I've done some basic research and it's clear that there doesn't seem to exist the same type of pipeline you see in the US (target->BB->PE->HBS->PE). Although hiring out of IB after 2 years is still the most common, they seem much more open to hiring at all levels, including post MBA out of IB, consulting, B4, etc.
Anyone have any insight into this, either with the small PE groups or the pension funds..?
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Hi AllStateRap, no, I never sleep and so I can respond to any lonely threads (like this one) at all hours of the night. Impressive, I know ;-)
If we're lucky, maybe I can guilt some users to help you out: NoUsernameForYou Sat1116 Ciparoo
I hope those threads give you a bit more insight.
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Generally speaking, buyside positions in Canada do not pay as well as an equivalent position in banking so they tend not to be as competitive. This is driven by 2 factors. First, Canadian PE funds (Onex aside) tend to by on the small size (and there aren't that many) so PE comp being directly related to fund size (or at least AUM / head), they generally don't match banking comp. And second, pension funds aren't competitive on comp, even though they generally play in mega fund space, they pay less than banking and don't pay carry. Pension funds have also expanded greatly over the last decade or so, but haven't for the most part been able to attract quality experienced PE professionals so they reverted to hiring the next best thing, bankers. I have worked extensively alongside most Canadian pension funds and I can say that for the most part, the level of talent is not up to par with your average PE fund.
I thought PSP Investments had carry. At the rate they're growing (supposed to overtake CDPQ in AUM as of 2020 if I remember correctly), if they really do have carry, wouldn't it have an impact on the industry compensation as a whole?
It seems like most people in IB exit to corporate positions rather than PE (based on the people I've met).
I can guarantee you that PSP DOES NOT pay carry. All pension funds structure their incentive compensation as a formula based on a multiplier of your base that depend on your group and the overall fund performance and there's always a cap (see p. 66 of PSP's annual report, they explain the bonus system well). Also note that the compensation of every senior leader at every pension fund is public. At PSP, the CEO made $3.2mm last year while the head of private equity made $1.8mm. Not terrible, but completely out of whack with the amount of money they manage ($135bn and $15.9bn). Comp level are very similar across pension funds and I don't see it improving any time soon, the attitude is that if you want to get paid carry, raise your own fund. Both PSP and CPP are growing like crazy and there's no plan that I know of to change to comp structure.
Note however that as they expended internationally, pension funds realized that they weren't able to recruit in more competitive markets with their Canadian comp structure so they pay much more outside of Canada
Fact: Pension Funds are big, relatively safe places to work, but it's like working in debt, everything is worried about the downside, not losing money is almost more important than making money (inflation adjusted of course).
With regards to competition, imagine many of the top ranked Analyst 3s competing with each other trying to get the top spots...
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Yeah but if you're doing direct PE investing, you're going to be looking for the same risk-adjusted returns as if you were coinvesting. Everyone might be worried about the downside in the portfolio as a whole, but they're still relying on PE to hit certain return thresholds as part of their asset allocation.
Granted, their return threshold might be a bit lower because they don't have the same time horizon as a typical fund, but we're likely talking about only a few percentage points less.
I would be interested to hear anybody's view on getting into PE in the U.S. from Canada. I know anecdotally of quite a few people who have ended up with pretty good placements across the U.S., but noticed almost all of them worked at one of the BBs or the EBs in Toronto.
Are U.S. opportunities available to people working at the Canadian Big 5 or is recruiting mostly focused on the BBs/EBs?
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