I keep seeing all these kids comment about "oh FoF is my back up" or "Oh he made x amount of money which is pretty good for FoF" and other comments implying that FoF is somehow inferior to Direct PE, PC, Infra, RE or whatever.
First of all: Don't use that term. Specify if you mean primaries (funds that invest in brand new funds managed by other GPs) or do you mean secondaries (buying LP stakes typically at a discount and constructing a portfolio). FoF tells me nothing.
Not sure where/how co-invests fall into this but there reputable shops that specialize in this. Harbourvest and Kayne Anderson come to mind but granted I do not know those firms super well.
Second of all: THESE INVESTMENTS/CAREER PATHS ARE NOT INHERENTLY INFERIOR TO ANY OTHER ASSET CLASS/TRANSACTIONSQ WITHIN THE PRIVATE MARKETS! They are types of transactions.
For example: Tons of great firms out there that specialize in secondaries; Ardian, Lexington, Harbourvest, Partners Group, Ashebridge (owned by MS), Alpinvest (owned by Carlyle) and even Goldman has a top tier secondaries business! These firms all have and/or are currently raising secondary funds between $3-$10 billion that have top quartile performance. They all also happen to pay well and we would all be lucky to work at one of these firms.
At the end of the day your comp is based on YOUR performance and your fund's performance/size. The role you play in the lifecycle of a successful PE fund ultimately determines your comp. Would you rather be working at a top quartile secondary fund with $10 bil AUM or a buyout fund with bottom quartile performance managing under a billion?? Who do you think gets paid more?? (adjusting for your level/rank)
The myth that primaries/secondaries/whatever are somehow inferior is perpetuated on this forum and needs to stop. No one in the real world talks like this or has this attitude. If you displayed that attitude to someone who actually works in PE...good luck.
End rant
I’m at a FoF (whoops, sorry) and 100% agree on that second point. It’s honestly not what I wanted to do originally, but now that I’m here I recognize that it’s an amazing path and I’m so lucky to be in my seat. I definitely wouldn’t brush off this career path; it’s just as much a front office investing finance role as PE/HF etc.
The first point though... I’ve never ever heard anyone have a problem with the FoF name. If you say FoF, it’s implied imo that it’s a primary, whereas you can then specify secondary if necessary. Not to mention a lot of funds do both
While on the topic of FoF (oops again), can anyone currently working in the space provide some insight on the recruiting for them (e.g. head hunter vs direct, what experience they like, etc.)?
I’m sorry that you work at a FoF (whoops sorry)
AccountingMajor switched to FoF.
😂
HAHA yes it is. sorry man.
"Inferior" is the wrong way to look at any career path - compliance, valuations, and other "unsexy" roles aren't inferior either, just different, but the nature of direct investing tends to appeal to people, particularly on this forum, who want to maximize compensation. It's a fact that with fewer fees between you and the returns, you can distribute more to your people and therefore average compensation at a like-size direct investing fund with comparable returns will tend to be higher than average compensation at an allocator or liquidity provider (comparing funds of different performance and sizes is disingenuous).
Your point on "fund of funds" nomenclature is a weird one... sure, there are more nuanced subsets but that's no different from getting upset at the term "private equity" when really I do "growth-oriented middle market services buyouts" and someone else does "large-cap distressed manufacturing recaps"
This is exactly the type of back office energy that lands you at a FoF
I made the transition from a GP (mid-market PE) to an LP role and I appreciate the skillset, return potential that secondaries offer. What I have learned so far is that the nature of the underwriting differs:
I would be interested to hear your thoughts on the long term business model for funds that invest in primary funds? From a pension fund point of view (at least based on our strategy) these types of funds tend to be a) more expensive and b) reduce our closeness to the market. However, understand there are other LPs that see investing via FoF (primary or secondary) structure gives them access to managers they wouldn't otherwise get.
???
FoF means investing INTO other funds (or "primaries" if you want some bullshit name for it).
Entirely not the same business as secondaries (buying out LP positions =/= investing into a fund), gp stakes (buying into a GP, which draws income from multiple funds, business =/= investing into a fund) or co-investments (investing directly alongside a fund =/= investing into a fund).
No idea why you're so butthurt from the usage of a term that literally describes a firm's investment mandate. If you think there's no difference in how interesting looking at dynamic businesses vs looking at a fund is I'd love to have what you're smoking.
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