Is private equity difficult to get into?
Getting enough work experience and then completing your master's degree is usually a good way to get into private equity, but it requires careful planning, as most top private equity firms prefer to hire entry-level employees that are as young as possible, so they have much time to gain experience and fulfill their ...
These odds are similar to or worse than playing any of the professional sports. Less than 1% of the population size pursing any competitive field is likely to compete at the elite level. In the highly competitive world of finance like hedge funds or PE, less than 1% of students break into one of the top 10 firms.
Landing a career in private equity is very difficult because there are few jobs on the market in this profession and so it can be very competitive. Coming into private equity with no experience is impossible, so finding an internship or having previous experience in a related field is highly recommended.
Private equity interviews can be challenging, but for most candidates, winning interviews is much tougher than succeeding in those interviews. You do not need to be a math genius or a gifted speaker; you just need to understand the recruiting process and basic arithmetic.
Private equity produced average annual returns of 10.48% over the 20-year period ending on June 30, 2020. Between 2000 and 2020, private equity outperformed the Russell 2000, the S&P 500, and venture capital. When compared over other time frames, however, private equity returns can be less impressive.
Also, low grades are more of a problem for the most “prestigious” front-office roles: Investment banking, private equity, etc. You could still win middle or back-office roles with a lower GPA, and you could also win non-IB-but-still-revenue-generating roles such as ones in commercial real estate or real estate lending.
PE firms are small, tight-knit, and full of extremely smart and highly motivated people. As a starting point, the right career background is critical.
| Private Equity Salary Data (2023) | ||
|---|---|---|
| 1st Year Associate | $135k – $155k | $140k – $230k |
| 2nd Year Associate | $160k – $180k | $170k – $270k |
| 3rd Year Associate | $180k – $200k | $180k – $300k |
| Senior Associate | $200k – $220k | $210k – $390k |
In private equity, you'll work hard, but the hours are not nearly as bad. Generally, the lifestyle is comparable to banking when there is an active deal, but otherwise much more relaxed. That said, there is some upside other than money and career prospects.
Private equity is an alluring career goal for those drawn to the financial world. These companies pay big salaries, plus incentives and bonuses. The potential is there to make a lot of money, even in your first year. And, the career carries a lot of prestige in the finance world.
Why are you a strong candidate for private equity?
Highlight specific skills, such as financial modeling or due diligence, that are relevant to private equity. Demonstrate your passion for the industry and the firm's specific sector focus. Showcase your track record of success in past transactions, highlighting any positive impact you've made on portfolio companies.
While the travel will be less, the work in private equity is very stressful and demanding, so the hours you actually spend working may be more stressful or mentally demanding.
Private Equity Principal Salary + Bonus: Compensation reports indicate highly variable numbers, but the 25th to 75th percentile is in the $500K to $800K range. Carry becomes even more important at this level and may substantially increase total compensation.
Private equity is the tier 1 among finance careers, so there are few exit opportunities more prestigious than private equity. Not to mention, private equity firms are less well-known outside finance.
The LPA also outlines an important life cycle metric known as the “Duration of the Fund.” PE funds traditionally have a finite length of 10 years, consisting of five different stages: The organization and formation.
Why Leave Private Equity? The short, simple answer is that you might work in the field for a few years and find out it's not for you. For example, maybe you have to do a lot of “sourcing” (cold calling), which you dislike. Or you find it boring to look at deals constantly but reject 99% of them.
Goldman Sachs does not give a specific minimum GPA requirement, though some sources suggest a GPA of at least 3.6 is preferred. Additionally, you may need to show relevant coursework and hard skills for certain programs.
Most employees at highly-rated private equity firms are hired after earning at least an MBA or master's degree in finance and then spending a few years working for a top organization as a consultant, accountant, investment banker or any other similar role.
The short answer: For M&A Investment Banking and Private Equity, you don't need anything beyond basic arithmetic. We are talking about addition, subtraction, multiplication and division. Throw in some percentages and growth rates and some means and medians. That's the math needed for Investment Banking.
As of Feb 6, 2024, the average annual pay for a Vice President Private Equity in the United States is $157,532 a year. Just in case you need a simple salary calculator, that works out to be approximately $75.74 an hour. This is the equivalent of $3,029/week or $13,127/month.
Do you need CFA for private equity?
Fully agree with Pedro here - CFA is not necessary and doesn't really give you an advantage. Most of the work is CDD, as you point out, so as long as you can read and interpret financial statements, you're good.
How do I get hired at KKR? When interviewing a potential investing team candidate, KKR looks for two main attributes: exceptional intellect and strong cultural alignment. The few going through KKR's hiring process could expect eight or more interviews to gauge that.
Heidrick & Struggle's data suggests that at the top end, a managing partner in a private equity firm with at least $1bn in Assets Under Management (AUM), can expect to earn at least $3.5m in salaries and bonuses, plus around $35m in carried interest over a fund's lifecycle (typically around five years).
| State | Annual Salary | Monthly Pay |
|---|---|---|
| California | $73,981 | $6,165 |
| Nebraska | $72,906 | $6,075 |
| Maine | $72,432 | $6,036 |
| Missouri | $72,062 | $6,005 |
The Principal
Principals are the next most senior role and usually need to have several years of experience as a VP before making the leap. Principals are evaluated on their ability to find promising companies and close deals on them. They are also involved in the management of and execution of company portfolios.
