According to a research report by McKinsey, at the beginning of 2020, private equity funds had invested over USD 4.1 trillion in companies worldwide.

Let’s take a closer look at private equity careers, including how to get your foot in the door, where you might fit in, what your daily routine might look like, and how you’ll progress.

What is private equity?

A private equity firm acquires an asset for one group of people, improves the operations and finances of the business, sells the company back to another set of people, and returns profits to both groups of owners.

A private equity firm is an organization established to make investments in privately-owned companies. These organizations usually consist of people who’ve had previous success in business ventures but now want to invest their time and energy into helping others achieve similar results.

What are the responsibilities of private equity professionals?

• PE analysts and associates: These professionals are employees who work for a company but have not yet been promoted into management positions. They often start by gaining some experience at an investment banking firm before moving into private equity. Most private equity firms don’t hire undergraduate students straight from school; they prefer even their entry-level employees to have some prior experience in finance. Associate work includes researching potential investments, doing due diligence, performing financial models, and preparing reports for investors.
• Vice Presidents and Principals: These professionals in their private equity careers oversee associate managers and help manage director-level executives in crafting investment strategies and negotiating deals with potential targets. Negotiations often involve carrying out complex tasks under pressure.
• Managing directors and partners: These professionals are the top executives in a private equity firm, and they make decisions on which investments to make and how to arrange deals. These are also the company’s contacts responsible for providing management direction for its portfolio companies. As partners, they’re essentially the blood vessels through which a private equity fund gets its oxygen; whereas managing directors manage each fund and turn their investments into high ROIs.

Why work in private equity?

Choosing a private equity career has various advantages:

• Private equity salaries are similar to those at investment banks, private equity professionals, according to Glassdoor, enjoy good remuneration packages. PE associates earn an average annual salary ranging from USD 150,000 to USD 300,000. Senior associates’ average annual salaries vary from USD 250,000 to USD 400,000 and so on.
• A private equity career delivers a stimulating mix of fundraising, investment, as well as financial and operational management.
• A flatter hierarchy is often found at private equity firms, you’ll be involved in decision-making from the start of your career.
• Private equity combines finance and operations, and it allows you to assist well-established organizations by providing reliable analysis and research rather than speculation to its founders.

How can you get a job in private equity?

Inexperienced business school graduates, no matter how clever, are likewise unlikely to get hired by these companies. This is, once again, a function of supply and demand. For every job vacancy, private equity companies can demand experience and attract a large number of eligible individuals.

Internships

Internships are really important. Apply for any private equity internship you can find during your undergraduate and business school summers. If you can’t get a private equity internship, look into venture capital, investment banking, or asset management. The idea is to demonstrate to recruiters that you’re not just another graduate with no experience.

Private equity certifications

Recruiters these days are looking for professionals with industry-specific finance skills and certifications, particularly in the private equity space. Apart from internships and academic qualifications, earning a private equity certification provides you with the required skills needed for working in private equity. Several institutions offer these certifications. Among them are the following:

• Financial Risk Manager (FRM) by the Global Association of Risk Professionals (GARP)
• Chartered Private Equity Professional (CPEP^TM) by the United States Private Equity Council (USPEC).
• Chartered Financial Analyst (CFA) by the Corporate Finance Institute (CFI).