Recruiting in the Private Equity market is challenging and rewarding in equal measure, but a recurring theme is the difficulty, or more accurately, the frustration experienced by an individual seeking to join a fund. Many blogs are written with the aim of providing hints and tips about how to make this move, but frequently the frustrations experienced by those making the hiring decisions are neglected, and this blog seeks to address their views. As the “middle man” brokering the deal, seeing both sides (candidate and hiring manager) enables a balanced point-of-view.
After a few years in a sell-side advisory position, many candidates believe that a move to the buy-side is the only desirable route and view not achieving this transition as a failure. This is certainly not the case but only a small percentage of those wishing to make this move will successfully accomplish it.
The main aim of hiring talented young investment professionals is to maintain the momentum and to continue the track records that the incumbent professionals have achieved. Talent makes the key decisions, not the name above the door. It is often Investment Directors who lead the charge when hiring, and as rising stars in their respective funds, it is in their interest (as potential future Partners) to make sure the right people get hired.
Conversations with an Investment Director at a leading mid-market Private Equity fund provided an insight into the attributes that candidates are often missing. Notably, they highlighted the requirement for a shift from a sales-focused mindset to a critical one. “In corporate finance, every deal is a fee opportunity, regardless of the quality of the business. On the buyside it only takes one or two bad decisions to bring down an entire fund, so we are much more focused on identifying and assessing downside risks.”
We also discussed whether there was an increase in time pressure on hiring decisions to ensure the fund can keep up with the deployment of capital in a tough deal environment. Could this possibly lead to “they’ll do” mentality to alleviate short-term pressures, versus the more comprehensive search for future Partners?
“No, we will only hire future partners, although we cast a wide net with around 40-50 interviews for each hire.”
The lesson here for the recruiting fund is that patience is needed and that you can’t force a square peg into a round hole. Certain attributes and skills can be taught, but a shift in mind-set is far more challenging to bring about. The mental realignment is a critical factor for a candidate wishing to make the jump from sell-side to buy side, and they should strive to adopt more of a resolutely objective perspective, playing devil’s advocate, treating every decision as if there are unseen risks, and delving deeper into those that are more visible.