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.
In this article we’ll explore what it’s really like in a career in private equity.
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 job is part fundraising, part operational management, and part investing.
The private equity career path attracts people who are:
The private equity career path and hierarchy vary from firm to firm, but here’s a representative example:
And here’s a flow-chart summary:
Unlike other industries such as investment banking, where professionals will typically pursue “Exit Opportunities” into other fields, Private Equity is often seen as an exit opportunity.
Private equity professionals earn well – especially at the upper echelons. Here’s a summary of what to expect at each level in a front-office role at a big firm in North America (pay will typically be lower in other countries):
|Position Title||Typical Age Range||Base Salary + Bonus (USD)||Carry||Time for Promotion to Next Level|
|Senior Associate||26-32||$250-$400K||Small||2-3 years|
|Vice President (VP)||30-35||$350-$500K||Growing||3-4 years|
|Director or Principal||33-39||$450-$700K||Large||3-4 years|
|Managing Director (MD) or Partner||36+||$700-$2M||Very Large||N/A|
To get into private equity, you’ll need:
For more, see our comprehensive guide on How To Get Into Private Equity.
Private Equity is a highly-competitive and sought-after field. PE firms tend to be relatively small, tight-knit and full of extremely smart and highly motivated people.
As a starting point, the right career background is critical. Overwhelmingly, PE firms hire people with experience working for a top investment bank, or professionals who already work in PE in different firms.
That said, firms expect new hires to hit the ground running with usable skills. We recommend that professionals seeking a job in private equity should:
Private Equity interviews don’t come along every day: ensuring solid knowledge of these fundamentals will ensure you’re in the strongest possible position to land a job in the industry.