Why is it so hard to get into private equity?
Not only do private equity firms have extremely particular job requirements, they also offer relatively few roles. To get into a private equity firm, you not only need the “right” background and education, you also have to be a solid fit with the existing team, and be ready to ace the private equity interviews.
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.
These odds are similar to or worse than playing any of the professional sports. Less than 1% of the population size pursing any competitive field is likely to compete at the elite level. In the highly competitive world of finance like hedge funds or PE, less than 1% of students break into one of the top 10 firms.
Unfortunately, you have a very low chance of getting into private equity from these fields. Overwhelmingly, private equity firms hire: Investment Banking Analysts at bulge bracket and elite boutique banks, as well as a few In-Between-a-Banks.
Private equity interviews can be challenging, but for most candidates, winning interviews is much tougher than succeeding in those interviews. You do not need to be a math genius or a gifted speaker; you just need to understand the recruiting process and basic arithmetic.
| Private Equity Salary Data (2023) | ||
|---|---|---|
| 1st Year Associate | $135k – $155k | $140k – $230k |
| 2nd Year Associate | $160k – $180k | $170k – $270k |
| 3rd Year Associate | $180k – $200k | $180k – $300k |
| Senior Associate | $200k – $220k | $210k – $390k |
In private equity, you'll work hard, but the hours are not nearly as bad. Generally, the lifestyle is comparable to banking when there is an active deal, but otherwise much more relaxed. That said, there is some upside other than money and career prospects.
PE firms are small, tight-knit, and full of extremely smart and highly motivated people. As a starting point, the right career background is critical.
Investment banking and private equity are two of the most prestigious and competitive areas in finance, offering significant opportunities for advancement and high compensation.
Also, low grades are more of a problem for the most “prestigious” front-office roles: Investment banking, private equity, etc. You could still win middle or back-office roles with a lower GPA, and you could also win non-IB-but-still-revenue-generating roles such as ones in commercial real estate or real estate lending.
What pays more PE or IB?
Private equity firms are investment businesses comprising investors who use their capital to invest in private businesses. Those working in private equity can often achieve a higher salary, but their income may be less stable than those working in investment banking.
Investment bankers want to leave for private equity firms and hedge funds because the money is better and the hours are shorter. Plus, the office environments aren't nearly as stuffy as the ones at investment banks.
Analysts at all types of private equity firms earn significantly less than Associates, just as Analysts in IB earn significantly less than Associates. In fact, PE Analysts often earn less than IB Analysts! So, you might initially make less money if you start in private equity.
Highlight specific skills, such as financial modeling or due diligence, that are relevant to private equity. Demonstrate your passion for the industry and the firm's specific sector focus. Showcase your track record of success in past transactions, highlighting any positive impact you've made on portfolio companies.
The types of questions in a private equity interview include technical knowledge, transaction experience, firm knowledge, and cultural fit. In addition, you may be asked to complete a case study. Answering questions with confidence and consistency is the key to converting an interview into a job offer.
Research the firm
Researching the firm is a critical step in preparing for private equity interviews. While it may seem obvious, many candidates overlook the importance of thoroughly understanding the firm they are interviewing with. This goes beyond simply reading their website and memorizing their key statistics.
While ZipRecruiter is seeing annual salaries as high as $277,500 and as low as $43,500, the majority of Vice President Private Equity salaries currently range between $115,000 (25th percentile) to $190,000 (75th percentile) with top earners (90th percentile) making $244,500 annually across the United States.
| Annual Salary | Monthly Pay | |
|---|---|---|
| Top Earners | $241,298 | $20,108 |
| 75th Percentile | $187,500 | $15,625 |
| Average | $143,004 | $11,917 |
| 25th Percentile | $113,500 | $9,458 |
It's extremely difficult to get into private equity, and once you're in, the job is stressful and requires long hours and sacrifices, especially when deals are in their final stages.
As we detailed earlier, the initial roles in private equity are focused on research and math. You'll need analytical skills and knowledge of formulas and financial modeling to work with the software that makes this data-driven culture function.
Is private equity more stressful than consulting?
With this power, however, comes greater accountability, as they're more deeply involved as company shareholders. This can lead to greater stress in private equity than in consulting firms.
These roles are also responsible for setting the overall investment strategy within a firm, which is a key undertaking. A managing director (MD) is the most senior position at a private equity firm.
Most employees at highly-rated private equity firms are hired after earning at least an MBA or master's degree in finance and then spending a few years working for a top organization as a consultant, accountant, investment banker or any other similar role.
This exclusivity is because of the length of a private equity investment, as well as the risk of a complete loss of investment. Second, private equity funds are often difficult to gain access to. Larger institutions and investors get the best terms and first access.
Usually, the key individuals will either be the investment firm's fund managers or general partners. This clause is usually used by venture capital firms, limited partnership companies, private equity firms, and mutual fund companies.
