Private equity (PE) firms raise capital from outside investors, use the capital to buy companies, enhance operational efficiency and then sell them with a high return on investment.
The investors include insurance firms, pension funds, family offices, endowments, funds-of-funds, and high-net-worth individuals. The private equity professionals gain profits for the firms in exchange for business operations. In brief, the professionals’ job involves fundraising, operational management, and investment.
Let’s walk-through the career path of PE professionals here.
Starting a career in private equity
The candidate must hold graduation in Finance, Economics, Accounting, or Investment Analysis. Further, if you want to gain a managerial position, a doctorate in Investment Analysis, Econometrics, Financial Engineering or Math along with the best private equity certification like Chartered Private Equity Professional (CPEPTM) or Certified Public Accountant is an added advantage.
The private equity career path
A Pre-MBA associate is the most junior professional in PE firms. The next career positions include Associate, Senior Associate, Vice President, Principal or Director, and Managing Director or Partner.
A pre-MBA Associate will have two to three years of experience in the investment banks, accounting or consulting firms as an Analyst.
Job profile of Pre-MBA Associate
Cold calling and screening sectors for potential investors
Analyze companies for investment opportunities
Source deals and support transactions
Manage portfolio companies
Determine to raise capital and investment uses
Execute exit strategies
Predict return on investment
After two years, you may get promoted as a senior associate.
You may pursue an MBA at a top school.
You may change career path into hedge funds, corporate development, entrepreneurship, or other PE funds.
PE Associate salary
As a PE Analyst, you may earn USD 66,500 while the average salary or a PE Associate is USD 90,863 per annum as per PayScale.
Post MBA Senior Associate
As mentioned earlier, senior private equity professionals having three to six years of work experience in investment banking, consulting, and private equity. They may get hired right out of the business school also.
Job profile of Post-MBA Associate
Responsible for deal screening and modelling
Manage advisors such as investment banks, lawyers, and accountants
Involve in sourcing, underwriting, closing, and monitoring PE investments
Identify, structure, negotiate, close, and manage investment transactions
Perform advanced analytical and operational activities for existing investments and proposed deals
Monitor the financial and operating performance
Senior Associates may become Managing Director or partner within six to eight years.
Senior PE Associate Salary
According to PayScale, the average salary for a Private Equity Senior Associate is USD 147,395 plus a bonus of USD 60,000.
It may take three-six years to become the vice president. The Vice President or Principal create ideas in their area of expertise, source investments, and lead the execution of transactions. They may also manage portfolio companies.
Job Profile of Vice President
Evaluate and execute investments
Manage the diligence process, finance, technology, memos, closings, and post investment management
Construct competitive analysis and dive into new markets
Build and maintain internal systems, models, and portfolio performance tracking worksheets
Organize reporting (internal and external) – quarterly LP reports and CEO summits
They can get promoted as a partner if generated more money for the firm.
Private Equity Vice-President Salary
According to PayScale, the average salary is USD 136091. Moreover, they get a share of profits of the investment (USD 8,757), bonus (24,389), and commission (20,000).
Managing Director or Partner
The Managing director is in charge of leading the firm, manage relationships with investors, raise new funds, participate in investment decisions, and sit on the company’s board.
The compensation depends on profits made by the firms. Moreover, as a partner, one should invest a significant proportion of personal wealth in the fund.
The roles in this industry are challenging and sought-after. It is your skills that add value to the business.