PE Fund-of-funds......exit ops?

23cal's picture
Rank: Chimp | 9

Given the state of the economy, like many other recent MBA grads I find myself considering alternate career paths. I currently have an offer at a PE Fund-of-funds. The position involves investing in different GPs across the PE industry along with co-investments in portfolio companies. My main question/concern is: what kind of long-term career prospects can I expect and what are the exit ops? Would I be better off doing something else (e.g.: Corp Strategy division of a F100)?

My main goal is to get into the direct PE industry, though I would like to keep my options open and possibly go into Hedge Funds or traditional IM. In terms of my background: management consulting and BB investment banking. Went to top-tier b-school (H/S/W).

In short, I feel like I have a solid enough background/foundation to reach my goals, I just picked a really bad time to graduate. I just want to make sure that the choices I make now will not "de-rail" my career path.

Comments (104)

Oct 8, 2009

congrats on the offer- are you '09? I can sympathize- it was (is?) an absolutely terrible time to graduate.

I think the exit ops of a PE FoF are probably pretty good if you want to work at a public pension fund or university endowment. These are really great jobs but hard to get (e.g. the University of Chicago investments office has a total staff of like 15). Another option would be a corporate pension fund like Boeing or GM or DuPont. Senior officers are very marketable and tend to resurface at the large AM firms as SVPs.

Corporate strategy in a F100 would obviously be great- but I don't know if they're taking too many junior (i.e. recent MBA) employees right now. If you're interested in IM and HF down the road, a job in treasury would be cool, especially a company like Pepsi or McDonalds that does a lot of foreign exchange hedging and advanced capital allocation work across international operations.

Working directly in PE is always tough to break into, and it's a notoriously snobby industry- but I would think most normal people wouldn't look down on you for not getting a PE job right of b-school in this market. It might make sense to network with some alums in a year or two when the dust settles and the credit markets get back to some degree of normalcy.

Oct 8, 2009

Appreciate the insight. Yes, I am a '09 grad.

Actually in my situation I seem to get a lot of headhunter calls about Corp Strat at a F100 as the bulk of my work experience is in management consulting. However, I've been apprehensive about pursuing such options for two reasons:

1) I've already done strategy-type work. I am not sure doing more of it adds to my resume.

2) I've done some research and I don't see many people going from F100 Corp Strat to alternative investments. Granted my research is no where near comprehensive and there could be self-selection reasons as to there being little movement from one field to the other.

Am I correct in assuming that a PE Fund-of-Funds would be a better route to take or should I actively be pursuing internal corp strat positions?

Oct 11, 2009

From someone currently in PE, I wouldn't say that a FofFs gig is necessarily 'looked down upon', but it doesn't really carry a lot of weight to people on the direct side. For instance, if you ever sat through the process that most FofF's go through with the prospective GP's, it's pretty comical. I experienced this process during my firm's last fund raising and it was a joke. That's no disrespect to anyone currently at a FofFs - I actually think it's an awfully cush job. Just trying to give you real feedback. Of course, given the current economic times, you have to do what you have to do... I think you'd be much better off going the BD route, or even the corporate strategy route. The work would be much more relevant to the buy-side than what fund-of-funds peeps do. Good luck.

Oct 11, 2009

unless there is significant co-investment or secondary platform (find out exactly what the investment mandate is, what %FoF, %Co-Inv, %Sec), its not very relevant to the direct side.

Freeze those knees, my chickadees!

Oct 11, 2009

Out of curiosity, what kind of Corporate Strategy positions are available out of business school? What would compensation/progression/responsibility look like?

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Oct 8, 2009

The two main positions I was recently called for were similiar in nature to post-MBA jobs at any top-tier strategy firm (at least according to the headhunters). One was at a very large technology company doing general strat work and the the other was doing international expansion for a "top global financial institution" (headhunter's words, not mine).

Not sure about pay, but would guess it to be on-par with consulting firm salaries. Not sure about progression either, but would assume it to be similiar to most post-MBA corporate positions in that they expect you to stay there long-term and have the practice of heavily promoting from within.

Oct 11, 2009

This forum should cover what you're looking for.

http://www.ibankingoasis.com/node/8019#comment-67894

Oct 11, 2009

GateBreaker - great! Thank you for the link! It was useful.

Just for the records: do you find fof more like Asset Management or investment consulting? I read the guide on eFinancialCareers.com and couldn't decide where fof is placed (I narrowed the choice to AM and IC).

Thank you in advance.

Oct 11, 2009

could be either --- many groups do consulting work as well.

related side note: many fofs try to hold onto their talent. it's tough to find good people in that space, because many want to work for the funds directly.

Oct 11, 2009

Riemann - thank you for answer. It helps!

So now can I ask for the last piece of advice... What are the transferable skills I can learn in such a private equity funds of funds (which works mainly on primaries, but also secondaries, mezzanine and co-invest.)?

Oct 11, 2009

fofs, in general, are considered quantitative positions. pe fofs are unique in that they are not overly complicated when it comes to quantitative analysis because they rely so much on qualitative information.

the skill set is somewhat unique in that you will spend a lot of time evaluating prospective managers. this requires that you dig into a lot of historical data to dissect the returns, etc. this type of due diligence work is somewhat transferable to other classes, but a lot of it is very pe specific.

many larger groups also have aggressive co-investment and direct investment initiatives. these skills are very similar to what you would use if/when you ever work for the fund manager/gp.

fof jobs are pretty fun. you will get to travel the globe and meet with and speak with the brightest people in the biz. you will also have the advantage of observing the industry from an interesting vantage point.

Oct 11, 2009

Thank you Riemann!

Oct 11, 2009

I've been interning in FOF at some boutique and ive seen not one person move from thier seat...im trying to end this internship and get into any small investment bakning boutique so i could atleast have something under mybelt. this really was boring!!!

Oct 11, 2009

are the managers coming to you?

at a minimum the due diligence phase normally includes several face-to-face meetings with the gps, meetings with the ceo of some of the portfolio companies, possible meetings with prior lps, etc.

plus during fundraising you will have to reach out to your existing investors...and new prospects...

...not sure why no one is traveling at your firm.

Oct 11, 2009

Sorry about that...i should've clarified. I'm on the operations side so i am literally in hedge fund accounting where we monitor the managers, funds, cf, etc. BORINGGGGGGGGg

Oct 11, 2009

very very very tough for a FoF guy to switch over the PE. thats just my honest opinion.

Oct 11, 2009

What if I take this experience to go back to get my MBA?

Oct 11, 2009
toconn04:

What if I take this experience to go back to get my MBA?

its difficult to get a post-mba position at a pe firm without doing pe pre-mba.

Oct 11, 2009

If you can guarantee that you will spending significant amounts of time doing co-invests and secondaries it is good, otherwise jumping into direct investing might be tricky.

Oct 11, 2009

A 740 on your GMAT puts you in perfect place for top-5 schools, but at this point the concern would be your WE. By your own admission what you do right now isn't challenging or stimulating, and as everyone else says, FoF work isn't that illustrious either.

Oct 11, 2009

Just a few thoughts and things you should consider:

How big is the FoF? Less than $5b AUM? Private equity fund raising is still difficult now, and FoF capital raising is no different. See if you can find out whether the FoF still has dry powder or if its in the fund raising process.

Do they do secondaries or co-investing? Primary fund investing has lost some of its popularity and secondary investing is what's "hot" right now.

Oct 11, 2009

The FoF as a whole has $26b AUM, with Private Capital (the division my offer is from) having $11-12B AUM and are not currently in the fund raising process. I would also gain exposure to secondaries and co-investments.

Oct 11, 2009

A Posse Ad Esses - the program I am currently in is actually highly regarded as an entry level training program out of undergrad. Many people use this program to springboard their careers in management or go back to get their MBA. I personally do not think it is worth it unless I could get into a top 5 program with viable pre-MBA WE. I also have always been more geared towards PE/HF, which I thought this FoF position might help me gain some exposure to that world.

I am starting to think that notion was incorrect.

Oct 11, 2009

Take it hands down it will be better than anemic experience you are getting, which in itself doesn't seem stellar relative to pe fof

Oct 11, 2009

Is this FoF part of a trading floor or not part of a larger institution?
Has there been any mobility between FoF and trading floors?

Oct 11, 2009

I have a similar situation except I am in my penultimate year of study at a target school. I got an offer to go to a PE FoF (at one of the bigest AM companies) that has roughly half of AUM in direct co-investments( I wold gain LBO modeling experience on live deals)...What are the chances of getting an analyst position after school for either a PE fund or perhaps an Ibank given the fund's structure??

To specify, I just received an exploding offer for the fund but have an ibank superday lined up for next week, so I need some help on the decision process from people that know the lay of the land.

Oct 11, 2009

I actually had a follow up question to my initial question. What would FoF experience allow me to do post-MBA?

If PE is out of the question, would the qualitative side of the role allow for more sales oriented positions?

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Oct 11, 2009

I wouldn't say PE is out of the question, will it be harder? Yes. While the ideal route is to do an analyst stint at IB before PE, with networking and some solid direct investing it is possible.

As far as exit opportunities: Alternative asset manager, Family offices, and investment consulting places (Cambridge Associates) are cushy gigs with solid pay and good hours.

I would suggest taking the offer, however if you won't be happy until you make it to PE, maybe you should roll the dice with the IB superday...do you have any connections there?

Oct 11, 2009

Don't listen to any of these idiots.

First, Cambridge Associates is such a chop shop and the place is filled with light-weights (they pay dog shit too). Do not become an investment consultant, because the institutional investors below make the investment decisions and consultants go along with it (typically because by mandate they need a consultant).

If I were you, I would go work for a University Endowment with a good PE program (think Harvard, Yale, Standford, Princeton, MIT); Pension Fund (think MassPRIM, CalPERS, CalSTRS); Family Office (think Ford Foundation). These are the real PE investors with capital to invest.

A FoF is not worth your time. They have shitty access, returns, and do not allow younger people to do anything meaningful; plus some of them do not even have capital to invest, because people do not invest in FoFs anymore. If you were to work at one of the above investors, you would have access, solid returns, and would have a stake in the investment decision.

Try to get a job at one of these institutional investors, work for two years so as to learn the lay of the land in PE, make contacts with the best PE shops globally, and go to a top 5 business school (your GMAT will get you in; what about your GPA?). From there you have a decent shot at getting into PE on the principal investing side.

Good luck.

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Oct 11, 2009

All that you mentioned as well as pensions, family offices, and endowments as they are all big allocators and need manager selection research types. You could also probably swing PWM or product manager type roles at AM, but I doubt that's what you want to do. If indeed you decide FOF is not for you then that's a whole different animal....

Oct 11, 2009

Thanks. Yeah, I have no interest in PWM because it's too sales-oriented, and I don't want to work with individual investors. Product specialist/manager roles at firms such as PIMCO, BlackRock, JP Morgan Private Banking seem intriguing though.

Oct 11, 2009

I would definitely not go the FoF route unless you want to stay there long-term. The majority of people I've seen exit the space have either gone to a different FoF, investor relations at a GP or private capital advisory (fundraising, secondaries) at an investment bank. I have never seen the move to corp dev.

Oct 11, 2009

I do not work in Corp. Dev. or FoF, but previously worked at a lower MM Growth Equity shop and once considered moving into FoF. I have conducted some transactions with FoFs committing to a co-invest, but the work conducted by the FoF was not very intense and is not consistent with traditional DD performed by Growth Equity or Buyout shops.

I know this is an obvious question, but why not try to transition to Corp. Dev. now? Overall, I don't think accepting this offer would preclude you from a future Corp. Dev. position, but it could make things more difficult.

Best of luck!

Oct 11, 2009

agreed with the above poster on trying to transition directly to corp dev. Might be easier and more straight forward. That being said, it can be done... I've seen it happen (and mostly with people like you who have the background prior to FoF).

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Oct 11, 2009

stay away from FoF for sure

Oct 11, 2009

Actually, I will amend my statement: I have seen one person make the FoF--> corp dev switch. Not sure if it differs by geography but he was in Asia.

Still though if you're in a direct investing role now I would think it'd be much easier to reach your goal from there.

Oct 11, 2009
Oct 11, 2009

This cheers me up a little bit; thanks. any other opinions?

Oct 11, 2009

I have a friend who started off at a FoF and is now at a value fund. He's a brilliant guy. You can most certainly make the jump if you demonstrate passion and interest in wherever you want to wind up.

Oct 11, 2009
Value Sleuth:

I have a friend who started off at a FoF and is now at a value fund. He's a brilliant guy. You can most certainly make the jump if you demonstrate passion and interest in wherever you want to wind up.

You are never doomed. I agree with Value Sleuth. Work your tail off in the FOF role and network network network. That is the only way you'll really get to where you want to go if you're in the FoF position.

What is the position at the FoF entail?

Oct 11, 2009

Can you shed some light on the FoF job?

Oct 11, 2009

Research on hedge funds. I meet with hedge fund managers and talk to them. Then I keep up with them every month and do some market research to figure out which strategies worked that month. Very little quantitative or valuation work. Most of it is to talk to different funds and be aware of how different asset classes and strategies are performing each month. Every quarter we reallocate assets to different strategies.

Oct 11, 2009
GoodElevators:

Research on hedge funds. I meet with hedge fund managers and talk to them. Then I keep up with them every month and do some market research to figure out which strategies worked that month. Very little quantitative or valuation work. Most of it is to talk to different funds and be aware of how different asset classes and strategies are performing each month. Every quarter we reallocate assets to different strategies.

It sounds like you're getting paid to network.

"The way to make money is to buy when blood is running in the streets."

-John D. Rockefeller

Oct 11, 2009
GoodElevators:

Research on hedge funds. I meet with hedge fund managers and talk to them. Then I keep up with them every month and do some market research to figure out which strategies worked that month. Very little quantitative or valuation work. Most of it is to talk to different funds and be aware of how different asset classes and strategies are performing each month. Every quarter we reallocate assets to different strategies.

It sounds like you're getting paid to network.

"The way to make money is to buy when blood is running in the streets."

-John D. Rockefeller

Oct 11, 2009

we have hired from FoF. You get exposure to lots of managers, get to see what works and what doesn't, as well as gain a decent perspective on how to invest because a lot of these guys might spend time explain their trades to you. It's not a dead end.

Oct 11, 2009

I'm at a top MBA program for finance (Wharton, Booth, Columbia) and we have several students from fof backgrounds successfully recruiting at HF and top IM shops

Oct 11, 2009

Does it mean I will have to go to business school before I can change tracks?

Oct 11, 2009

I think people under-rate HF FOF jobs. I'm a couple years out of school and at one, and making as much as friends at top HFs. The money won't grow as fast as you get more senior, but you can still make $1mm/year in your 30s with a very chill lifestyle. Given that your job is to hear the best ideas of all the best HF managers on a daily basis, you can "learn" a fair amount too for what that's worth.

But maybe I'm biased, and I've also heard of some other FOFs that pay terribly. And to answer your original question, the transition out of FOF to HF would be difficult unless you take an entry-level job at HF (and a pay cut).

    • 1
Oct 11, 2009
CashCow:

I think people under-rate HF FOF jobs. I'm a couple years out of school and at one, and making as much as friends at top HFs. The money won't grow as fast as you get more senior, but you can still make $1mm/year in your 30s with a very chill lifestyle. Given that your job is to hear the best ideas of all the best HF managers on a daily basis, you can "learn" a fair amount too for what that's worth.

But maybe I'm biased, and I've also heard of some other FOFs that pay terribly. And to answer your original question, the transition out of FOF to HF would be difficult unless you take an entry-level job at HF (and a pay cut).

What does your day to day entail? I got a recent offer from a credit HFoF for the summer.

The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.

Oct 11, 2009

What about the lack of valuation experience?

Oct 11, 2009

CI is the most transferable of FoF roles but, without knowing more about the specific team and how they work, would guess you will *very* heavily leverage the lead sponsor's diligence, based on friends I have in CI gigs.

I do think it would be fairly limiting in exit opps.

Oct 11, 2009

Hugh - thanks for your reply. I would send you a PM with details of the firm, but I apparently don't have enough banana points. At any rate, its a small PE FoF team within one of the largest BBs (i.e. GS/MS etc).

However, if I take their assertion at face value (that the diligence is done in a great deal of depth), would the fact that I'd be applying for other jobs from a FoF be a limitation? I guess what I'm asking is; are the preconceived notions about FoF roles a big drawback?

Also - to anyone else too - other than other FoF roles, what kind of exit opps would be open to a FoF analyst who has done 50% coinvestment work (with an ostensibly deep level of due diligence)?

Thanks

Oct 11, 2009

Think I know which group you mean - I'll shoot you a PM to discuss

Oct 11, 2009

I work with a lot of FoFs and LPs in my line of work. Even with lots of co-investments, I would say most common routes would be to other FoFs, other LPs (including the Canadians), maybe placement agents, potentially SWFs... Maybe just maybe banking (that's probably a stretch though).

Oct 11, 2009

The biggest drawback about FoF (at least from what I've read) is that the analysis tends to be too general. It makes sense, since you're looking at returns on a fund level, and you care less about each individual investment when you're looking at 80 funds and invest in 20.

Of course, there's the issue with not enough due diligence and modeling work, but if you work on a lot of co-investment deals, that problem could be mitigated.

Oct 11, 2009

I swear if you gave the search function a chance it will change your life. This question has been asked before many times.

"Don't quit. Suffer now and live the rest of your life as a Champion" - Muhammad Ali

Oct 11, 2009

there is no such respect for our beloved search function..

haha I had the same question a few months ago. Ran a search found some useful stuff but it was a little outdated. Someone might have some useful info.

This is what I found..life style is the normal buy-side hours 50-60(rare) hours a week. Not sure about exit opps or pay. I saw a lot of numbers thrown around, just don't expect anything like IB/PE pay.

Oct 12, 2009

I think you'll definitely be able to get into some MM funds, but megafunds will be tough. skills in PE FOF and M&A/PE are two different things

Oct 12, 2009

Depends on what your responsibitlies are at the FoF. If it solely manager due diligence, than exit opps to direct PE is going to be more difficult (not impossible though). However, if you are doing co-investments, then the skills you learn are going to be very similar to whatr you would learn at direct PE shop. Needless to say, your exit opss will be better.

Oct 12, 2009

Agree with above, as long as you are on the investment side you have better exit ops, the IR type position will be limited

Oct 11, 2009

right...so the grp i will be with is core but we also do co-investments/VCs and distressed so i hope this will give me a fair amount of exposure...on a side note, how would this compare to something like working for a investment firm like Tamasek...?

"I worship individuals for their highest possibilities as individuals and I loathe humanity for its failure to live up to these possibilities."

Oct 12, 2009

Yes. I recieved an offer from a PE FoF and a few of the younger interviewers told me throughout the process that they either already had plans or were planning on moving to PE firms in the near future. FoF is a great way to make contacts to segway into one of the top tier funds once you get some solid experience.

Oct 12, 2009

The transferability of your skills depends on whether the FoF will do co-invests or not. Also it depends on what your role is.

I haven't had much experience with them, honestly. I am just going off of what I have seen in previous posts and my best guesses given the skills utilized at a FoF.

Oct 12, 2009

Thanks biznazzman, gives me hope.

@ West Coast - there will be 20% co-investments. My role is of an Analyst/Associate.

Oct 12, 2009

Solid, it should be pretty good exit opps wise, especially if you deal significantly with the heavy hitters or occupy a particular niche. It probably won't place as well as a BB, but you have a shot.

Like biznazz said, you'll be making contacts; in that regard, the move can be kind of random. I have never heard of headhunters going to FoF, so there won't be the well defined pipeline you see at banks.

Oct 11, 2009

tough to make the transition, but probably not impossible. definitely not the norm

Oct 12, 2009

Privave equity placement may be an easier exit opp. I think that going directly to a fund would be tough from a FoF.

Oct 12, 2009

So as always, best bet would be to leverage contacts. It won't be the well defined pipeline, however, there is hope! If you have known someone who has made this transition and can state their stories, that would be great too!

Thanks for your thoughts!

Oct 12, 2009

So would getting this PE FoF experience and then going to B-school help the transition to a traditional PE fund much easier and better?

Thanks!

Oct 12, 2009

bump!

Oct 12, 2009

To get into PE... def BB IB over BB FoF.

Oct 12, 2009

Thanks. So even if it is a PE FoF. My concern is that I might be able to network a with a lot of PE managers if I am in a PE FoF which wouldn't be there in BB IB. Also, what if I go to a boutique IB? (think Jefferies/Sagent etc.)

Thanks man.

Oct 12, 2009

first off, clean up your grammar. you write as if you're in elementary school. honestly, focus on getting the offer. i would say IB will beat FoF any day of the week for PE recruiting

Oct 12, 2009

Thanks for the response and sorry about the typos.

Oct 12, 2009

Another supporter for IB > PE FoF. The work for PE FoFs isn't very quantitative. It's primarily due diligence (qualitative) work on GPs - none of the financial modeling work necessary to move to buyouts.

The thing you will learn in a PE FoF role is what are desirable traits of a GP that LPs/institutional investors look for, and I think you'll learn a lot about areas of interest for investment (re: hot industries/companies). But without the LBO/modeling skills, it's tough to transition to a direct investing role... unless you are joining a PE FoF that also does co-investments (in which case you could get the modeling exp).

Jan 14, 2018

Array

Oct 11, 2009

co-investment and direct investment programs will give you a similar experience...

most larger fof groups have some sort of direct investment program...

Jan 14, 2018

other fund of funds. i was considering working for a fund of hedge funds (~$1B AUM), but i decided against it and will stick with IBD. I got the feeling that taking the funds of funds job would be somewhat of a career limiting move.

Jan 14, 2018

same here for BAAM

Jan 14, 2018
phosho:

same here for BAAM

Did you intern at BAAM, or juat get the offer?

Jan 14, 2018

just the offer.. ppl seemed cool though

Jan 14, 2018

other FOFs and PWM

Jan 14, 2018
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Jan 14, 2018
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Jan 14, 2018