Why Is Private Equity So Popular as a Career? (2024)

FAQs

Why Is Private Equity So Popular as a Career? ›

There are many possible reasons, some less common than others. The major driver of many private equity firms is the intent to analyze, acquire, build and resell companies. Prospective private equity employees should understand this motivation and have a true interest in the process.

Private equity investors work with portfolio companies over the long-run, often 5-8 years. Hedge funds investments can be as short as a few weeks. So private equity teaches you the art of long-term view. Private equity also gives you the ability to work closely with the company over an extended period of time.

So why are PE investments so popular? Part of it is how interest rates (until recently) have been so low for so long, allowing these firms to access a ton of capital for very cheap.

Examples of solid answers to the “why private equity” question: You want to work with companies over the long-term instead of just on a single deal. You want to get exposed to the operations of companies and understand all aspects rather than just the financial ones (note: “exposed to,” not “control” or “improve”).

Private equity is one of the most competitive jobs to get – period. Not just in finance, but across the board. Private equity firms have very specific requirements for their hire candidates, both for entry-level analyst positions and for higher-level job openings.

Working at a Private Equity Firm

The private equity business attracts some of the best in corporate America, including top performers from Fortune 500 companies and elite management consulting firms.

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.

The decade of the 1980s is perhaps more closely associated with the leveraged buyout than any decade before or since. For the first time, the public became aware of the ability of private equity to affect mainstream companies, and "corporate raiders" and "hostile takeovers" entered the public consciousness.

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 investors believe that the benefits outweigh the challenges not present in publicly traded assets—such as complexity of structure, capital calls (and the need to hold liquidity to meet them), illiquidity, higher betas than the market, high volatility of returns (the standard deviation of private equity ...

How much does a VP in private equity make? ›

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.

On the whole, investment bankers are drawn to private equity for its long-term focus, greater control over investment decisions, higher compensation, entrepreneurial opportunities, and the opportunity to develop a more diverse skill set.

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%.

Private Equity Career Training

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

Getting promoted in private equity (PE) is not easy. You need to demonstrate exceptional skills, performance, and potential in a highly competitive and demanding environment.

Compared to consultants, private equity professionals often have more influence and a more direct impact on the companies with which they work. With this power, however, comes greater accountability, as they're more deeply involved as company shareholders.