Moving to Private Equity. Here's some advice from seasoned investment professionals to help you find the right fit


What to think about when you're considering a move to Private Equity

Which fund

Droxford Partners

Many of the candidates we speak to are interested in moving into Private Equity.  In previous articles we have shared the range of reasons why as well as who suits the industry.  But once you’ve set your heart on the buyside, with so many funds out there differing in elements such as size, strategy, sector etc, how do you decide which one is for you?  And with the carry model such that it is, it’s important to get it right as you could be tied in for many years so you don’t want to get it wrong.  Here we speak to members of our network from the Private Equity community to share their advice.

Investment Manager, Mid-Market PE Fund: “People rush to get into Private Equity.  There are clearly financial benefits, and it is known as being more of the elite side of the financial sector and that’s one of the goals people have.  The carry model is one of the main reasons on the financial benefits side that people are attracted to but the reality of that means that it’s a long-term game.  It certainly makes you think about whether it’s something you really want to do for the next 10 years. 

The main thing I drill into people who ask me my advice is to meet and speak to as many different people as possible and choose the one that best suits you.  It’s a competitive industry so you’ll end up applying to many different funds.  Don’t choose the biggest brand or the one that you think is most prestigious without doing your diligence as the day-to-day and team dynamics might not be what you want.  What a lot of people tend to forget is that interviews are a two-way process and to use those opportunities to ask questions and figure out if ultimately it is a place you’d like to work.” 

Partner, Venture Capital Fund: “There are different investor funds that suit different personalities.  Some are very “eat what you kill” and ego driven environments, others are more mission driven, some are more financial driven.  I think you need to match what you are and who you are with the personality of where you are going.  If you are driven by being top dog and being rewarded on your own performance then you need to find a fund that supports that structure and personality.

If you want to work more as part of a team, go somewhere that is more collaborative in its decision making and rewards on overall performance of the investment portfolio rather than the investments you make.  In ventures you are always learning as you are at the leading edge of innovation and you’ve got to know your market place.  It helps to care about what you are investing in and have a genuine desire to know about the market”

Partner, Mid-Market Private Equity Firm: “Understand that you will need to decide whether to specialise in a sector or be a generalist.  If you specialise - where and why?  If you are keen to be more of a generalist, be careful as the market is moving more towards specialisms.

Know that it is important to find a part of the market that genuinely interests you.  As you become more senior, so you will start to originate more.  You will be more successful engaging with management teams and originating deals in a sector that you understand and have a passion for.

Recognise that culture is so important.  Take time to really understand the culture of the different firms that you are considering and which one would suit you best.

Ask yourself, what sort of investor do you want to be?  Venture, growth, buyout, turnaround?  How do you think about creating value and making a return?  From buying cheaply / fixing up / bit of growth / multiple arb?  Or from overpaying for a great platform and management team operating in a market with significant tailwinds and pulling multiple growth levers.  Both are perfectly valid investment strategies but require a very different mindset.

Finally, beware the JAMMBOG - Just Another Middle Market Buy Out Group.  What differentiates the PE firm you are thinking of joining and why?  Is there a sustainable advantage, a reason for that Group to continue to survive and thrive?”