I have two possible paths to break into PE, what do you think?
Path 1: I can remain in the project finance group and lend money to PE firms at the portfolio company level.
Path 2: I can transfer to another department, which it lends money at the fund level (acting as a LP.)
Both jobs will allow me to get involved in the transaction from start to finish, and I have been working with PE people (via project finance) all the time in structuring the deal. Which path do you think I will get a better chance to get into PE in the future?
Path 2 sounds like you back-lever project finance deals for infrastructure funds, is that accurate?
In either case I think that Path 1 is a better bet. I'd rather be analyzing individual deals/new transactions than lending against existing assets or lending on a portfolio level (more like a fund-of-funds activity)
Kenny. Yes, you're right.
Idk if either path is really a good path for breaking into PE. Especially the buyout team. Idk. Maybe PE shops have a project finance division where your skill set will be applicable.
There are dedicated energy and infrastructure funds that recruit from project finance.
Interesting. Not saying there are or there aren't (idk), but can you post a link to such a firm with such personel?
I think the OP needs to lateral into banking or at least valuation if he wants to break into PE.
Here are two associates at ArcLight, a top-tier energy sponsor, who came from project finance:
http://www.arclightcapital.com/getdoc/92e7e1aa-35fe-4c82-9f35-2e796a862…
http://www.arclightcapital.com/getdoc/49abf055-bf0a-4989-9c9b-c3a87d5d3…
Looking at three energy sponsors I could think of off the top of my head, I found others with project finance experience though some came at a more senior level. At the associate level, almost 100% of those without project finance experience have energy, power, or nat-resources backgrounds, which as HerSerendipity mentioned often is either merged with or works closely with project finance depending on the bank. For example Barclays has a great energy franchise but to my knowledge does not have a dedicated project finance team (could be wrong here-don't know anyone in BarCap DCM), a friend of mine moved from there to an E&P development co in a strategy/corp fin role. Another friend of mine who was a project finance analyst at a French bank is moving to a MLP fund that also manages some PE capital.
Not sure what you mean by valuation but I really would never council someone to choose big 4 valuation or somewhere like Duff and Phelps over basically any front-office role at a bank.
blackstone has an infra division
As Kenny said, a lot of energy/infra funds have people with project finance experience. I would also say that some of banks don't have dedicated project finance groups (they're often lumped in with power/energy coverage or structured energy-type groups). I haven't seen many PE people come from banks with "pure" PF groups (RBC, UBOC, SocGen, etc.)
Off the top of my head: MS/GS/first reserve/carlyle infrastructure groups, arclight capital, energy investor funds, highstar capital, energy capital partners, etc. etc.
Valuation as in a group that does modeling. Idk if project finance does this. I'm at a BB and honestly have no idea what project finance even does- or if we even have such a team (we probably do, as there are a lot of roles within the bank I am not familiar with). I'm still not sold on the project finance to PE path based on two examples from the same firm. Both worked at the top power shops on the street. Chances are, the OP is not at GS/MS or BarCap's legacy Lehman Natural Resources group. These peope likely also summered in investment banking roles where they picked up some modeling. Of course there are exceptions to every rule (heck there are GS lev fin people at Carlyle- i.e. zero modeling experience, just there b/c of GS brand). However, most people are not exceptions, and if the OP was that exception, he probably would have the connections necessary not to have to post on WSO for help deciding between project finance paths.
If its PE that you want, try to lateral into IB. If you really have deal exposure and know the people on the teams, you can start by talking to the people within your firm.
I have two friends who work in infrastructure banking. The modeling/valuation models they use are different than other areas of banking. Almost all their work is with PE firms who specialize in the space and those firms use the same types of modeling and same contacts. Would say that is the best path to PE for sure.
Got it, my first reaction when I hear valuation is a valuation consulting group.
Project finance helps arrange the capital structure for green-field developments (often times E&P but also real estate/infrastructure etc) that need more complicated financing structures. The one dedicated project finance person I knew definitely modeled, which makes sense because the need to really understand the project and its cashflows in various scenarios in order to finance a new development is pretty obvious.
Those were the first two examples I found after looking at a few sponsors off the top of my head, I'm sure with some effort I could find more. I'm not sure we can realistically make any assumptions about where people interned, either. You are of course right about the significance of being at a top bank.
That all said, I do agree with you that it's probably not the "best" role to get into PE, but that wasn't the question. The question was which group should be picked.
Thank you very much all for responding. The information is very informative.
Few firms or the same firm? I answered the question. Try to lateral to IB for PE.
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