stock list basically just is required at this point, in addition to thoughtful one-off requests on a deal-by-deal basis.
I also have to think that the detail in full buyout vs. growth equity tends to skew more towards BS, whereas GE gets to the point quicker. Or maybe that's just a grass is greener mindset, who knows!
I second this comment. The endless "sensitivity" cases you have to run, silly "what if's", and other n number of iterations on scenarios that you know are going to tell you the same exact thing you knew before can be painful and mind numbing.
On the sensitivity thing; during my time in PE, I always seemed to get numerous requests that were outside of the scope of anything I'd ever done before and were born from some crazy idea my deal team lead had. Zero guidance, or template to go off of, yet somehow the senior guy already had an answer / outcome in mind that anything that deviated from that was "wrong". Yeesh.
Short Answer: No.
Long Answer: Despite what I tell people, no.
I think it depends on the person and their perspectives on life and their career.
I feel like ~75% of the guys I know coming out of their pre-MBA PE roles are pretty much done with PE and in some cases investing all together and will tell anyone and everyone that PE is the intellectual equivalent of watching paint dry. I think it stems from a couple things (1) the feeder aspect of target schools/banks, (2) lack of perspective, (3) PE process, and (4) fund culture.
(1) if you go to a target school and are on the path at 19/20 years old. You get your SA offer, convert to FT... Crush on-cycle recruiting and end up in PE. You have basically done what all of your friends and potentially family have told you will "make you happy", "make you rich", "get you laid", or tbh "get you into HBS so you can figure out what you want to do with your life". While the whole process is extremely competitive you'd be surprised how many kids are just on the treadmill.
(2) Going hand-in-hand with (1) you have likely been locked into this train of thought since 19 years old. You didn't "take that cool internship" or "travel abroad for the summer".. you were sitting at a PWM or boutique bank internship so that next summer you could get a shot at a BB/EB for SA. Kids in finance lack perspective of how shitty most jobs are because they have 0 to compare it to. They see and hear their friends working less, getting paid not much less (sometimes), and start thinking the grass is greener. Though without work/life experience outside of finance there isnt much to pull from to keep your FOMO in check.
(3) Kids in finance lie. Personally i think it has a lot to do with (1) and (2). Firstly because they were told for years that this is what success looks like and this is what crushing it looks like. Secondly because who is going to go back to their undergrad after sitting in that classroom for 4 years and studying guidebooks that "hey kids maybe check out other industries. It isnt all models and bottles". Everyone sits with their buddies dick measuring live deals and platform investments. No one talks about the 2 years of pitches and books that were never even bound to get the mandate or the 3+ months of diligence lists, APA calls, and internal discussion materials. A lot of the boring/mundane/shittier parts of this industry arent talked about and kids go into PE just unprepared for the actual investment process.
(4) really to just close it out. PE isnt really a fast-moving thing. So while there are cool start-ups with amazing work from home and vacation policies, and hedge funds that have a PM and make 10 trades a quarter.. PE isnt that. PE is very much a funnel and diligence game. The people that make it far are not always the ones you wanna grab a beer with.
Now... I personally love most of my job in PE, but will openly admit that there is a fuck ton of admin and legal work that I fucking loathe. BUT it's much better than doing anything else that I could think of. Intellectually I think you take a really cool thing/idea and stretch it over a period of months that likely loses some of its allure.
well said
HugLife Your post just convinced me that PE after the military is going to be fun for me!
Thank you for sharing your wisdom.
From your prospective, are there any movies that do a great job of highlighting what private equity really is?
It's not movie worthy... that's kind of the point hahaha. Very lengthy process before any real "action" happens. And you get blueballed a LOT
Barbarians at the Gate is probably the closest you’re gonna get but that 80’s level of corporate excess doesn’t really exist in companies today.
This is a great post, but I feel like the only thing I've noticed that counters the above, is regarding how PE isn't "fast-moving"... the process deadlines may be slow, but the type of managers in the business and the deliverables and timelines associated with those deliverables still seem like they are lightspeeds faster than the sell-side. My firm is of the mindset that if you have any free time you should ALWAYS be pushing a process forward no matter what, and that items should be finished and worked on rapidly and immediately. It's the most stressed I've ever been in my life. It could be culture related, but my firm truly believes that any moment of free time should be used to work on related deal opportunities - monday through sunday, 365 days a year. Maybe I got the short end of the stick, who knows.
Intellectually stimulating? At times kind of? It requires you to think but I wouldn't say the thinking is stimulating at all. More often than not it is shitty process work or doing deep dives on bullshit. They call it banking 2.0 for a reason.
plskystks Can you elaborate on "deep dives bullshit"?
Sure something like "hey can you please look at what this business would like if we took it through a bankruptcy process and utilized 502b6 to reject leases?" will take my entire day up as i spread lease docs by location. I feel like the first few days working on a transaction are cool as you are learning about companies and business models but once you get into the dataroom and are looking at super granular detail, whether it be lease example above or comparing store by store performance, product performance, etc., it is a fucking grind and the work is not intellectual by any means.
You do if you really enjoy the industry
I did 2 years of it and disliked it, but it has nothing to do with the industry or interesting companies I looked at.
A non-VP PE gigs is mostly just a long never-ending grind of legal work, admin work, data rooms, and other ad-hoc financial modeling-related things. It's fine when you're in banking since you have PE to look forward to, but it really gets old once you're on the buyside.
10% of it is interesting and either lasts the first month of the deal and/or most of that is shared with your MD.
Safe to assume given your profile that you're on the public markets side now. How does PE compare to working in HF overall?
That's a very broad question with many subjective answers.
Everyone's different but I love the public markets. If you like being creative and using data and automation (required to get an edge going forward), go with public markets.
If you like building the rolodex and hand-shaking to find non-auction deals among on the golf course and running/closing transactions, go with private markets, which includes VC.
I've found hours to also be better in public markets, but there's more intensity during the day especially during earnings or major spin/M&A announcements. To each his/her own as I don't want to be known as the "PE hater guy". It just wasn't for me.
Since this thread has devolved into "what I hate about the PE job," vs. original question, I'll add one other downside of the job on here.
PE deal teams / groups, in my experience, are unbelievably political. Even more so than banking. Team sizes are much smaller, and the competition to advance up the ladder is fierce. Guys you thought initially were in you corner or "buddies" are not, and are maneuvering around you to make themselves look better to partners and MD's. This is doubly true for your manager / direct report; if you're not making them look good or give them opportunity to place blame elsewhere when something isn't going well, they will. Very cut-throat and intense.
That doesn't sound fun. I'm no push over but and don't mind a bit of fight and niggle but damn having to deal with people like that on your team every day would get old very quickly.
I would say that this is shop dependent
Agreed, yes. I probably should've stated that. Some team's a pretty tight-nit, however - again in my experience - I've heard this same critique from many of my peers.
while doing what you like, no job is boring
I think it depends on what you're doing day-to-day. This is definitely not traditional but I'm an entrepreneur that's shifted into doing angel deals + buyouts and use some of the companies I invested in as platform co's to do acquisitions off of when there's good synergy and I love it.
Everyone I deal with for the most part is really smart and I learn a lot day to day dealing with people and looking at different companies. The best part is being able to take the best parts of businesses I look at and invest in and then apply those to other businesses in my portfolio.
If I was stuck building models all day or cold calling a ton of companies to try and get deal flow, doing the shitty boring DD myself, then yeah, I can see it sucking.
CompBanker should chime in.
The folks who are sick of mind-numbing junior associate corp PE analysis—have you ever considered REPE? Real estate is simpler because 1) it’s the asset level and 2) it’s basically just several variations of the same business model, but honestly it sounds like some of you might find it more intellectually stimulating than corp PE based on examples described here.
My thoughts: 1. Simpler as mentioned above. While you don’t completely escape mind-numbing work, a simpler business model/structure probably allows you to spend more time thinking about the market and generating and defending the thesis, game-theorizing how it could play out, etc. (plus if complexity gets your juices flowing there’s all kinds of shit you can get into playing with different cap structures, types of financing, going after debt to control the equity, etc and you don’t need to have worked in R&R beforehand) 2. Interesting travel. You get to fly around to different cities and meet with people that are connected around town and learn about the history of the areas. Spend time touring really beautiful new buildings (core) or up and coming areas where you can just feel the potential (opportunistic). 3. Quicker transaction pace (at least on the asset level, maybe not entity). Probably allows you to see more deals and less time slogging through them after they lose that new deal smell. 4. Seems like people climb the ladder faster. Probably a function of it being simpler/quicker. This means earlier deal-making and earlier involvement in the strategic decisions. Not uncommon to be point person on a deal when you're 29-30. 5. I always heard comp is much better in corp PE, but you tell me. Market rate for an associate at a megafund-level shop with like ~2-4yrs experience is around $125k base + $125k bonus in NYC. There are some comp surveys floating around the RE forum for some more info. This range is based on my experience, my contacts and what I heard from recruiters. I know for a fact that some regional acquisition team heads make around ~$500-700k and I've also known people making $1M+ that are still involved in deals and not sitting in senior management (though may have been by choice since these people did have a lot of experience under their belts).
You probably get “pigeon-holed” in RE but honestly it’s a pretty cool industry. I think development is pretty fascinating and a lot of investments I’ve looked at/done over my short career have been developments and adaptive reuse of old crappy buildings into new, cool ones. You get to touch construction, architecture, engineering, environmental, politics (land use, etc). Plus hotels are pretty dope and fall into the RE camp. And sounds like you could get stuck in some mundane industry specialties in PE.
I would bet PE backgrounds would play well in RE interviews. You’d just need to pick up some of the industry-specific jargon and concepts (cap rates, thinking in terms of PSF metrics and unit economics) but it’s not difficult. Just a thought.
This is a really good answer for why REPE...
Would this be applicable to Infra PE as well?
I'm the wrong person to ask but my guess is that infra is somewhere in between, leaning closer to RE.
i work at KKR and its fucking boring as I carry along
I currently work at a MM PE fund, and prior worked at a BB bank. I would say the job is much more stimulating than banking, because I spend a lot of time developing investment theses, identifying opportunities to create value, executing on them, looking at lots of different deals and being able to pass on crappy ones (vs. trying to sell shit businesses in banking), and on and on. I have more freedom to pursue interesting projects vs. trying to hit a client deadline.
I like working with the team at the PE fund, but the part that I dislike about it is dealing with portfolio companies. Don't get me wrong - it's fun and stimulating to work on operational projects and identify real opportunities, but it can be boring as hell and difficult working with them. A lot of this has to do with dealing with "regular" people - those that are there to collect a check and work 9-5 and avoid having to do much. Not to mention them having limited excel / financial knowledge, so it's like you're speaking two different languages. So trying to work with them can be difficult, as we're from two different worlds (think coming from an investment banking culture to having to deal with people from The Office). Even the executives can be a little difficult to deal with, as it can create a culture of "us vs. them".
Overall I wouldn't change my job, just a point that I'm not a big fan of. Others have been able to thrive in this environment.
Anyone run into similar problems?
People have touched on many of the negative aspects of PE already. I'd like to just add that where the fund is in its life and how it's performed will greatly influence how the job is for associates.
If a fund has not performed and the next fund looks to be smaller or maybe not possible (i.e. zombie fund), the situation can get very political very quickly. People will desperately cling onto shrinking domains. Principals that might have been on the cusp of Partner may be left out as there is no room for them in a smaller fund. Some junior partners may need to justify their value because they could be left out as well. This creates an environment where everyone is afraid for their jobs and trickles down to associates in the form of deals that are clearly going no where or unnecessary portco work. Tough to get repeatedly excited for something that you know is CYA for your boss...
If you're at one that is in the midst of fundraising get ready for a steady stream of requests for LP meetings. If the fund has performed poorly, you as the associate will likely have to cut up returns and portfolio data a hundred ways. And iterate the fundraising deck a frustrating number of times... Believe it or not, some people find this intellectually stimulating, and fundraising is arguably the most important part of the PE business model (yes, even more than investing). But I know most junior PE professionals didn't expect to be investor relations analysts.
I think many folks (myself included) went into PE with the idea that they could really stretch their investing muscles. I'd argue that's a minority of your time in PE. As a deal based business with 5-10 year hold times, you'd be better off enjoying the game theory behind deal making, incentivizing management, and monitoring investments. Nothing wrong with that, but it's helpful to understand what most of your time will be spent on.
I think it depends. I've worked in big firms, and small. I worked in real estate PE, tech growth, buyouts in China, in healthcare PE and in a family office, and did a bit of IR / capital raising as well. Healthcare and tech were super interesting to me because I like to learn about new technologies. I found REPE to boring as s**t. I couldn't bring myself to look at another stupid building to buy. Buyouts were ok since you have a big company to evaluate, but I didn't enjoy the modeling part.
Repellat reiciendis quisquam soluta dolore et amet maxime. Sit molestiae consequuntur sequi neque. Soluta non est eum. Aut itaque alias tempore saepe et accusamus quisquam consequatur. Ducimus vero possimus et fuga.
Dolore atque illo in sed quasi beatae facilis tempore. Incidunt natus eos porro non modi ut ipsa. Eos saepe ea ut quibusdam sint.
Rerum fuga et cumque ullam consectetur id. Nulla iusto unde labore corporis et recusandae ut. Nostrum ea in illum. Fuga unde cum quisquam non odio doloribus nihil.
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...
Sapiente fuga non commodi cumque quis asperiores est. Ab ut ducimus iste non libero et aut consequatur. Incidunt aut ratione et voluptatem et debitis ut.
Quasi ut unde voluptatum itaque. Sed exercitationem quidem ea aliquam. Illo et deserunt molestiae beatae iste. Neque maiores provident repellendus non quidem suscipit.
Sit in eum quia. Non aut et nesciunt cum. Ipsam aut saepe quidem modi est. Eaque animi et corporis ad vel aut. Fugiat quasi laborum eum quibusdam voluptatem. Ut et cumque cum.