How to approach LMM PE recruiting?
So I'm a 1st year analyst at a borderline MM/EB firm. Have been very active on the PE recruiting front, including reaching out to HH proactively, etc. Didn't get invites for the super early MF/UMM party that happened 2 months ago, but was also focusing towards the MM when talking with headhunters. Told them specifically I wanted firms with ($3-10Bn AUM, ~$1-5Bn last fund raised). Soon after on-process kicked off I had two interviews set up for two ~$2bn firms that I had known about earlier and spoken to associates well in advance. However, I was out of the process for both firms after just the first round... one firm didn't give any explanation, the other one said that they had just as good 2nd year candidates with more deal experience. Obviously felt deflated and considered waiting a year to continue the PE process that I'd been frankly preparing for since senior year of college. However, this week a couple more opportunities/interviews came in, which went pretty well. Have been given indications that I would move on to the next rounds. However, these firms have been on the smaller end (800M AUM/500M last fund (partner track), 3.3Bn AUM/800M last fund, 1.5Bn/900M last fund) and puts them pretty much in the LMM space. While they are great opportunities, and their previous funds have done tremendously well (20%+ IRR), I'm just wondering if I should focus my efforts more upstream.
Just see some downsides I see are MBA name recognition (HBS/Stanford would be harder to get), moving upstream later would be even more difficult, and compensation would probably be lower. Know it's very possible I don't get offers from any of the 3, but proactively looking for advice because if something does come up it will be a very quick turnaround and I wanted to get advice beforehand moving into next week.
Hey Slinking-, the following topics might be helpful:
Hope that helps.
Also interested
Bump! Interested as well.
Are you asking for advice on the interview process with LMM firms? Or advice on continuing to recruit for LMM firms?
As far as interview processes go, I'd prepare as you would for any PE interview. You might find some firms are less technical; however, occasionally you might find some that really care about technicals as you'll be doing everything as a junior with less training than at a bigger fund. The biggest thing will be culture fit and having a good answer around why LMM over MM/UMM/MF and specifically why that fund.
In my opinion, the big benefit with LMM is that you'll get a lot of exposure to the end to end deal process (you might be borderline quarterbacking deals from the beginning) and if the fund is decent, you should get a good amount of deals reps early on.
For reference, I'm been at a LMM fund for ~5 years and have done 7 deals, both platforms and add-ons, have led nearly all of them, have done a few exits as well, sourced, worked closely with our portcos, done fundraising, etc. Sure the quantum of the capital we're deploying is way less than at a bigger fund, but the motions are similar and I enjoy the variety.
With that being said, you've identified some of the downsides to LMM. If you're early in your career, having a brand name fund gives you more options as you can more easily exit to a smaller fund. It would be tougher to move upstream. If you have aspirations to work at a big fund, I'd continue to grind away on the recruiting front. For business school, if you're H/S or bust then you probably need to go to a bigger fund, the competition is just so high from all the other MF kids who get two and outed. If you're ok with the general MBA business schools">M7, than any job is PE is selective enough to give you a fighting chance at the MBA business schools">M7 in my opinion.
At the end of the day, it comes down to what you want. I had a more unique path, so I never really had the option to do the traditional route into a UMM type of fund. I see those firms as having some definite benefits and the optionality is why most people from banking shoot for as high as they can go in terms of fund size, brand name, and prestige.
As someone who has spent a few years in PE now, I can say that the benefit to a good LMM firm is that there's a lot of upside opportunity, these are places that you could realistically have a shot and moving up a few levels, perhaps not to partners, but at least go Associate to VP in a few years time. Maybe even to partner, who knows. They also usually give a slightly better quality of life, no guarantees on this, but you have better odds on having some balance if that's something you're into.
Hope this helps.
What is comp like?
It really varies, on the lowest end, so maybe like sub $100-200M fund, I'd imagine in the mid to high 100k range all-in. Probably no carry, but maybe if it's a small enough fund.
In the ~500M AUM range, maybe you get into the low $200k range.
$1B+ I think you can start expecting the more market comp of $250k or so.
My comment on LMM PE salaries, is that everyone reads around here that a PE associate should be making $300K+ etc etc. I think that's really only true from the MF and UMM funds. The truth is that the salaries aren't crazy high for the LMM
If you joined a $100M fund, they only have $2M in mgmt fees each year. If you have a team of 4/5 people, especially with people a little more senior, VPs/principals etc, those guys aren't going to take less than a few hundred thousand if that. So salaries + rent + overhead etc adds up fast. This type of fund might only pay like ~$150k.
Just my anecdotal evidence though.
Can you elaborate on what you meant by "quarterbacking deals from the beginning"?
Do you truly mean that you were, within six months of being hired, the go-to person on the deal team managing accounting DD vendors, insurance / benefits broker, spearheading lender outreach, keeping tabs on all the keys docs (credit agreement, SPA, operating agreement, employment agreements, etc.) - in addition to running point on core business diligence?
If so, hats off to you. I wouldn't have known my asshole from the ground at that point in my PE career - much less run point on anything.
MF here. Echoing Harvey specters points above. Though i was told that i'd be running processes during my MF process, that isn't really the case honestly. Though I sort of knew that'd be the case thanks to WSO, it was still pretty numbing to see the heavy execution work and the almost lack of ownership which comes with not being able to lead processes. Granted, these processes are large and generally transformational to the platform / industry we are working on so I understand the senior's lack of "trust" with associates but it's something to consider. You're dealing with generally sophisticated management teams (ie pubco C-suite teams / excellent operators) so you need to understand that the actual involvement in deals can be more valuable in LMM and I wish sometimes i had that involvement but I do believe the way we get to pick some of the sharpest minds in our target industries is pretty cool and informative
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