Written by PER Consultant: Richard Jones
If you’ve ever considered a career in private equity, chances are you’ve thought about a role within a direct investment firm (GP) where you’re taking ownership of businesses and working with them directly post acquisition. It is, after all, the most widely understood part of the market. However, the private equity landscape is so much broader and more varied so it can be a bit of a maze if you aren’t familiar with the options and the terminology.
One part of this wider marketplace you might want to consider is fund of funds and co-investment. This area is growing with pension funds, sovereign wealth funds and family offices building their own investment teams and putting increasing quantities of money into this private equity asset class. These are often referred to as LPs – Limited Partners.
Much like the secondaries market, which we’ve previously explored on this blog, there is increased demand from our clients for talented people to fill roles. If you haven’t thought of this area already then take a moment to consider it seriously. We thought we would bring some of our roles to your attention and feature them on our site this week.
Fund investing – why do it?
In our view, if you have a real interest in the private equity world and how it works, then indulge it in fund investing.
Someone we recently placed summed up the opportunity perfectly: ‘Fund investing is the best way to get the “inside track” …to see what you don’t get to see in the media, to really understand what’s going on and get to know the people making it happen.”
We think that perfectly sums up the qualities needed to be a good fund investor: inquisitive, probing, and someone who wants to figure out what’s ‘under the hood’.
Not only does it give you a great macro view of the market, but it also enables you to get unparalleled exposure to individuals and institutions on a daily basis.
Fund investments are as qualitative as they are quantitative. You will get to flex your technical skills as well as using strong relationship skills. If you are a ‘people person’ with strong analytical skills this could be a real option for you.
What about co-investments?
Many LPs, alongside their fund investment strategy, have a remit to ‘co-invest’ alongside their GPs in their direct deals. Depending on the fund, your involvement in these transactions can vary from reviewing the deal to playing a hands-on role. Either way, the deal flow will be constant and varied, and you will need a good mix of commercial and technical skills to be effective.
As far as co-investments go, if you like to be busy then the deal execution activity should fulfil your desire for variety in your day. The chances of completing deals within a co-investment environment are generally strong so it won’t take long to build your track record.
From a career perspective, compensation is competitive, career progression is readily available and we think it’s a great option for a differentiated route into the private equity maze.
About the author: Richard focuses on entry and mid-level searches in a variety of investment strategies including traditional LBO funds, LPs, fund of funds and secondaries, across the UK and Europe.