In JobSearchDigest.com’s recently released “2013 Private Equity & VC Compensation Report,” there are two charts of interest to followers of the private equity industry job 
market: the first is regarding how the survey respondent found his or her current position; the second deals with what the individual did before entering the private equity industry. The two charts are reproduced to the right.
The first (top) chart indicates that the top way for individuals to get their foot in the door is through private equity industry recruiters and job boards, with over one-quarter (27 percent) of total respondents’ current jobs stemming from this method. Not far behind recruiters and job boards are personal networks at 24 percent and professional networks at 21 percent. The remaining ways individuals got their jobs at their current private equity firm include: previous employer relationship (11 percent), school alumni network (6 percent), and school career services (4 percent).
The second (bottom) chart shows that the industry is largely comprised of individuals with prior financial industry experience, with investment banking topping the list at 31 percent, followed by intra-industry movers at 17 percent, asset management at 4 percent, public accounting at 4 percent, commercial banking at 2 percent, and hedge fund asset management at 2 percent. In summing all these areas up, the total comes to 60 percent.
The remaining 40 percent stems from non-financial or academic background: the top of which is management consulting at 12 percent, followed by other industry experience at 11 percent, MBA students at 10 percent, and other students at 7 percent. The student and management consulting figures seem in line with other industries. What seems perplexing is that only 11 percent of the private equity industry employment stems from non-financial, non-academic backgrounds.
Why should this surprise anyone? Isn’t it good that the industry is so specialized that it takes from the best and brightest in the financial world rather than looking to non-financial industries for help?
Well, first and foremost, it is unusual for an industry to have such a strong connection with related industry competitors. For instance, only 40 percent of individuals working in the science, technology, engineering, and math fields (STEM) actually have an academic background in a STEM field. Why 60 percent for private equity?
The answer to this question probably lies in the ultra-competitive nature of the private equity industry. Unlike, for instance, the STEM or teaching fields, where things are less fast paced with more room for trial and error, there’s little to no room for error in the high stakes world of PE.
Would it be better if the PE industry diversified a little more into non-financial backgrounds? Perhaps. On the one hand, financial professionals tend to be more driven toward money, something important in the wealth maximizing world of private equity, whereas on the other hand, non-financial professionals could bring more introspection and technical expertise to the field. In all, the question really is: would an increase in the number of non-financial professionals working in the private equity industry improve returns?
Overall, the answer to this question could only be answered through trial and error, a risky proposition. It is odd, though, that only 11 percent of non-financial, non-student individuals came to be employed in the private equity industry. Perhaps individuals responsible for expanding the labor capital in the private equity industry should consider diversifying a little more.
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