Private Equity Analysts deep dive — backgrounds of 41 Analysts at the Top 5 Funds

In this post, we go deeper into the backgrounds and previous experiences of the 41 analysts working at the top 5 PE funds. Our first installment on this topic can be found here.We focused on identifying the schools and firms that nurtured the most PE juniors. We also examined whether studying Finance, Economics or other business-related subjects is a for working at a PE fund and what qualifications are necessary to enter the industry as a graduate.

Educational background

Most of the analysts (44%) in our sample completed their degrees in the UK. The three major schools from which PE firms tend to recruit are LSE, Oxford and Cambridge. Schools in the UK are followed by French universities, led by HEC Paris and ESCP Europe. 24% of the analysts in our sample studied at these schools. Harvard Business School (which provides one third of all U.S. educated analysts) leads among US colleges. Places four and five are tied between Italy and Germany. The Stockholm School of Economics (Sweden) and IE Business School (Spain), rank strongly on the individual basis, however their respective countries didn’t make the top five.

Note: This chart considers undergraduate and graduate degrees, as well as MBA. Most analysts in our sample have studied in more than one country.

58% of students went on to study a master’s after their bachelor’s, but 40% did not. Most analysts either studied Economics or Business Administration, followed by more specialized degrees such as Accounting & Finance. A total of 14% obtained degrees in technical fields, such as Engineering (11%) and Mathematics (3%).

Note: This chart includes degrees of analysts who continued their studies in master’s programs.

The picture changes quite a bit if we look at graduate studies. Most PE analysts obtained focused degrees in the fields relevant to the PE industry, such as Accounting & Finance or Real Estate. This finding implies that while students who target roles in the PE industry might take a broader perspective during their undergraduate studies, specializing in a Finance-related for the master’s is almost a necessity. It appears that pursuing a degree in Accounting & Finance offers the necessary skills valued by many PE firms.

Overall, despite the observed affection of some banking divisions (e.g. S&T) to hire quantitatively affine graduates even if they have no experience in finance, the PE industry is still dominated by graduates from business-related fields.

Interestingly, our data shows that the majority of students who decide not to continue their studies have graduated in either Economics or Business Administration. As opposed to that, the spectrum of people who decide to pursue a master’s degree is almost equally comprised of people who obtained degrees in both business-related (Economics, Accounting & Finance) as well as unrelated (Engineering, Humanities) areas.

Internships –what, where and how much

Having obtained internship experience before starting a full-time role is a must in almost every business-related field. However, PE industry itself has been historically reluctant to hire interns as most funds recruit investment professionals with previous experience in IBD, consulting or other fields. Only recently have funds established internship programs as the competition for top talent has intensified and they have recognized the value that graduates can provide to them.

For this reason, most of the current PE analysts in our sample had to obtain the skills essential for PE in other fields. As already mentioned in our first article covering the analyst profiles, IBD and consulting are the most popular industries in which to acquire relevant modelling skills and deep understanding of business and strategy concepts. Another important source was the S&T desks that require high quantitative affinity, attention to detail and stress resistance, all of which are essential to PE firms.

We also noticed that 22% of the internships were actually completed at PE funds, which well reflects the change in attitude of many PE firms towards graduates. Here, most graduates have participated in Blackstone’s summer analyst program.

Note: Most analysts have completed more than one internship. Each internship is counted separately.

All of the PE analysts in our sample have completed at least one internship, most of them at least two. On average, they have spent 10.4 months in training before starting in their first full-time roles. The majority (42%) have obtained less 6 months or less in terms of work experience. This is a clear sign that not the duration or the number of the internship count, but rather the right firm and exposure.

Note: Most analysts had multiple internship positions prior to getting into their first full-time position. Each internship position has been counted separately.

Full-time experience — which industries should you target?

The popularity of IBD and consulting as a place to learn the skills required in the PE business also holds for the full-time roles. Before changing to a fund, 65% of the analysts in our sample worked for investment banks, 12% for consultancies. There is also a significant share of investment professionals that switched junior positions within the industry.

Note: Some analysts had multiple full-time positions prior to joining their current firm. Each full-time position has been counted separately.

The average tenure in a full-time role was a bit over 2 years. The chart below confirms the common belief that it is best to enter the PE industry having worked between 2 to 4 years. While the potential candidates have already acquired some relevant knowledge, the cost of hiring them for PE funds is still relatively low (compared to luring away more senior employees).

Graduates in PE — who are they?

Starting at the PE funds as a junior is still quite unusual. Since the funds are more thinly staffed than investment banking divisions or consultancies that they recruit from, there has always been a large pool of potential entrants with previous work experience, understanding of business models and concepts as well as strong modelling skills. However, the new challenges of the PE industry and high demand for talented workforce have created opportunities for many graduates to directly enter the industry.

Most of the graduates who got a junior position at a PE fund straightaway had a master’s degree (71%), predominantly in Accounting & Finance. They studied at HEC Paris or Bocconi. All of them were hired by Blackstone, mostly after having completed either a summer internship with them or at a bulge bracket investment bank.

Conclusion

Having decomposed the profiles of the 41 recent PE analysts, we conclude the following:

• The country of education and school matter. PE firms mostly recruit from the UK, France, USA, Germany and Italy as well as selected schools in other countries. Regardless of the country, going to a top-rated school, e.g. Oxford or Harvard, is almost a must.
• While obtaining a master’s degree is not necessarily a must, if you do so, try to complete one in the field of Accounting & Finance.
• Try to intern at an investment bank or consultancy while studying. And give a shot at getting into a PE fund directly. The firm and exposure, not the length or number of internships matter.
• If you cannot get into a PE fund directly, there is an alternative proven route through full-time employment at an investment bank or consultancy.
• Although entering PE directly after university is hard, it is not impossible. Here, same rules apply — a top-tier school and relevant work experience either with a PE fund or at a bulge bracket.

Written by Pavlo Moshynskyy & Jack Rizvi