Things To Consider Before Joining a Small PE Shop?

Kanzu's picture
Rank: Senior Chimp | banana points 19

Good day to you all.

Trying to get some ideas from fellow users who have gone through this process before:

I've recently received an offer to join a smaller size PE shop. The fund manages c.$3-4bn AUM, and is specialized in a specific industry. I happen to like this industry and am currently an analyst in the same industry group at a BB.

Team (<10 investment professionals) has a good reputation in terms of culture and track record. Compensation is on par with other PE shops.

I will be the only junior level guy in the group once I join (any concerns here other than potential higher work load?)

If anyone can share some insights into things that need to be considered before taking the offer, it would be much appreciated (especially aspects which I have not touched on above).

Thank you.

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Comments (8)

Most Helpful
Mar 7, 2019

<10 guys managing $3-4 billion (i.e. fund sizes potentially $1 billion+) is actually pretty impressive. So while this may be a smaller PE firm in headcount, not so much on the AUM side.

I wouldn't necessarily be that concerned about higher workload (yet) - obviously less heads means more work per head, but it may also be the case that the mid/senior guys do a lot of their own work as well (if you're the only junior guy and haven't signed yet, then they kinda have to be doing a lot of their grunt work currently, right?)

Some good things to consider:

career trajectory (partner track or no? what's next step? when would you know about promotion potential?)

how long have others been at the firm? if it's low turnover, that's typically a good sign. also might be worth trying to linkedin stalk former employees - if they were all there for <2 years before quitting, maybe a red flag, but can go the other way too, if even the former employees had been there for a while.

    • 3
Mar 11, 2019

Thank you sir, very helpful.

Mar 12, 2019

Also - this might be obvious for some people but not others. AUM is not the same as total deployed capital. I say this because I can't honestly think of any funds that large with <10 people. Are you sure that's AUM or capital deployed over the life of the firm?

"Rage, rage against the dying of the light."

Mar 10, 2019

Try to figure out the following points:

1.Compensation progression (carry/bonus/salary)
2.Promotion structure/career progression (what do you need to do, what is expected, etc)
3.Backgrounds of the team?
4.Sourcing capabilities?
5.Decision making / Authority matrix? - are people generally able to run with things and discuss together? or is it a one man show?

All of this is important at a small shop since things tend be less structured

    • 1
Mar 11, 2019

Thank you, this is very helpful.

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Mar 12, 2019

These are great points. A few more specific ones I'd mention:

  1. where have associates that have decided to leave gone?
  2. at what level does it appear you take board seats (some funds this small will sponsor you for seats at asso. level
  3. source of capital (obvious), but fund-less structure, institutional, family office, etc...
  4. latest fund raise - look for an press release to see if the fund was over or under subscribed for their latest raise, how long ago it was, are they / do they plan on raising again soon?
  5. kinda same as OP's 5, but will you participate as a member of the investment committee (can be a lot less frustrating when you at least have a say in one of your deals getting killed after 100's of hours of hard work, trust me)

edit: changed "IP" to "press release"

"Rage, rage against the dying of the light."

    • 1
Mar 11, 2019

Thank you - point #2 is particularly interesting but regrettably didn't ask about this during the process - guess I'll see after joining them.

For point #1 - I'm assuming it's a good sign that the people who left ended up joining mega funds?

Mar 14, 2019