PE Secondaries pay and exit opportunities

Hi,
I am thinking about joining a secondary fund team in an investment bank after 2 years of M&A. I need to tell them my expected salary and bonus. Can you tell me about the average salary level and the split between base and bonus? Also important what are exit options?

Thank you very much

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Comments (48)

May 25, 2011 - 5:10am

I'm in the same situtation as well. Have worked for a year in a mid-market PE fund doing mostly direct deals and a bit of FoF, and now thinking of joining a larger - but secondary - fund. Pay should be a bit around £50k before bonus (I'm based in London btw). Working hours should be great (even compared to normal PE) but I'm hesitating a bit because of the exit opportunities later on although. Anyone got any ideas? Is a switch back to primary investing possible?

May 25, 2011 - 10:18am

I've seen comp for pre-MBA roles at secondary funds around $80-$100 base with 25 - 40% bonus figures. I was deep interviewing with a few secondary firms, here is what i gathered - It's a pretty good platform to exit into business school, so if thats your next logical step then that will work out great. If your end goal is to get into direct after secondary, it will be tougher. You will naturally build great relationships with top PE/VC and Hedgefunds, however, they will discount your skillset against other direct-background kids going for the job. If you want to do direct, then do direct now. Not to say its impossible to go from secondary to direct, because people do, but its not a golden path. If you really want to get into F500 or operational, then secondary can get you there, but you most likely need to go to BSchool first.

May 26, 2011 - 6:22am

Thanks for the post. I'm a third year M&A analyst at a top boutique (lazard/bx m&a/evercore) and just signed up with a global fund (20bn+ aum) that does 50% primarily, 30% secondary and 20% co-investments. I specifically asked for being more involved in secondary and co-inv given my background and my goal to continue building on my corp fin skills. The points being discussed here went through me many times and end of the day its the decent pay (200k all in for 1st year), decent hour (40-70hr a week), great team (normal, nice and extremely smart ppl, 4 HBS grads) and the fact that I will learn a set of new things from banking that made me sign this over a direct PE firm, which I also had a few options to join. The next step is to pick up the school bag for an MBA 2 years later, then try to re-access what I want to do.

Its not the most traditional path, but it's not an atypical path as banking analysts do joint fof/secondaries. Just need to balance other things. I had an offer from megafund for which I need to put in an ave. of 90 hrs a week and pays 300k a year; it's banking 2.0. Was it hard to walk away from it? it certainly was. But if I had to continue to be burned out, answer emails at 2am, look like shit in the morning after 4 hrs of sleep, cancel my appointments with the ladies for another 2-3 years, id rather not do it.

My advise to you is, if you want to join this gig, make sure it's a solid fof, otherwise you are better off with a smaller PE/VC.

hope this helps.

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Apr 9, 2021 - 11:07am

thanks for your insights! i'm in the same boat the moment (2-3 years in M&A at BB) and evaluating options. would be keen to hear more about your experience at the secondaries though - have you stayed? what sort of skillsets did you learn? do you regret or wish you did things differently (try GP first etc)?

Jun 5, 2014 - 5:46pm

dondraper85:

not to sound dumb, but can we get a quick explanation of the difference between secondary and primary etc? thanks


Know this is an old thread but with a recent bump I'll answer this:

Primary investing is committing capital to new funds. So if GP XYZ is raising fund II, a FoF doing primaries would make a new commitment to this.

Secondaries is buying/selling existing LP stakes. So if that GP XYZ has been deploying fund I for a few years, and Pension ABC has a commitment to it but, say, wants to change their alternative asset allocation, they can sell that LP stake to the FoF that's investing in secondaries. You now have that stake and assume all of the capital commitments and receive the distributions. Useful for vintage year diversification, j-curve mitigation, portfolio re-allocation, etc.

Jun 5, 2014 - 5:47pm

Private Equity Secondaries / Co-investments to Direct Private Equity (Originally Posted: 06/29/2014)

Hello All,

First time poster, long time reader. I was wondering if anyone knows how difficult it is to move into a small direct PE shop coming from a background of PE Secondaries and Co-investments? Would it make sense to look into a small IB for a few years before trying to make the move or is the Secondaries and Co-investments background enough?

Any thoughts would be appreciated!

Jun 5, 2014 - 5:48pm

If you have done secondaries and co-investments, I sure hope that you have built a strong network of contacts and FRIENDS (at a number of funds that you would like to work with) who will vouch for you as a person since this transition is not one that is usually made (most people come from IB some from consulting). If not, start building the network ASAP. Get coffees/beers with the guys on the other side, make some friends. Show that you are smart and techincal and get it. Ask tough questions especially on the co-investments and see how it goes. That's what I would say. Small shops easier to get into with a personal network, so work it hard. Good Luck

I used to do Asia-Pacific PE (kind of like FoF). Now I do something else but happy to try and answer questions on that stuff.
Jun 5, 2014 - 5:50pm

I think it's fairly difficult. As you know, you're cultivating very different skills as a secondaries fund. On the other hand, if you can sell your co-investments and the work you've done there, I think that can make you look interesting.

I don't recommend going to the sell-side if you don't plan on going to BB IB unless you have people who can vouch for you. It might be too difficult to jump back to the buy-side from a no name IB.

--Death, lighter than a feather; duty, heavier than a mountain
Most Helpful
Jun 19, 2018 - 2:21pm

Secondary funds can range in strategies from direct secondaries (investing directly in companies) to PE secondaries (purchasing LP positions in PE or VC funds). Generally, while secondaries and co-investments are, from a 30,000 foot view, looking at existing companies and judging their investment merits, there are a few key differences than a direct PE shop. For example, sourcing will look very different, as secondaries will likely be from brokers, and co-investments may be from the primary commitment team of a larger organization. While you may have direct access to management, you will likely not be building an operating model or leading the due diligence. There will be no opportunities to work on improving the company operationally (whether you want to or not, that's a different story).

These are a few of the differences that could factor into a decision of a small PE shop that likely won't have many resources spent on training the new hire.

--Death, lighter than a feather; duty, heavier than a mountain
  • 2
Jun 5, 2014 - 5:51pm

I've known a couple friends who moved from FoFs/Secondaries/Co-Invest firm to direct PE - it's certainly very doable, especially if you've done some co-invest deals. As the person above pointed out, a role at one of these places has the added benefit that you have direct access to a large number of direct PE shops, so it's the perfect way/excuse to network with them. And if you end up working on a co-invest with them, they also have direct experience working with you. So if you leverage that, over time, am fairly certain you can position yourself well for when one of these shops wants to add to their team. One caveat - the two guys who left to direct PE, moved back (on their own accord) to FoFs/Co-Invest roles, so becareful what you wish for and know what you actually want !

Jun 5, 2014 - 5:52pm

Great to see this topic as I'm in a similar situation now. I received an offer from a very successful Secondary PE fund (which recently raised 5bn+ fund). I have about 1 year direct PE experience and plan now to stay with this Secondary fund at least 2-4 years. I also think of an MBA after this secondary experience but this is not mandatory. I am thus trying to asses my chances to transit on principal investing afterwards.

Would appreciate your thoughts on this!

Apr 9, 2021 - 11:10am

how does the experience in secondaries help with getting into MBA? a lot of comments scattered across WSO say that the stint is helpful but not sure why? wouldve thought it'd be more reputable to go from GP direct buyouts to MBA actually..

Jun 5, 2014 - 5:53pm

Career Options after PE Secondaries (Originally Posted: 02/19/2014)

Hi! To those of you who were or are currently in PE secondaries -

I've searched for this topic on this site, and a lot of posts only explain what PE secondaries is and how it's not as good a path to PE/HF compared to direct PE. What I'm really looking for is a list of common career options that fit people with PE secondaries experience.

I'm not necessarily pursuing direct PE or HF careers because I don't like the focus on company diligence. Rather, I'm more interested being out of the weeds and seeing the big picture. Are there any career paths, within the investment space, that will suit my interest and be reachable with a PE secondaries experience?

I'm sure I'm not the first and only one to ponder over this question, so it would be great to hear thoughts from people who have gone through this path. Thanks so much in advance!

Jun 5, 2014 - 5:55pm

Thanks Hugh Myron. I did consider FoF investing, but from an industry perspective, that area seems to be of diminishing future growth potential, especially for third-party managers due to disintermediation. From a skill set perspective, I do hope to find a career that will more fully leverage the PE secondaries skill set, which is not just manager diligence, but also includes valuation/modeling, transaction negotiation and execution, overall PE industry knowledge, etc. Any other ideas?

Jun 5, 2014 - 5:56pm

Reviving the old thread:

I am hearing a lot of pension funds (think evergreen big AuM players) have dedicated secondaries (LP interests, co-invests and secondary direct) allocations. So that's not much of a step "after" the PE secondaries, more like a development within. It would be interesting to hear some thoughts on whether a career in a pension fund secondaries team defers significantly from a PE Secondaries FoF. Is the salary better or worse in the pension funds? Is it a bonus-driven culture? Does the carry in the PE fund compensate for the small bonus pool?

The above is also true for family offices, although their AuMs are much smaller and the teams usually are not that separated. As a general rule they are not as technical as PE funds or even dedicated pension teams, but I am sure there are sophisticated players in this space as well. I can also imagine that the these are even more bonus-driven teams, but I am happy to be proven wrong. Who said that when family offices start buying, one should start selling?

Also, more and more PE LP Secondary FoFs are focusing on co-investments and some even have side pockets for secondary directs. You mentioned you are not looking to DD companies, but I think this adds a bit diversity and gives you at least some direct investment skills. I am not arguing that the move from PE Secondary FoF to PE Secondary direct is easy, but why not doing both. Diversity in the job is a good thing, and direct investment skills are useful in many career paths.

Jun 5, 2014 - 6:01pm

Compensation in PE-secondaries (Originally Posted: 12/17/2014)

Hi everyone

I am currently working in an investment bank in Frankfurt but have just been offered an analyst at a private equity secondary fund in Switzerland.

How much should I expect my base salary and bonus to be?

May 1, 2018 - 7:39am

Hi,

I will have an final round interview with a large private equity secondaries firm in Europe. Can someone who has worked in PE secondaries tell me about working hours? What can I expect? Don't wanna hang around in the office nearly as much as I did in IB.

Very much appreciated.

May 5, 2018 - 1:09pm
pipe:

Hi,

I will have an final round interview with a large private equity secondaries firm in Europe. Can someone who has worked in PE secondaries tell me about working hours? What can I expect? Don't wanna hang around in the office nearly as much as I did in IB.

Very much appreciated.

Apr 9, 2021 - 11:13am

has anyone here interviewed with / have experience working with / know of people working at lexington in their secondaries team? keen to hear first hand feedback about the type of work they do, how intellectually stimulating it is, culture, and just overall take on it. im coming from a BB M&A team and considering interviewing there but not sure what to expect

Apr 10, 2021 - 10:25am

FWIW I work in the secondaries space, more on the single asset/concentrated side, and comp is more or less the same as on directs side of our company. There is more pressure to deploy continuously in secondaries though and if I average out the hours I probably work 20-25% more. So I guess it's lower on a per hour basis 

Apr 10, 2021 - 7:18pm

I dont know if this can be generalized across the street. I'd say most of my secondaries peers work much less than directs because you are ultimately a passive investor in secondaries with limited port co management post investment. I've worked at two middle market 50/50 lp / gp secondary shops and say my median hours are around 50-55 / week. Obviously it will spike during heavy deal flow periods like Q1 of this year, though this is a weird period for any pe job.

Apr 16, 2021 - 1:27am

This is my first gig doing secondaries so that may be true, I just have one data point. I clock around 70 hours most weeks. I work in a specialized asset class within secondaries (think real estate, distressed, infra) so our underwriting is quite detailed as compared to how I understand generalist PE buyout secondaries work. Usually buying one fund or even a collection of assets and doing direct style DD

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Apr 10, 2021 - 12:31pm
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