Private equity is an asset class. It’s all about investment into private businesses that don’t appear on the stock exchange – companies that aren’t publically owned. This area of the industry is considered to be a bit of a Holy Grail for many aspiring bankers. It deals with incredibly huge amounts of money (in the millions and billions!) and the salaries can be top dollar. In the investment realm, you’ll often hear it shortened to P.E. (but don’t worry; the dress code is more along the lines of snappy suits rather than short shorts and gym shoes).
What do private equity roles involve?
Private equity professionals work closely with their clients, who are typically businesses who want to invest in companies (often buy them) in order to grow their capital and size. In European asset management this includes venture capital – investment into new companies that show promise as a good return on investment.
This area is certainly not about acting on impulses! There is a lot of strategy development involved in conjunction with the client, which opens the field for lots of advisory and client relationship roles.
These experts will research into potential investment opportunities and develop investment strategies alongside a client’s management team, accountants and lawyers. Investment plans have to be tailored to their every desire, and with a constant eye on the long-term return properties! Nowadays, the client will be concerned with investing their money wisely and ethically. They want to know the level of risk involved in whatever they choose to invest in.
Operations, marketing and research
You could also work in operations in private equity. Operations professionals team up with investment experts to ensure the companies the client is investing in will be able to make money and provide a return on investment by improving efficiency, such as in their technology. There are other non-investment related roles here too, such as in marketing, research (into businesses and potential investments), fund administration and financial control (relating to the development of the firm itself as a business)
Junior roles will usually involve supporting work such as with deal sourcing (finding potential new investment opportunities), due diligence tasks (investigation of an investment opportunity) and portfolio management.
Who could I work for in private equity?
Roles in private equity are available with (not surprisingly…) private equity firms. There are also private equity divisions with investment banks. There’s a lot of flexibility in the type of thing you could specialise in here: there are funds that focus on a particular region or industry; some that target the emerging markets (markets that are expanding at a rapid rate such as China, India and Russia); and there are some firms that offer generalist expertise. They’ll work on investment portfolios in pretty much anything from media and telecommunications, retail, and pharmaceuticals to education, energy, engineering, defence and more.
Working up to a private equity role
Needless to say, the prestige surrounding private equity makes it very difficult to get into! It’s unlikely that P.E. will be an industry you can storm into straight away. You’ll have to spend some time developing your knowledge in a banking environment (investment banks are generally preferred), perhaps in an analyst role. This will provide you with a strong grounding to make the jump into private equity.