Why investment bankers want to work in private equity (2024)

FAQs

Why investment bankers want to work in private equity? ›

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.

Second, you can say that you want to work in private equity because you'll gain much more exposure to the deal process. You'll learn significantly more by being at the frontline of the due diligence work. Third, you can say that you want to be actively involved with post-investment operational work.

Deal Origination: Investment banks actively seek out promising investment opportunities, either by identifying potential targets or by collaborating with private equity firms looking to deploy capital. This process involves rigorous market research, due diligence, and a keen understanding of industry trends.

Private equity firms hire their entry-level staff as associates and typically expect at least two years of experience as an investment banking analyst. Similar to investment banks, associates at private equity firms can work extremely long hours, especially during deal closings.

However, investment bankers tend to work longer hours, often working late into the night and on weekends. Private equity firms also tend to have a more relaxed work environment and offer more flexible hours. So, if you're looking for a career with less hours commitment, private equity may be the way to go.

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”).

Leave this field empty if you're human: 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.

In private equity, you'll also be responsible for a lot of different tasks. The deal teams are lean and your decisions will have a high degree of permanence, which is why I'd say the stress level is overall higher in private equity than in banking. Very importantly, there's also no one around to check your work.

At KKR, we seek to generate attractive returns across our private equity strategies by leveraging our one-firm culture and the collective expertise of our accomplished investment professionals, operational experts and support specialists to step change the businesses we invest in and create value for our clients.

Is investment banking the only way into private equity? ›

Consulting to Private Equity

Some firms will prefer only investment bankers; however, many are open to candidates with consulting backgrounds because they acknowledge that many top undergrads go into consulting after graduation.

Key Takeaways. Investment bankers and stockbrokers can make a lot of money on Wall Street, but they come with notable downsides—notably, long hours and stress. Private banking is a way to enjoy the high incomes offered by Wall Street, but with reasonable hours and less stress.

A role in private equity is a very competitive yet rewarding career path. Getting started in a profession in private equity (PE) requires strong analytical and networking skills to jumpstart a career at a PE firm.

The financial expertise acquired through investment banking can be applied in areas like asset management, private equity, venture capital, and hedge funds. Private equity offers a more attractive work/life balance but is also potentially even harder to break into.

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.

Because private equity investments take a long-term approach to capitalising new businesses, developing innovative business models and restructuring distressed businesses, they tend not to have high correlations with public equity funds, making them a desirable diversifier in investment portfolios.

As private-sector companies are usually profit-driven, you may find more jobs with a higher salary than government or non-profit positions. Ensure your ideal job entails a salary that will meet your needs. Private-sector jobs in larger cities may have a higher salary.

You have the ability to make a positive impact in your clients' financial future. Wealth management offers a favourable work/life balance. This field is often attractive to entrepreneurs. Wealth management can increasingly be performed remotely; reducing travel requirements.

The benefits of starting a career in equity research include more direct exposure to the stock market, speaking with different types of investors, and becoming a subject matter expert, all of which can arguably set you up to be a good investor in public equities.