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Private Equity Jobs

What has Private Equity Employment Done this Year?

August 5, 2013

With the Labor Department recently reporting that the economy added 162K seasonally adjusted jobs, one might wonder: how many jobs has the private equity industry added so far this year, and how does the private equity industry compare to other industries?

Here are the numbers.  Through the first six months of 2013, the private equity industry has added a little over a thousand jobs on an annualized basis, representing about a 2 percent annual growth rate.

The 2 percent annualized growth figure is closely in line with the historical average.  Overall, the industry is still operating about 600 jobs shy of the all-time high in August 2008 of a little less than 36K.

Comparatively, the private equity industry is doing relatively well when weighed against the hedge fund and investment banking industries.  Consider this data: the first figure shows the year-over-year growth in employment by industry by quarter.  When looking at the employment figures in this way, the private equity industry is about average, besting the investment banking industry by around 0.2 percent, but lagging the hedge fund industry by around 1 percent.

The second chart shows how employment has changed since the beginning of the “official” NBER economic recovery in 2009.  Interestingly, when looking at the employment figures from this angle, the private equity industry appears most stable, being the only one of these three sectors to now be above where it stood in 2009.  Overall, since 2009, the private equity industry is up about 2 percent, with the hedge fund industry down a little over 4 percent, and the investment banking industry down about 3 percent.

What’s the take away from this analysis?  Here are three points.

First, the private equity industry has the most stable employment base of the three industries.  This is likely unsurprising given the increased regulatory pressure being placed on the investment banking industry over the past four years (which has in turn decreased employment in the industry) and the more volatile bursts and busts of the more open hedge fund industry.

Second, all three of these financial sectors are growing faster than the economy at large, with the 2 percent year-over-year growth rates in the private equity and investment banking industries and the 3 percent year-over-year growth rate in the hedge fund industry besting the 1.4 percent year-over-year growth rate for the economy as a whole.

Third, the hedge fund and private equity industries are likely to surpass their all-time employment highs this year, with the investment banking industry still a few years behind.

Overall, employment in the private equity industry continues to grow, with total employment this year likely to surpass the all-time sector high of about 36K in August of 2008.  The private equity industry continues to be a more stable base than the hedge fund or investment banking sectors as well.

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Breaking Into Private Equity

August 16, 2012

Public History on Private Equity

According to the most recent Global Alternatives Survey by Towers Watson, private equity managers currently control 22 percent of the alternative investments market.  This puts them in a strong position, behind the big leader, real estate, at 35 percent, but ahead of hedge funds, which control 21 percent of the market.

While most private equity firms shared concerns at the beginning of 2012, conditions are markedly better 7 months in. Recently, leading PE consultant Bain & Company released their Global Private Equity Report 2012 which explores and outlines the current state of the PE market. While 2011 presented some adverse market conditions 2012 has, lately, shown some very positive ones.

Of course, the market is still in transition.  Before the 2008 financial crisis, PE firms benefited from highly liquid leveraged loan markets, which broadened intra-firm strategy options and allowed for optimized returns.  All of this came to a halt after the crisis with little sign that those levels would be seen again.  As such credit is still hard to come by relative to 2007, with some lenders withdrawing from the PE market entirely.  On the other end, the initial public offering market is stunted by its private equity dependence, which discourages fund managers from getting involved entirely.  The fact that an IPO like Facebook’s can flop has caused a general air of caution in the market. Still, as early as 2010, the value and volume of European buyouts started to increase and initial public offering markets are still cautiously taking on larger assets with proven sales and revenue.

More dangerous is that private equity investments take place in a few privileged firms, which in some cases have their own distinct hiring rings you may or may not be a part of. Sixty-eight percent of all capital invested in private equity goes to the top ten private equity managers.  More importantly, the Towers Watson survey points out that most of this money is held by North American managers rather than those in other parts of the world.

Slim Pickings

What we see then is that, even though there’s slow growth in private equity, it’s consumed by a few big firms which means even fewer job opportunities.  Why?   Part of synergy in big business requires cutting back redundant staffing, so increased unemployment happens not only as small companies shrink, but also as big companies grow.  As such, senior analysts become junior analysts, and eventually those fired are looking for new jobs – usually another step down the ladder.

Although it is slow right now breaking into private equity is possible.  As always, show your strengths and your industry specializations, and give the employer something unique that puts you in the best position to analyze that industry.  Good luck!

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How is the Economy Affecting the Private Equity Manager’s Life?

August 6, 2012

Private equity professionals typically spend their day evaluating various businesses and investment strategies, such as judging potential gains and losses to certain growth companies, assessing the possibility of leveraged buyouts, and gauging upside and downside risks associated with potential venture capital investments.

Private equity managers do a lot of the same things that hedge fund and investment banking professionals do, with the differences being that private equity firms tend to be more focused on executing transactions on behalf of their fund rather than on behalf of their clients. They also tend to be more focused on corporate managerial issues, such as streamlining management processes and corporate cost cutting, as opposed to the rapid fire trading of hedge funds.  The generally longer time horizon and use of their own money in less liquid investments can end up making the job of a private equity manager more or less lucrative than competing financial careers.  It all depends on how good you are.

The Economy’s Affect On The Private Equity Manager

This background leads to the question: how is the economy affecting the life of the private equity manager?  Well, not surprisingly, private equity employment is highly procyclical with economic growth, with year over year growth rates up almost 5 percent before the onset of the financial crisis, after which employment dropped as much as 6.5 percent at its trough in the fall of 2009.  Since the bottom out of the employment decline, private equity firms slowly added to their payroll through the end of 2011, after which private equity employment has seen a slight decrease.

Private Equity Employment Prospect

So, why is private equity employment growing slower than the economy’s overall employment base, and, when will it pick up?  One reason behind the lagging performance of private equity employment is that investors are still jittery about prospects for economic growth, and as such, are demanding greater liquidity, which is something private equity firms are not know for (because of the way a number of private equity deals are structured, liquidity is generally not a feasible feature).  Another reason is that private equity returns during the financial crisis period underperformed some of their competitors, such as hedge funds.  So, although private equity investments generally outperformed hedge funds and most other asset classes in the period before the onset of the financial crisis, the large losses during the financial crisis is a factor that sticks in investors’ minds (i.e. loss aversion as opposed to return maximization).

When will private equity employment growth pick back up?  When investors have greater confidence in the strength of the economic recovery, employment in private equity firms will likely pick up at a faster rate than competing financial professions.  The real question for individuals interested in private equity employment is, then: when will investors become more confident in the economic recovery?

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Private Equity Deal Making Jumps Ahead

October 25, 2010

The big players in private equity are set to jump back into the market in 2011, reports Time magazine. Companies such as Blackstone Group, Silver Lake Partners LP, TPG Capital, and Bain Capital Partners are poised to boost their M&A and IPO activity to levels not seen since before the 2008 crash. One reason is […]

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The Wild West of Private Equity Jobs

October 11, 2010

Private equity investments are apparently flooding into emerging economies.  Even though the lack of reliable market information and the constant threat of political upheaval makes this corner of the PE sector especially dicey. The Emerging Markets Private Equity Association reports that private equity investment in emerging markets rocketed to $13 billion in the first half […]

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Private Equity Professionals Go Back to School

September 27, 2010

Five years ago, Harvard Business School launched its entrepreneurs-in-residence program to help students with advice on how to start new ventures. The program has expanded every year and now and includes 5 private equity and venture capital professionals for the 2010-2011 academic year. It’s a “win-win” experience for both students and industry insiders. The students, of […]

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UK Launches a Benchmark for Private Equity

September 13, 2010

Is private equity fundraising ready to spring back to life? The industry is keeping an eye on a new effort by UK-based private equity group BC Partners, who are attempting to raise $7.6 billion by the end of 2011. It apparently marks the largest fund-raising effort in nearly two years, according to an article in […]

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A Little Flash Can Land You That Private Equity Job

August 30, 2010

Dealbreaker recently highlighted what a little extra guts can do for your private equity job search. It seems an ambitious job-seeker named Jeffrey Chiang decided to take a page from personal ads and the acting world to give his resume that added kick. Chiang included a few “action” shots along with a close-up photo (known […]

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Best University for a Billion Dollar Private Equity Career

August 16, 2010

Private Equity tycoon David Bonderman went to Harvard. So did Apollo Management’s Leon Black and Hamilton James of Blackstone. It turns out that the ranks of Harvard alumni who are billionaires jumped to 62 this year, up from 54. More than any other American university, reports Forbes. One billionaire alum, speaking anonymously, claims the school’s […]

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Why an MBA May Help Your Private Equity Career

August 2, 2010

Entrepreneurs typically look down their noses at MBA grads, believing great business leaders are born and not made. Or at least forged in the crucible of actually starting a company. But today’s MBA programs are adapting and offering training that is much more suited to those who wish to build and grow businesses, including those […]

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