What Does a Career in Private Equity Look Like? (2024)

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Private Equity: What You Need to Know

Private equity firms are usually smaller than investment banks and can be as small as 5–10 employees within a firm. While historically smaller, there are also several large private equity firms emerging with large market caps. Regardless of size, associates employed by these firms use private equity funds for various portfolio companies across all industries and levels within a company life cycle. Private equity funds are brought in from fundraising outside capital, usually from investment companies or wealthy individuals. Funds buy outstanding portions of private companies or struggling public companies by buying out shares and delisting. Once portfolio companies are purchased, PE firms work heavily with management to rework company operations to cut down on unnecessary costs and inefficient work-related matters. Unlike hedge funds, private equity firms hold onto their investments for an extended period, up to 10+ years, before selling for a profit.

What is LP and GP in private equity?

Limited partners (LPs) are wealthy individuals or investment companies that invest their money upfront to private equity firms to begin their investment journey. Limited partners are not involved in company operations after investment and are only looking to turn a profit on their investment. General partners are PE firms and are responsible for the restructuring of company day-to-day operations and budgets to improve efficiency and make new technological advancements. From the beginning to the closing of a deal, general partners get paid by charging a fee to the company in question for their services.

Different types of private equity strategies

Private equity firms can use a few different strategies when choosing which companies to invest their funds in. PE firm's three main strategies are venture capital, growth equity, and buyouts.

  • Venture capital:This form of investment takes place at the startup phase in the company life cycle. Startups need outside capital to fuel company progression and reach growth goals. VC investors usually choose companies that are not ready to go public yet.
  • Growth equity:The companies that growth equity firms choose to invest in have proven successful and are well managed but need increased liquid assets to grow. Growth equity investors are either looking for a minority or majority share for a long-term investment.
  • Buyout:These companies are failing, either privately or publicly, and need to be bought out to improve in-house operations. Such operations may include budget cuts, management changes, and outsourcing.

Private Equity Jobs

Private equity firms usually look for entry-level associates with at least two years of experience within the banking industry. Investment bankers usually follow the PE firm career path as their next job and typically have a bachelor's degree in finance, accounting, economics, and other related fields. 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. Private equity professionals can advance fast within a firm and typically start as junior associates or analysts.

  • Juniorassociate/analyst: Employees in entry-level positions do not get to make deals or work independently through all process steps; instead, they are assigned more specific tasks such as reviewing data. Some required skills include financial modeling and the ability to work with a large amount of data.
  • Seniorassociate: The main difference between a junior analyst and a senior analyst is independence. Senior associates spend their time seeing a deal through from start to finish. In addition, generating ideas is a new job responsibility as you progress from junior to senior associate, allowing you to take on more responsibility in decisions.
  • VicePresident: Vice presidents have more of a communications role than junior positions. VP's deal less with data sorting and more with client relations and presentations. Technical skills matter less than negotiation abilities, and they also are responsible for in-house management and mentorship of associates.
  • Director:One step away from Partner, Directors are in charge of fundraising as well as facilitating deals. Most of the execution is delegated to the previously mentioned team members while the director handles the final negotiations and major company decisions.
  • Partner:Partners focus mainly on company representation, funding, and client relationships. This job has no technical component, but negotiations skills are required to present and convince Limited Partners to provide funding. Partners are also required to invest a portion of their wealth into the company to invest in their team.

Is Private Equity Right for Me?

As previously emphasized, starting a career in private equity is competitive and typically requires relevant experience and a robust set of skills. Private equity professionals work long hours and are highly competitive and must think critically, and have a passion for financial investing deals, not just following the markets. Other requirements to start a career in private equity are:

  • Excellentgrades and a notable transcript in school. (an MBA or advanced degree is not required but can be beneficial.)
  • Previous experience is often required and encouraged. In addition, excellent networking skills would be beneficial when landing an interview with a PE firm due to its competitiveness.
  • Strongproblem solving and analytical skills in addition to required knowledge on:
    • bolt-on acquisition analysis and market research conductions
    • confidential information memorandum (CIM) reviews and financial modeling formulation
    • ability to create leveraged buyout (LBO) for client deals

Obtaining an internship within a private equity firm or starting off in a related career path like investment banking or management consulting would be beneficial in exposing yourself to the environment. PE firms are typically looking for individuals with assertive, independent, and analytical qualities.

Other Possible Career Tracks in Finance

Explore other financial careersbeyond private equity:

  • Investment banking
  • Portfolio management
  • Risk analysis and risk management

How Can the CFA Program Help Me?

Equity investments is one of several important subjects that are covered through the CFA® Program. Because CFA charterholders have mastered a curriculum that provides comprehensive investment expertise, many employers list the CFA designation as a preferred credential for consultant roles. The CFA charter prepares professionals to adapt to the continually changing demands of the investment industry.

Explore whether CFA Program is the right choice for your next career steps

What Does a Career in Private Equity Look Like? (1)
What Does a Career in Private Equity Look Like? (2024)


Is private equity still a good career? ›

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.

What is it like to work in a private equity firm? ›

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.

Is private equity a stressful career? ›

but nowhere near as much as in management consulting. While the travel will be less, the work in private equity is very stressful and demanding, so the hours you actually spend working may be more stressful or mentally demanding.

Do private equity jobs pay well? ›

For the vast majority of first-year private equity associates, the base salary is around $135k to $155k. Then, based on fund performance, bonuses tend to range from 100% to 150% of the base salary.

Is it prestigious to work in private equity? ›

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.

Is private equity harder than banking? ›

As for hours, both private equity and investment banking can be demanding careers. 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.

Why not to work in private equity? ›

Private equity will confront you with the real life of business and will overlay financial considerations – companies can only exist if they make a profit, there is no way around it. Travel. Travelling Monday to Thursday as a consultant is not fun, but private equity professionals are also very often on the road.

How hard is it to get a job in private equity? ›

Yes! Private equity is one of the most competitive jobs to get – period. Not just in finance, but across the board. Private equity firms have very specific requirements for their hire candidates, both for entry-level analyst positions and for higher-level job openings.

Why not to go into private equity? ›

Private equity funds are illiquid and are risky because of their high use of debt; furthermore, once investors have turned their money over to the fund, they have no say in how it's managed. In compensation for these terms, investors should expect a high rate of return.

Is there a lot of math in private equity? ›

PE is all about deployment of capital via valuation of target companies, and return optimization based on the PE firm objectives. If you are the models person, the valuations person or the treasury person with multiple currencies exposures then a lot of math.

What is the average income for private equity? ›

What Is the Average Private Equity Firms Salary by State
StateAnnual SalaryMonthly Pay
46 more rows

How many hours a week do private equity work? ›

Private Equity Associate Lifestyle and Hours

At many smaller funds and middle-market funds, you can expect to work 60-70 hours per week, mostly on weekdays, with occasional weekend work when deals heat up.

What is the lowest salary in private equity? ›

Private Equity Associate Salary. $69,000 is the 25th percentile. Salaries below this are outliers. $120,000 is the 75th percentile.

How do you break into PE? ›

Many people who work in private equity have master's degrees in finance or MBAs from top institutions, so even if you can't directly enter the field after graduation it can still help you later on, after accumulating a few years of experience in a related field.

Where do people go after private equity? ›

Those who wish to broaden their horizons or simply desire a change of pace will often migrate to similar sectors such as hedge funds or portfolio management. Additional exit options include: Being hired as a chief analyst by another firm. Starting a new private equity organisation.

Does private equity have a future? ›

As Private Equity (PE) houses and portfolio companies look ahead to 2024, they anticipate a changing exit landscape, continued hurdles in meeting their investment objectives and ongoing talent challenges. 2023 did not bring the dealmaking rebound many PE houses and portfolio companies had hoped for.

What is the future of private equity? ›

Summary. Private equity firms will focus on five key trends in 2024. Deploying artificial intelligence will lead the way, followed by investment in infrastructure particularly related to energy projects. Value creation will also be a priority as firms seek to improve strategic and operational efficiency.

Is private equity slowing down? ›

With M&A activity continuing its lower volumes globally and the IPO markets slow, although slightly thawing, sponsors saw diminished exit opportunities in 2023. Global private equity exits shrank in value from approximately $783 billion in 2022 to approximately $574 billion in 2023, down more than 25%.

Does private equity do well in a recession? ›

Private equity can be a very well-performing asset class during a recession. By understanding the risks and opportunities and having the right processes and technologies in place, your firm can punch above its weight and deliver high-quality returns to its LPs.

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