Q&A: Mega Fund Associate - Asia Pacific Edition

This is the only hard thing about breaking into private equity in Asia Pacific and Europe for that matter. There is no strict recruiting timeline for PE jobs here as the 2 and out system does not exist. Similarly they don't interview people after 6 months of banking, they interview people who have 2-4 years experience. This results in 3 key things: 1. Each position is more competitive as everyone on the street will likely be going for it and more over you are competing against bankers not just in the region but else where 2. You will not have an opportunity to interview at every PE shop like in the US. i.e. if you are a first year IB analyst and KKR just hired someone that year - it is unlikely they will look to hire for the next 2-3 years so unless you want to wait that long for KKR you will unlikely ever interview with them 3. The interview process, from talking to my US counter parts, is much harder as they expect you to know a lot more considering you would have done about 2-4 years IB experience by the time you start recruiting

For your background funds here do recruit from MBA, there are quite a few PE associates here who have MBA, but there is no strict MBA recruiting. You will have to find which funds are hiring and go for those roles. It is unlikely the funds will reach out to you, you would have to reach to headhunters in the region and find the lay of the land.

As mentioned above PE is PE everywhere in the world so your contacts are the same as you would in the US, e.g. bankers, business owners, buyside professionals. I would say its much easier to network here since all the major cities are much closer and everything is more concentrated. I would also say contacts are much funner here as well as e.g. through a deal I met a billionaire family (won't say name since industry is too small) - I am now friends with the grandson who is around my age who invites me on his yacht parties.

Asia is quite a large market, some headhunters are better at certain markets than others. You can PM which specific markets you are looking at and I can guide you

The start-up scene in Asia is quite large given the opportunities to capitalize on the high population sizes, young demographics and propensity to spend. I'm not that familiar with who the major players are at the very early stage seed investing, but for larger series you start to see the the major players of Seqoia, Softbank, Tencent etc. In fact some of these raising are so large they are being led by MFs e.g. Go-Jek raise was led by KKR / Warburg and TPG / Carlyle led what was basically a $1.9bn series A of Baidu's financial services start up.

Unlike the US, in Asia Pacific at the MF the same teams that evaluate more mature businesses will also evaluate these growth / VC type investments as well.

VC scene is very active. China has the second largest number of unicorn, according to a report by Deloitte, right behind the US, which has about 140. The third country is India, which has about 10.

In relation to your 1st /2nd question: In APAC, some banks run a generalist model while others have the traditional coverage / product teams. I would say as long as you are in a generalist model or coverage team in a top bank then you will get a look. If you are not in a top bank then you have to be more specific on the coverage team, each market has its nuance you will have to do some research / ask around e.g. Credit Suisse in SEA is considered the best and UBS in Australia. But never underestimate the power of prestige GS is still GS even though quite frankly in some markets they are no longer really top 3. You do not want to be in a product group here in Asia such as ECM or DCM as even during an IPO process or bond issue the coverage team in a will do most of the work and whatever little modelling there is while the ECM / DCM teams are really just preparing generic or niche ECM / DCM materials (believe this quite similar around the world except for maybe MS M&A in NY). In some banks the ECM / DCM team is just VP upwards and they staff juniors out of the coverage team e.g. UBS. LevFin at certain banks is ok as they handle all the debt modelling rather than ask the coverage team to do it e.g. GS. Just thinking now I don't think I know anyone who did pure ECM or DCM that is in PE right now - could be wrong.

In relation to your 3rd question: Yes depending on market conditions and quite frankly luck - a lot of bankers here in Asia Pacific lack the M&A deal experience relative to more developed markets due to the fact of where the market is at this point in time in Asia (businesses generally don't need M&A grow yet unlike in more developed markets hence they just raise money whether through equity or debt to pursue organic growth. Additionally a lot of business are family owned and therefore look to IPO to maximise cashing out). However this does not necessarily mean you can't get M&A experience it just means a smaller % of bankers relative to the same % in more developed markets get that M&A experience e.g. my experience in 2 years was 1 IPO, 7 M&A. But quite frankly a lot of it is due to luck / timing - yes there are some things you can control e.g. be good at your job so people want to staff you, play politics right to follow the right MD / VP who are bringing 80% of the deals in your team but most factors are out of your control e.g. the coverage team I was in prior to me joining had a dip in market activity and therefore there wasn't much deal flow but fortuitously in the 2 years I was there the market just boomed. Similarly because the market dipped and there wasn't much deal flow the main associate in my team organised a rotation to NY the year before I joined and left half way through my first year. Consequently I was required to step up in terms of the type of work I was doing much faster than other analysts which while hard in terms of hours was very good from a learning perspective but I would classify this as pure luck. Similarly the majority of my M&A deals were buyside, of which, many were in auctions and yet I won every single one - While yes your MD should be smart enough that if he is backing a buyside horse that he should have clear reason why this buyer rather than others will win because it is much easier and less risky to just provide financing trees to all potential buyers rather than conflict yourself out through M&A but I still consider this out of my control and thus luck.

However as mentioned above, when PE shops hire they look at analysts globally so their talent pool is not strictly tied to Asia Pacific. There are many associates here who started their career in NY or London and moved back, just thinking out loud this is probably why they look to these markets for hiring as in general terms their M&A experience should be more developed after a set number of years.

If you are in ECM I would suggest you try to internally rotate as soon as possible to a coverage team. If you are in DCM I would suggest you try to rotate into LevFin or do LevFin work (some banks have the same team doing both) or a coverage team.

In response to Question 4: Yes, there a lot of smaller funds in HK, I would say in general terms it is easier but not to the extent you would expect, unless they are a really bad fund in which case you shouldn't want to join them in the first place. The reason for this is as mentioned there isn't a standard recruiting timetable in Asia Pacific, hence if no MF funds are hiring and only these $500mm - $1bn funds are hiring, guess what your competition is still going to the be entire street including those who may end up going to MF. This is because people just interview for practice knowing they wouldn't accept the offer (I know this because many of my friends, including myself, did this). What this does is that it causes the people interviewing to have a quality benchmark that is probably higher than what you would see for a similar fund in the US for example. But in general terms I would say it is easier as competition is still less than for MF roles.

1. In general 3 people - 1 of each of the levels you mentioned. In general this means that associates in Asia Pacific probably get more responsibility than say in the US where they usually run fuller teams. Has its pros and cons, e.g. as a 3rd year associate in Asia you will probably still have to model while in the US you will likely have a first year associate under you and vice versa i.e. 1st year associates in Asia get much more exposure than the 1st years in the US

2. I think the easiest way to to answer this question is for MFs the minimum equity check size for the fund itself has to be ~US$150m. Depending on the deal structure, multiple etc that widely vary the TEV and EBITDA

3. This really depends how your businesses are doing. If everything is going well then its really just attending board meetings and updating investor update packs which should be like 20% of your time. Thus far I have been lucky so that has been my ratio but I have friends in other funds where that ratio drastically increases. But some people really like the portfolio stuff but TBH my point of view is that it is really BS when PE professionals say that their fund or they themselves get really operationally involved. I agree you get more operational exposure through understanding the strategy, board representation and having operational guys come in to give advice on cost savings or process improvement but as a PE professional this is all still at a very high level. Unless you are actually working in the company or executing the strategy how involved can you really get, and if your fund is making any PE professional with no background or experience go in as say a head of strategy then I would really question the value add of that fund. But this is all relative as my fund obviously deals with companies that are much larger scale and therefore should be able to afford people who know what they are doing.

4. MD - sources deals and only gets involved in very key aspects. Don't expect any help on executing form an MD. VP the guy in charge of executing, but at this stage probably has a family to get home to so will help where he can during relatively normal working hours. Likely give you a framekwork on what the key diligence items etc will be and how to go about it. Associate does everything that is required to execute the deal which includes the DD, liasing with advisers etc.

5. Yes you do, you can travel as much or as little as you want. If you tell your VP hey I am too busy I don't think its worth my time to travel to Shanghai for that management meeting he will likely be ok with it. Alternatively if you love travelling you can go travelling every other week if you really wanted to. I will travel at least 3 times for boarding meetings in a month plus add a couple more for management meetings. If you are deep in DD for a business not in your home location expect to travel more but again doesn't mean you necessarily have to. E.g. one associates in my team absolutely hates travelling so they basically only travel for board meetings and some how even when they are deep in DD for a company not in his home location they can manage just through using phone and email.

6. I am generally a curious person so the thing I like the most is I think PE is just a good platform to learn, meet highly successful people and see new industries, businesses etc. This might be more so in Asia Pacific where PE teams are not structure by industry verticals. I have been invited to events / activities which ultaimtely come from the fact I am working in PE and sometimes I sit back and think wow this is actually pretty cool and something I probably wouldn't have been able to do if not for my time in PE. e.g. Being invited to the VVIP of UFC when they were looking for an external investor a couple years back. Plus I think if you are not really sure what you want to do, PE is the best job to be in because 1. you are highly recruitable post your experience whether it be another job or to go to business school 2. On a relative basis you should be getting paid decently during this time of uncertainty and 3. For the first 3-4 years at least, you will be learning a lot and building a network that should help you form a conclusion on what you want to do long term.

Sorry I will not reveal my location - market is too small.

Sourcing is like anywhere in the world a combination of auction processes and relationships. But thinking rationally, if the business is family owned and they are looking to sell a majority why wouldn't you go through an auction?

I think at this rate, it was it quite clear China is going to take over US as a super power unless the US really starts taking charge, which to Donald Trump's credit, he is really trying to start intervening. In general the tariff wars between China and US are more isolated to commodity type trade / manufacturing, in terms of deal flow I would say most funds are generally averse to both those industries as these businesses generally compete on price with little to no differentiation. So from my perspective I don't think it will impact the deal flow that I see materially but I could be wrong.

Could you elaborate on why SOE PE is bad? I have friends who did it who thought it was OK.

Assuming your current shop is reputable, my advice is to get an interview with the best PE shop you can get as once you get an interview it is a level playing field, and whether you get the job or not is purely based on your performance at that point in time. i.e. don't limit yourself to just lower MM PE. However depending on how long you spend at your current and previous shop, people might question why you are constantly moving and therefore your judgement skills.

In terms of pay, upward potential, network - I would say all 3 are correlated to size of the fund. Pay is driven by AUM and management fees, more AUM means more mouths to feed and therefore progression (to a certain point) is quite linear, assuming strong performance and larger funds interact with larger companies which generally attract better talent as they can afford to pay their employees thereby building a better network. This statement is based on complete generalities obviously there are exceptions.

I see people give advice on this forum about joining smaller funds with head room, more responsibilities, etc etc. But such a move is purely based on an assessment of risk / reward. I.e. carry is not guaranteed, if you join a smaller fund you are likely getting paid less and if you don't convert the fast promotion then you become significantly worse off with no brand name and less pay during the period. However each person's risk appetite is different so only you can judge that based on your personal situation. Also people underestimate how much life is easier when you don't have to worry about all the admin / back office tasks that get completely taken care of for you in larger funds. Some people may not value that but I definitely do haha!

I think getting into IB post MBA shouldn't be too difficult, bearing in mind the difficulty increases the "lesser" the school.

However post MBA you should be going into IB at an associate level which makes it more difficult to transition to PE, not saying its impossible but you may have to take hair cut in rank when you switch over.

I don't know what you current background is but if you have work experience in IB / finance already I would consider just going straight to PE post MBA.

There are a lot of variables that go into this. Really depends on the firm, culture and your performance / standing in the firm.

I know of people that have wanted to move and got it but equally I know people who wanted the move and couldn't get it.