What Does a Career in Private Equity Look Like? (2024)

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Private Equity: What You Need to Know

Private equity firms are usually smaller than investment banks and can be as small as 5–10 employees within a firm. While historically smaller, there are also several large private equity firms emerging with large market caps. Regardless of size, associates employed by these firms use private equity funds for various portfolio companies across all industries and levels within a company life cycle. Private equity funds are brought in from fundraising outside capital, usually from investment companies or wealthy individuals. Funds buy outstanding portions of private companies or struggling public companies by buying out shares and delisting. Once portfolio companies are purchased, PE firms work heavily with management to rework company operations to cut down on unnecessary costs and inefficient work-related matters. Unlike hedge funds, private equity firms hold onto their investments for an extended period, up to 10+ years, before selling for a profit.

What is LP and GP in private equity?

Limited partners (LPs) are wealthy individuals or investment companies that invest their money upfront to private equity firms to begin their investment journey. Limited partners are not involved in company operations after investment and are only looking to turn a profit on their investment. General partners are PE firms and are responsible for the restructuring of company day-to-day operations and budgets to improve efficiency and make new technological advancements. From the beginning to the closing of a deal, general partners get paid by charging a fee to the company in question for their services.

Different types of private equity strategies

Private equity firms can use a few different strategies when choosing which companies to invest their funds in. PE firm's three main strategies are venture capital, growth equity, and buyouts.

  • Venture capital:This form of investment takes place at the startup phase in the company life cycle. Startups need outside capital to fuel company progression and reach growth goals. VC investors usually choose companies that are not ready to go public yet.
  • Growth equity:The companies that growth equity firms choose to invest in have proven successful and are well managed but need increased liquid assets to grow. Growth equity investors are either looking for a minority or majority share for a long-term investment.
  • Buyout:These companies are failing, either privately or publicly, and need to be bought out to improve in-house operations. Such operations may include budget cuts, management changes, and outsourcing.

Private Equity Jobs

Private equity firms usually look for entry-level associates with at least two years of experience within the banking industry. Investment bankers usually follow the PE firm career path as their next job and typically have a bachelor's degree in finance, accounting, economics, and other related fields. 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 professionals can advance fast within a firm and typically start as junior associates or analysts.

  • Juniorassociate/analyst: Employees in entry-level positions do not get to make deals or work independently through all process steps; instead, they are assigned more specific tasks such as reviewing data. Some required skills include financial modeling and the ability to work with a large amount of data.
  • Seniorassociate: The main difference between a junior analyst and a senior analyst is independence. Senior associates spend their time seeing a deal through from start to finish. In addition, generating ideas is a new job responsibility as you progress from junior to senior associate, allowing you to take on more responsibility in decisions.
  • VicePresident: Vice presidents have more of a communications role than junior positions. VP's deal less with data sorting and more with client relations and presentations. Technical skills matter less than negotiation abilities, and they also are responsible for in-house management and mentorship of associates.
  • Director:One step away from Partner, Directors are in charge of fundraising as well as facilitating deals. Most of the execution is delegated to the previously mentioned team members while the director handles the final negotiations and major company decisions.
  • Partner:Partners focus mainly on company representation, funding, and client relationships. This job has no technical component, but negotiations skills are required to present and convince Limited Partners to provide funding. Partners are also required to invest a portion of their wealth into the company to invest in their team.

Is Private Equity Right for Me?

As previously emphasized, starting a career in private equity is competitive and typically requires relevant experience and a robust set of skills. Private equity professionals work long hours and are highly competitive and must think critically, and have a passion for financial investing deals, not just following the markets. Other requirements to start a career in private equity are:

  • Excellentgrades and a notable transcript in school. (an MBA or advanced degree is not required but can be beneficial.)
  • Previous experience is often required and encouraged. In addition, excellent networking skills would be beneficial when landing an interview with a PE firm due to its competitiveness.
  • Strongproblem solving and analytical skills in addition to required knowledge on:
    • bolt-on acquisition analysis and market research conductions
    • confidential information memorandum (CIM) reviews and financial modeling formulation
    • ability to create leveraged buyout (LBO) for client deals

Obtaining an internship within a private equity firm or starting off in a related career path like investment banking or management consulting would be beneficial in exposing yourself to the environment. PE firms are typically looking for individuals with assertive, independent, and analytical qualities.

Other Possible Career Tracks in Finance

Explore other financial careersbeyond private equity:

  • Investment banking
  • Portfolio management
  • Risk analysis and risk management

How Can the CFA Program Help Me?

Equity investments is one of several important subjects that are covered through the CFA® Program. Because CFA charterholders have mastered a curriculum that provides comprehensive investment expertise, many employers list the CFA designation as a preferred credential for consultant roles. The CFA charter prepares professionals to adapt to the continually changing demands of the investment industry.

Explore whether CFA Program is the right choice for your next career steps

What Does a Career in Private Equity Look Like? (1)
What Does a Career in Private Equity Look Like? (2024)


Is private equity still a good career? ›

Compared to other jobs in the financial space, private equity roles can provide a more balanced lifestyle, potential for better pay and more engaging, connected work. Private equity is growing in popularity, and an increasing number of college graduates or financial professionals are looking to break into the space.

What is it like to work in a private equity firm? ›

Private equity professionals work long hours and are highly competitive and must think critically, and have a passion for financial investing deals, not just following the markets. Other requirements to start a career in private equity are: Excellent grades and a notable transcript in school.

Is private equity a stressful career? ›

but nowhere near as much as in management consulting. 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.

Is it hard to get a job in private equity? ›

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. However, private equity is challenging to break into. Recent graduates compete with seasoned investment bankers and stockbrokers for a precious few job openings.

How much do PE guys make? ›

What is the Average Salary in Private Equity?
Private Equity Salary Data
1st Year Associate$135k – $155k$275k – $385k
2nd Year Associate$160k – $180k$330k – $450k
3rd Year Associate$180k – $200k$360k – $500k
Senior Associate$200k – $220k$410k – $610k
2 more rows
Mar 8, 2024

Is private equity high paying? ›

In short, if you're at a top mega fund, then you can expect to get paid between $350-$400k per year. These numbers reflect total compensation paid to private equity associates in 2022.

What are the disadvantages of working in private equity? ›

Drawbacks / Disadvantages:

Still fairly long hours and an intense work environment, and significant travel may be required, especially as you advance. There may not be a clear path to advancement at your firm, depending on the firm's size and policies and your level.

How many hours do people in private equity work? ›

Private Equity Associate Lifestyle and Hours

At many smaller funds and middle-market funds, you can expect to work 60-70 hours per week, mostly on weekdays, with occasional weekend work when deals heat up.

Do private equity firms lay off employees? ›

Private-equity firms typically run leaner operations than banks and so have less need to cut jobs during slowdowns. But some have laid off about 5% to 15% of their staff, said Sasha Jensen, founder and chief executive of Jensen Partners, an executive-search firm for alternative-asset managers.

Are people in private equity smart? ›

Private Equity Career Training

PE firms are small, tight-knit, and full of extremely smart and highly motivated people.

Where do people go after private equity? ›

Those who wish to broaden their horizons or simply desire a change of pace will often migrate to similar sectors such as hedge funds or portfolio management. Additional exit options include: Being hired as a chief analyst by another firm.

Why not to go into private equity? ›

Private equity funds are illiquid and are risky because of their high use of debt; furthermore, once investors have turned their money over to the fund, they have no say in how it's managed. In compensation for these terms, investors should expect a high rate of return.

What are the odds of breaking into private equity? ›

For a student looking to break into one of the top 10 PE firms, your chance is 1 in 300 or 0.33%. To break into one of the top 10 hedge fund firms, your chance is 1 in 147 or 0.68%.

Is private equity harder than banking? ›

Both investment banking and private equity are demanding careers that require long working hours, although private equity firms tend to have a more relaxed work environment and offer a more flexible schedule.

Does private equity have a future? ›

Thus, while we can't predict the future, we believe the conditions noted above could precipitate a rebound for private equity dealmaking and exits in 2024 relative to 2022 – 2023. Moreover, we believe small- / middle-market managers are particularly poised to capitalize on the current opportunity in private equity.

Is it worth it to go into private equity? ›

You may be aware of the longstanding question about whether private equity returns have historically outperformed public equity. The simple answer is: yes, by a significant margin.

Is private equity slowing down? ›

With M&A activity continuing its lower volumes globally and the IPO markets slow, although slightly thawing, sponsors saw diminished exit opportunities in 2023. Global private equity exits shrank in value from approximately $783 billion in 2022 to approximately $574 billion in 2023, down more than 25%.

Does private equity do well in a recession? ›

Private equity can be a very well-performing asset class during a recession. By understanding the risks and opportunities and having the right processes and technologies in place, your firm can punch above its weight and deliver high-quality returns to its LPs.

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