Over the last decade, the biggest names in private equity have transformed into global alternative asset managers covering a broad range of asset class and activities, making them among the best paid and most attractive places to work.
The likes of Blackstone founded by Steve Schwarzman as a private equity fund 20 years ago, the world’s biggest investor in real estate and credit, now offers a broad range of career opportunities.
“Private equity is regarded as more of a mainstream asset class than it was 10 years ago and is seen as the pinnacle of a career in finance because you are working as a principal, doing deals rather than as an adviser,” says Charlie Hunt, director of UK for recruitment firm PER.
If you want to get into private equity, the best way to do so is to complete a training program at a big bank. Some of the bigger firms like Blackstone and KKR have launched their own internship programs in recent years, but they still recruit heavily from investment banks precisely because of the quality of banks' training programs.
Most people who quit banking for private equity usually do so after 24 to 34 months in IBD.
Private equity funds are steadier recruiters than investment banks and while banks are keeping an eye on costs, PE has room to grow, given the record amount of dry powder that firms have to put to work.
“Recruitment by private equity firms for entry-level positions is slightly down compared with 2019 because it’s harder to on-board staff in a remote-working environment. By contrast, mid-to-senior level hiring is up because these individuals have more of a track record and can hit the ground running. Funds continue to grow and there is still pressure on them to deploy capital, so they still need to build their teams, ” Hunt adds.
When you make the initial move from investment banking into private equity, you may earn less at first but if you are successful, you will earn more from bonuses. Usually, from vice president onwards, you become part of a fund’s carried interest scheme and if that pays out, the rewards are considerable.
Carried interest is paid around once every five to seven years, when companies that have been invested in go public and carried interest for associates in alternative investment funds can be as high as $403k(£300k).
The following provides insight into private equity pay via base salary figures from the Blackstone Group, the Carlyle Group and KKR, the world’s biggest private equity firms, based on how much capital they have raised over the last five years. The figures demonstrate that once you get into these organizations and are successful, your earnings can increase dramatically.
Pay at the Blackstone Group
Blackstone is the world’s biggest alternative asset manager, with total assets under management of $584bn, spread across private equity ($189bn), real estate ($174bn); credit and insurance ($144bn); and hedge funds ($78bn). It’s run by Steve Schwarzman who founded the firm in 1985 at the age of 37, with Jonathan Gray as President and chief operating officer.
Blackstone has raised $96bn in the last five years, $35bn more than second-placed Carlyle. Now 72, Schwarzman takes an active role in recruitment, and said in his 2019 book ‘What it Takes”, that he wants people who are curious, able to adapt, punctual and also good to be around. “When I interview people for Blackstone, I’m looking to understand whether an individual will fit our culture. At a minimum, this includes the airport test: Would I want to be stuck waiting at the airport with you if our flight were delayed?” If the answer is yes then you are on the runway to success.
Pay at Carlyle Group
Founded in 1987, Washington-based Carlyle Group has raised $61bn over the last five years, making it one of the fastest growing PE funds. With $217bn of assets under management as of March 31, 2020, Carlyle deploys private capital across four business segments: Corporate Private Equity, Real Assets, Global Credit and Investment Solutions. Under Kewsong Lee, who was appointed sole CEO in July 2020, Carlyle is looking to expand its offerings in private credit and direct lending.
Carlyle’s starting salaries are the lowest among the top three, but if you’re successful, you can end up earning more than at rivals.
Pay at KKR Group
Initially made famous among a broader segment of the population outside of financial services by the classic book Barbarians at the Gate: The Fall of RJR Nabisco, KKR, also headquartered in New York, continues to be one of the primary private equity players worldwide to this day. As at September 30, 2020, the firm has $234bn of assets under management.
Henry Kravis and George Roberts will continue to lead the firm they founded as Co-Chairmen and Co-Chief Executive Officers but in 2018 they appointed Joe Bae and Scott Nuttall as Co-Presidents and Co-Chief Operating Officers
While the base salaries of their junior executives don't appear to blow the competition out of the water, there is no doubt that your overall compensation ceiling at KKR is sky-high if you stay for the long term.
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