Dicking around with a CapitalIQ type service and decided to browse through some of the PE listings. There are a ton of random little boutique type places that:
1. Have very, very limited websites
2. List investments (which seem legit enough) but don't have any references to "investors" or "raising a fund" or anything like that
3. Don't seem to conform to typical PE recruiting (stocked full of post-MBA folks). More like an assortment of people out of UG or random masters programs
Here's a representative example, this one a mezzanine fund:
Are these actual PE firms, if not what are they?
There are tons of little family shops that may or may not have funds. A lot of the time it's friends and family or just a group of guys who have money and like to put deals together. You don't need a giant website, a fund, or a bunch of constantly updated news articles on the web in order to put deals together.
Let me try and clear some things up:
1) Capital Point Partners did raise two funds ( Fund I was $100mm, Fund II looks to be only $28mm but that was after first close... may have been reopened if performance was decent).
2) Capital Point is a mezz fund and given the size of the companies it invests in/lends to, it probably is only putting $3-7mm to work per transaction. Mezz funds back PE sponsors in acquisitions or provide junior capital when a company cannot obtain a bank loan for the full needed amount.
3) If a fund has no references to investors or raising a fund, then it may be a fundless sponsor. This means that the partners (incl. family and friends) of the firm supplied the capital to make acquisitions or investments. Some PE groups choose to remain this way if they are investing in the lower MM b/c they don't need outside capital and therefore, do not have to report to or deal with LPs.
4) Small funds don't have a recruiting schedule or season. They fill as needed based on departures or new funds raised.
Groups that have limited websites are not necessarily sketchy. TPG, one of the largest (if not the largest) PE firms had a shit site for a long time. It's funds or subsidiaries (i.e. TPG Credit) provide much more color. There are plenty of HFs or family offices that also have very limited sites.
However, if the site is archaic and doesn't seem updated, it probably reflects some on the quality of the firm (but note, you need to do your homework b/c I always felt Leonard Green's website was a joke, but the shop is obviously well-respected and performs).
Nailed it. I was way too lazy to type that much
Wow peinvestor, that was a fantastic post. Thanks a ton.
No prob. I know this site tends to look down on the MM, particularly the lower MM funds since the pay and "prestige" isn't there, but from what I can gather, these are still solid gigs. Working in the MM in the MW, I see plenty of MM funds in Chicago, STL, Minneapolis, Milwaukee, etc. and the associates all seem content/happy.
There is far more autonomy as you move down in fund size and you will get more exposure to various responsibilities and roles within PE shops (i.e. traditional analysis, portfolio company monitoring, business development/deal sourcing, capital raising, etc.).
So, if you don't mind sacrificing pay (still going to make more than most people in the world) for lifestyle and variety, then I'd consider lower MM.
Another benefit of lower MM shops is the increase in responsibility. Compared to the mega funds, associates at lower MM funds are not spreadsheet monkeys and play a role in all aspects of the fund. Also, the structure is different, whereas a typical mega fund may be a two or three year program, smaller MM funds have the ability to move up through the firm and receive a larger portion of carry in the fund.
Aren't HFs not allowed to have extensive websites under the premise that it is "advertising" (which they are not allowed to do)?
Is it the same case with PE?
You guys are both spot-on. I work for a buyout shop that goes after companies in the lower middle market in the Midwest. Even as an analyst here, I am involved with every aspect of the deal. In addition to the typical modeling, analysis, company monitoring, etc. I am meeting with management teams of the companies, working with the lenders, meeting with bankers and sourcing deals, doing dinners with our investors, and just generally, functioning as if it was my company as well. I was in a unique situation where I was the first employee and we didn't own any companies when I was hired. The whole process has been like starting my own business, where I'm doing everything a typical PE analyst does, but also everything else that goes with starting a business from scratch.
I highly recommend doing it if you have the ability. The experience you gain is invaluable compared to that of my friends working for larger shops. It's also a ton of fun
This post is spot-on. People on this board tend to underappreciate the quality of many MM and lower-MM jobs. Just because a firm doesn't raise formal funds from outside investors or recruit through a brand-name HH doesn't mean that there are no opportunities or that they are "not a real PE shop".
Yeah, I meant no offense to anyone who works at a place like this. It's just tough to tell what i'm looking at when there's so little info available. Seem like pretty sweet gigs
I would caveat this post by pointing out that not all MF Associates are spreadsheet monkeys. There are several large funds where Associates get pretty involved in their portfolio companies and in the deal process. Definitely true that this is the exception to the rule though.
Don't think anyone took offense. You have a right to be skeptical to a degree. Just remember that you can't always judge a book by its cover (i.e. LGP). Also, quite a few family offices that invest and call themselves PE, when in fact they probably use a more multi-strategy approach. Very few have websites.
Like anything, your experience is going to vary widely between shops. More than anything else, this explains why most IB-types tend to steer towards the larger funds: even if the Associate experience is crap, they will still have plenty of opportunities to move into something different. If you move to a small fund and have a bad experience, it can be limiting. That said, there's no reason to be skeptical of a firm just because it doesn't manage a $5B+ fund.
i work at a middle market in chicago and love it - exposure to all aspects of fund management, investment process, etc. the experience 1 year out of school is invaluable at this point
Alright, new question: What about Business Development Companies/BDCs? Is the sort of work/compensation/lifestyle comparable to more traditional private equity (holding firm size constant)? There's very little discussion of them in the WSO archives.
Thank you
There are quite a few threads about BDCs. It really just depends on the group. Quite a large range in terms of deal quality, comp, culture.
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