by Brian DeChesare Comments (21)

The Private Equity Career Path: The Complete Guide

Private Equity Career Path

When thinking about the private equity career path, our favorite analogy still applies: a fraternity house.

Yes, we previously compared the investment banking career path to a frat house, and private equity careers are similar in many ways.

But if investment banking is more like a “party/drinking fraternity,” private equity is more like a “business fraternity.”

The hierarchy is a bit flatter, despite seeming similar on the surface, and it’s a more intellectual environment that demands critical thinking and risk assessment in addition to sales skills.

You still have to complete certain rituals to advance, there are still levels, and you receive added benefits as you move up – but the culture and long-term trajectory differ.

In this comprehensive article, we’ll explain the advantages and disadvantages of the private equity career path, including the work, hierarchy, promotions, lifestyle, and salaries and bonuses.

But let’s start with the basics before delving into “fraternal differences”:

The Private Equity Job Description

Private equity firms raise capital from outside investors, called Limited Partners (LP), and then use this capital to buy companies, operate and improve them, and then sell them to realize a return on their investment.

The industry is called “private” equity because the companies that private equity firms invest in are private initially, or become private as a result of the investment.

The outside investors or Limited Partners might include pension funds, endowments, insurance firms, family offices, funds of funds, and high-net-worth individuals.

Imagine that you and your friends went to all your contacts, asked for money, and then decided to become “home flippers” by buying homes, fixing them up, and selling them at higher prices.

You keep some of the profits for yourselves in exchange for operating the business, but you give the majority back to your contacts for providing the bulk of the required money.

That’s what private equity firms do, but on a much larger scale and for companies rather than houses.

The job is part fundraising, part operational management, and part investing.

For more, see our articles on the private equity industry, private equity strategies and investment banking vs private equity.

Why Work in Private Equity?

If you got the “Why private equity?” question in an interview, you’d probably say that you love investing and operations, and you want to build value for companies over the long term.

But in real life, most people are drawn to private equity because it offers high compensation, somewhat better hours than investment banking, and more interesting work.

Some people also enjoy the excitement of working on large deals and interacting with “the best and brightest,” as well as understanding company operations in more depth.

Unlike investment banking, exit opportunities are not a major reason to go into private equity because PE itself is viewed as an exit opportunity.

That said, some professionals do leave the field for hedge funds and other buy-side roles (for more, see our coverage of private equity vs. hedge funds).

Private Equity Skills and Career Requirements

The private equity career path attracts people who are:

  • Competitive, high achievers who are willing to work long, grinding hours.
  • Extremely attentive to detail.
  • Interested in deals rather than simply following the markets or investing in public companies or other assets.
  • Interested in investing and operations and using critical thinking to evaluate companies rather than selling or being an agent.
  • Interested in long-term projects such as building a portfolio company over many years, and are also open to non-deal work, such as company monitoring and fundraising.

At large private equity firms (“mega-funds”), junior-level hires (“Associates”) are overwhelmingly investment banking analysts who spent 2-3 years at bulge-bracket or elite-boutique firms.

At smaller firms, more Associates come from middle-market and even boutique banks; some management consultants and Big 4 and corporate development professionals also get in.

Firms have been hiring more students directly out of undergraduate, so there are now quite a few “Private Equity Analyst” positions in the industry as well.

Getting into private equity directly after an MBA is nearly impossible unless you’ve done investment banking or private equity before the MBA.

You could complete the MBA, use it to win a full-time investment banking job, and then recruit for private equity roles…

…but that is significantly more difficult than breaking in pre-MBA from investment banking, and it’s not an ideal path (see: more on the investment banking associate job).

To get into private equity, you’ll need:

  1. A sequence of highly relevant work experience, including transactions and financial modeling.
  2. Top academic credentials (grades, test scores, and university reputation);
  3. A lot of networking and interview preparation;
  4. Something “interesting” that makes you appear to be a human rather than a robot;
  5. The ability to think critically about companies and investments rather than just “selling” them.
  6. A strong cultural fit with the firm – PE firms are much smaller than banks, so “fit” and soft skills are even more important.

For more, see our comprehensive guide on how to get into private equity.

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If you do not have the skills and work experience mentioned above, your best bet is to gain transaction experience in corporate development at a normal company or in M&A at a Big 4 firm and use that to move in.

Or, join a PE firm’s portfolio company, work on the operational side, and eventually move to the firm itself.

Do not bother with non-deal-related jobs such as equity research, or back or middle office roles.

The CFA is the only certification that means anything at all in PE; it is marginally helpful, but it plays a small role next to everything above.

The Private Equity Career Path

The private equity career path and hierarchy vary from firm to firm, but here’s a representative example:

  • Analyst – Logistical Monkey.
  • Associate (Pre-MBA) – Deal and Analytical Monkey.
  • Senior Associate – More Experienced Monkey.
  • Vice President – Manager of Deals.
  • Director or Principal – Generator and Negotiator of Deals.
  • Managing Director or Partner – Rainmaker, Fundraiser, and Chief Representative.

And here’s a flow-chart summary:

Private Equity Career Path and Hierarchy

We’ll look at each level in detail below, but here’s a summary of the age, earnings potential, and promotion time for each one:

Position TitleTypical Age RangeBase Salary + Bonus (USD)CarryTime for Promotion to Next Level
Analyst22-25$100-$150KUnlikely2-3 years
Associate24-28$150-$300KUnlikely2-3 years
Senior Associate26-32$250-$400KSmall2-3 years
Vice President (VP)30-35$350-$500KGrowing3-4 years
Director or Principal33-39$450-$700KLarge3-4 years
Managing Director (MD) or Partner36+$700-$2MVery LargeN/A

We are not going to address the exit opportunities and hours/lifestyle for each level because PE is usually the end goal, and the hours don’t necessarily change much as you move up – expect 60-70 per week at smaller firms and 80+ at mega-funds.

The key differences at each level of the private equity career path lie in the work tasks, promotion time, and compensation.

Also, note that all the compensation figures below refer to figures in North America – they will be lower, sometimes significantly lower, in regions such as Europe and Asia-Pacific.

Private Equity Analyst Job Description

Private Equity Analysts are hired directly out of undergrad without previous full-time experience.

They work on the same types of tasks as Associates: deal sourcing, reviewing potential investments, monitoring portfolio companies, and fundraising, but they complete fewer projects independently from start to finish.

For example, an Associate working on a deal might build the entire financial model and coordinate the due diligence process, including speaking with lawyers, auditors, consultants, and other parties to get answers.

But an Analyst on the same deal might help only with specific tasks such as setting up conference calls, sifting through data, and assisting the Associate with certain research or documents.

Age Range: These roles are only for students who just finished undergrad, and they only last for a few years, so we’ll say 22-25.

Private Equity Analyst Salary + Bonus: You’ll almost certainly earn less than an IB Analyst in terms of total compensation; your salary + bonus will likely be in the $100K – $150K range, with the bulk coming from your base salary.

Carry, i.e., a share in the profits from investments, is unlikely-to-borderline-impossible for Analysts, so don’t even think about it.

Promotion Time: Expect 2-3 years for a promotion to Associate, if your firm promotes Analysts (it varies widely).

Private Equity Associate Job Description

Private Equity Associates must be able to lead deal processes from start to finish without step-by-step instructions.

They spend their time on sourcing – generating new deal ideas – as well as financial modeling and due diligence for active deals, portfolio company monitoring, and even some fundraising.

The PE Associate role is an evolution of the IB Analyst role, so you still spend a lot of time in Excel, PowerPoint, and data rooms – but you have more responsibility and must act more independently in those tasks.

A typical day for a PE Associate might include the following:

  • Meet with their boss or other team members to discuss ongoing deals and potential ideas.
  • Build a financial model for an active deal or review and tweak an existing one.
  • Conduct a conference call with the owners of a private company that might be interested in selling to your firm.
  • Review customer contracts in the data room for an active deal.
  • Review a portfolio company’s quarterly financial results and speak with the CFO about them.
  • Assist with the fundraising process by setting up webinars with potential new Limited Partners (LPs).
  • Complete administrative work such as editing NDAs or conducting market research.

Age Range: You need several years of IB or a closely related field to get in, so we’ll say 24-28.

Private Equity Associate Salary + Bonus: Your salary + bonus will probably be in the $150K to $300K range, depending on the size of the firm and your performance.

Some of the large funds may pay more than $300K, but we’re using the 25th percentile to 75th percentile range as a reference here.

Carry is still quite unlikely unless the firm is brand new and you’re an early hire.

Promotion Time: Expect 2-3 years for a promotion to Senior Associate.

Private Equity Associate vs Analyst

As discussed above, the Associate tends to be more involved with the entire deal process from start to finish, while the Analyst might only help with specific tasks the Associate can’t get to.

The Associate is more of a “Coordinator,” and the Analyst is more of an “Assistant.”

Analysts are hired directly out of undergrad, while Associates join following several years in investment banking or a related field, such as management consulting.

Associates also earn more and are more likely to stay at the firm for the long term – if there’s a path to advancement there.

If there is no direct promotion path, Associates might complete an MBA or move into a different industry, such as hedge funds, corporate development, or strategy at a tech company.

Private Equity Senior Associate Job Description

“Senior Associate” and “Associate” are nearly the same.

The main difference is that “Senior Associate” is used to denote:

  1. An Associate who has been at the firm for a few years and been promoted directly, or
  2. An Associate who worked for a few years, went to business school, and then returned to the firm.

The work is not much different, but Senior Associates move closer to the VP-level, where they have more “manager” responsibilities.

Age Range: We’ll say 26-32 because at the minimum, you must have completed two years of IB or PE Analyst work, followed by two years of PE Associate work.

Some Senior Associates may be in their low 30s because they may have switched industries after undergrad, broken into IB, switched into PE, and then completed an MBA program.

Private Equity Senior Associate Salary + Bonus: These increase incrementally over the Associate level, but not dramatically so. The range might be more like $250K to $400K depending on the firm size, region, performance, etc.

At this level, a small amount of carry is more plausible. You’re not going to become a multimillionaire and retire at age 35, but it might boost your bonus a bit.

Promotion Time: You’ll need 2-3 years to reach the next level of Vice President.

It’s quite difficult to get promoted to VP because the nature of the job changes a fair amount at that level.

Many Associates and Senior Associates at larger PE firms realize there is no great path to VP there, so they end up going downmarket to advance.

Private Equity Vice President (VP) Job Description

In private equity, Vice Presidents are “deal managers.”

They need to convince the senior team members – Principals and Managing Directors – that they know what they’re doing so that the senior staff trusts them to manage deals.

VPs also lead and mentor others on the team, work more directly with clients, vet transactions, and lead due diligence and negotiations.

The VP role may sound similar to the Associate role, but it is very, very different.

Soft skills start to matter far more at the VP level, and you need to be a good talker and presenter to advance.

If you can prevent an important deal negotiation from falling through with some smooth talk on a conference call, that matters 100x more than being an Excel/VBA guru.

Very few, if any, professionals make it to this level with poor communication skills, but plenty of people with mediocre technical skills make it – as long as they talk and present well.

Age Range: The likely range here is 30-35 because you must have already spent at least ~4 years in PE at the Associate levels, you probably did something before that, and you might have gone to business school as well.

Private Equity Vice President Salary + Bonus: The likely range here is $350K to $500K, with about half in base salary and half in the year-end bonus.

Carry becomes increasingly important at this level, which could boost your bonus a fair amount – but you probably won’t see its full effects unless you stay at the firm long-term.

Promotion Time: You’ll probably need 3-4 years to advance to the Principal level.

Private Equity Principal or Director Job Description

You can think of Principals as “Partners in training.”

They have a lot of decision-making power, but they don’t have the same type of ownership in the partnership that the MDs/Partners do.

Principals leave most of the deal process management to the VPs and Associates and get involved when deals are nearing the finish line, and critical negotiations are required.

They also spend more time on sourcing deals and fundraising, and they are often the ones who convince business owners to consider a sale in the first place.

Principals also act as the go-between between the deal team and the MDs/Partners.

Age Range: It’s 33-39 here because of all the previous experience you need.

Private Equity Principal Salary + Bonus: Compensation reports indicate highly variable numbers, but the 25th to 75th percentile is in the $450K to $700K range.

Carry becomes even more important at this level and may substantially increase total compensation.

Promotion Time: It normally takes 3-4 years to reach the next level of Managing Director or Partner.

Private Equity Managing Director (MD) or Partner Job Description

Partners or Managing Directors are the king of the hill.

They spend their time on fundraising, deal origination, and “fund representation,” which could mean attending events and conferences, speaking with LPs, and doing everything required to boost the firm’s brand name and reputation.

They still spend some time reviewing deals, but they are less involved than the Principals unless it’s an extremely important deal.

Unlike the other roles here, this one depends 100% on human relationships – not Excel, VBA, Python, or small details in documents.

That makes it the toughest job because it’s much harder to address LPs’ concerns and convince them to invest in your new fund than it is to write an Excel formula or lead a deal process.

Oh, and one more thing: MDs and Partners must also invest a significant amount of their personal wealth into the fund to ensure they have “skin in the game.”

So… if you’re a risk-averse person, this is probably not the role for you.

Age Range: You’re unlikely to reach this level before your mid-to-late 30s, so we’ll say 36+. But that’s just the minimum – most Partners are likely in their 40s or beyond.

Many MDs and Partners stay in private equity indefinitely because there’s no reason to leave unless they’re forced out or the firm collapses.

Private Equity Managing Director Salary + Bonus: Compensation here is highly variable, but a reasonable range is $700K to $2 million, with slightly less than half from the base salary.

“Senior Partners” will earn more if the firm makes the distinction.

But carry is the key driver at this level and could increase total compensation by a multiple of the range above.

For example, the senior professionals at firms like Blackstone could earn tens or hundreds of millions per year (!), largely due to carry.

However, you should keep your expectations in check: the average case for total compensation at mid-sized and smaller firms is in the low millions if you make it this far.

Promotion Time: N/A – this is the top of the ladder.

Careers Beyond the MD/Partner Level: Senior Managing Partner, COO, CEO, and More

Some firms distinguish between normal Partners and “Senior” ones; Senior Partners own a higher percentage of the partnership, earn more carry, and have more decision-making power.

At the private equity mega-funds – the likes of Carlyle, Blackstone, and KKR – there are also C-level executive positions in the hierarchy.

There is no set path for advancing into these roles, so it depends on timing, performance, and who’s planning to retire.

We’re not covering them here because there’s little tangible information about these roles, and most students and professionals won’t even make it midway up the ladder.

Private Equity Careers Pros and Cons

Summing up everything above, here’s how you can think about the trade-offs of the private equity career path:

Benefits / Advantages:

  • High salaries and bonuses at all levels, with the potential for carry to boost senior-level compensation far beyond what investment bankers earn.
  • More interesting work than investment banking and other sell-side roles.
  • Somewhat better hours than investment banking, at least at mid-sized and smaller funds, and a more predictable schedule… if you’re not working on a major deal.
  • Direct exposure to different companies, industries, and management teams, and significant responsibility even at the junior levels.
  • Firms are small, so advancement is directly linked to your performance; office politics is less of a factor than at large banks.
  • The industry is unlikely to be disrupted by technology because it’s a relationship-based negotiation and sales role at the top levels.

Drawbacks / Disadvantages:

  • Still fairly long hours and an intense work environment, and significant travel may be required, especially as you advance.
  • There may not be a clear path to advancement at your firm, depending on the firm’s size and policies and your level. And even if there is a path, advancement can be challenging because Partners rarely get “burned out” and leave.
  • You could end up doing a lot of cold calling, research, or portfolio company monitoring rather than deal execution – and even if you do work on deals, you’ll be lucky to close ~1 major transaction per year.
  • You won’t gain the same network or structured training that you would at a large bank because PE firms are so much smaller.
  • You will have to contribute a significant portion of your net worth at the top levels, which is fine if the fund performs well… but a big issue if it struggles.
  • It’s extremely tough to get into the industry if you get a late start, you’re a career changer, or you did not attend a top university and then do investment banking.

So, is private equity right for you?

Rather than assuming that it is because “everyone” does the investment-banking-to-private-equity-path, you should consider these factors and be honest about what you’re looking for in a long-term career.

If you want more of a “business frat” than a party/drinking frat, then a private equity career could deliver.

But if you don’t want to be in the frat house at all, you’ll need to consider strategic alternatives.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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Comments

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  1. Avatar
    Brenda Le

    Hi Brian,

    Thank you for your prompt response. I actually do work for a PE backed company. So are you saying there is a chance to get into PE if I did work for a PE backed company? Overall, I have about 12 years of accounting work experience. I think there is a big challenge to get into PE a Manager level. I would probably need to take a step back.

    I assume you work in PE? You’re so knowledgeable!

    1. If you have 12 years of accounting experience, you are unlikely to get into private equity. It’s an industry where you can get in at the entry level or at the top level, but where it’s very difficult to get in at the mid-levels because they only want people with previous PE experience. You might be able to get a non-investing/non-deal role in private equity, but probably not the roles described here.

  2. Hi Brian,

    Wow – awesome article. It’s basically cliff notes 101, you hit all the points. Thank you for sharing! I wish i started in investment banking and work my way to PE. Like you said in your article might be too late to start since I am far along in my career. I am a CPA, work in corporate accounting as a manager. Started in public accounting as an auditor. I think my technical skills can transfer over and i can pick up, learn and adapt to more depth financial modeling; but the soft skills such as the sales aspect of it is what I think I lack. The idea of evaluating a firm is super interesting to me. Accountants usually come in after the acquisition is made and handles all the accounting/on boarding from there. The comp in PE is very attractive!!

    1. It’s tough to say without knowing the number of years of experience you have, but it’s generally quite difficult to move from accounting to PE because the skill set doesn’t line up as well as you think – since you don’t work on company-wide transactions in accounting/auditing (at least, not the entire process from beginning to end). Your best bet might be to join a PE-owned portfolio company, advance up the corporate finance hierarchy, and try to move into PE from there.

  3. Avatar
    bouffort kevin

    Hello,

    Thanks a lot for this article again.
    I still have a question, if I achieve to work within a BB bank, does my non-top tier Business school, matter?
    Thx

    1. Yes, it will be a big problem. You can still get into IB, but a BB bank will be a challenge. See: https://www.mergersandinquisitions.com/non-target-mba-to-investment-banking/

  4. Hi Brian,
    It was an absolutely amazing article. I am curious to know if MDs would share losses of the investments and in that case can their share of carry be negative? Also are bonusses and carry used interchangeably for MDs or they are paid separately?

    1. Yes, it’s possible to lose money if an investment does poorly. It won’t always happen (depends on the deal terms, how poorly the investment goes, etc.), but it is possible, which is one of the main risks in buy-side roles.

      Carry is different from normal annual bonuses. Normal annual bonuses aren’t linked as directly to long-term investment performance and are more about AUM and the fund’s performance in a given year.

  5. I know that MDs in both IB and PE are relationship-driven jobs that require winning clients/investors, managing many parts of deals and people, etc. But what is the difference between IB and PE MDs/Partners besides winning clients to your bank vs. winning investors to your firm? They seem like very similar roles at this level. Are there any detailed differences in the day-to-day that differentiates the job responsibilities outside of the core function of the business (i.e. investing vs. advising)?

    1. And to that end, what would you say would be the telling factors of whether someone would prefer IB or PE as a long term option.

    2. The roles are similar, but MDs in PE are still more analytical because they weigh in on all investment decisions, while MDs in IB are more sales/relationship-focused because they’ll do any deal that generates fees.

      I don’t think you can really tell upfront which one you prefer until you do internships in both and see them firsthand. But if you think your IQ is higher than your EQ, PE is probably better (and vice versa for IB).

  6. Avatar
    Recent Graduate

    Hi Brian,

    Great article. When you say, “Many Associates and Senior Associates at larger PE firms realize there is no great path to VP there, so they end up going downmarket to advance,” do you mean that they move to smaller PE firms and become VPs there? Do smaller PE shops often get their VPs from associates at megafunds?

    1. Avatar
      Recent Graduate

      As a follow up to this, how often do you see the opposite situation, where an associate at a smaller PE firm moves to a megafund after a few years or after an MBA? Thanks in advance.

      1. It is definitely harder to move in the other direction, but it happens… they’d still rather hire you over someone with 0 PE experience. But prestige and reputation are real factors in the industry, so the mega-funds can afford to be picky with their hires.

    2. Yes. I wouldn’t say “often,” but it happens a fair amount.

  7. Avatar
    Jacob Wheeler

    Excellent write-up. One of the major concerns I have about PE is the seeming lack of job security and advancement opportunities, as touched upon in the article. I want to know greater detail on this point though. Is it possible that you could be an above average performer, but simply not end up making it? My concerns lie with the factors you can’t control. Is it common for people to be left jobless somewhere in there career, and are forced to move to a much lesser-known/worse paying firm/industry? Is IB better suited for someone who is dedicated but more risk-averse like me? If I was a partner at a large PE firm, I’d be pretty confident investing my own money, but my risk aversion lies not within the job, but for the job itself. I guess my question boils down to: is it really common/easy to be laid off, despite somewhat decent performance, and end up getting screwed career-wise? Thanks.

    1. Thanks! Yes, it is very possible to be “above average” and simply not make it up the ladder at a certain fund. It depends on timing, performance, the org structure, whether or not the fund is expanding, and so on. I have seen and heard of many people who go to mega-funds or upper-middle-market funds and then either move out of PE or move to smaller funds to advance.

      I don’t know if it’s “common,” but it definitely happens, and it is one downside of the career. Advancing in IB is arguably easier because bankers get burned out and few people want to stay in the job for life, so there’s higher turnover.

      Yes, I would say IB is a better bet if you’re dedicated but more risk-averse.

      I don’t think it’s common / easy to be officially “laid off” in PE, but it is fairly common to figure out that you’re not going to advance up the ladder at a specific firm. Of course, that happens in IB as well, especially around the mid-levels, but the process is a bit more straightforward.

  8. Thank you for the insights and this article. I think compensation is often a highly discussed factor in this job, and ramps pretty significantly in this industry. For instance, at my middle market PE firm (bit over $10bn of total money raised), analysts get squarely in the bracket you listed, but senior associates get $450k all in.

    1. Yup, and it could go even higher than that. But remember that we are trying to represent the *range* of different PE funds here, not just the bigger ones. Compensation reports show a wide range of salary + bonus levels, even for Associates and Senior Associates. So, our approach is to use the 25th percentile to 75th percentile of the range, which means that the numbers will probably be lower than what bigger funds pay.

  9. Useful article – though I must say I disagree with parts of the job description for the Analyst role. Based on my knowledge of the analyst role at several mega/upper mid market funds:
    – Analysts are almost never involved in fundraising,
    – Analysts are usually responsible for the the bulk of the modeling work, most of the time associates / senior Associates just check it.

    Having experienced it I found the job very stimulating from an intellectual standpoint, far from an « Assistant » job :) but it is true that the Associate still coordinate the deal process and the advisors.

    1. Yes, that may be true, but we’re attempting to cover the Analyst role at a wide range of funds here, not just bigger ones. And at smaller ones, Analysts will do more of the logistical tasks and less of the modeling work.

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