As with investment banks, there’s a distinction between “front office” and “back office” jobs in private equity firms. Front office refers to the positions that actually generate revenue for the firm, the researchers, principals and dealmakers who bring money in the door and close transactions.
Back office refers to the people who support them, such as accounting, IT, HR, risk management and compliance people. It may not be as glamorous or as well-paid a position, but private equity firms need an infrastructure to support their business.
The knock against back office is that these positions are not as well respected by the alpha males in the front office. Even the top business schools are reportedly less eager to accept MBA students who’ve worked in back office positions, thinking that they would be less likely to go after the high prestige jobs after graduation. For this reason, some industry experts suggest that it’s better to do banking or trading at a small boutique firm rather than work in the back office of a large firm if you want to land a job at a leading private equity firm one day.
The flip side is that back office positions are often steadier, more secure, and less stressful jobs that have regular hours. They also typically don’t suffer the attrition and high burn-out rate of the front office crowd.
Accounting, financial control and administration are important jobs within a private equity firm. You might report to the firm’s controller or CFO, working your way up to being responsible for all administrative and compliance issues.
The job of investor relations staff is to build relationships with current and future investors and to play a key role in selling the firm’s advantages to potential investors. Marketing staff manage the external image of the firm through the development of various marketing materials, PR activities, events and presentations.
What sort of tasks would you be involved in with a back office position? An accountant in a private equity firm, for instance, might handle the reconciliation of investment positions, cash management, P&L analysis, waterfall calculations, distribution calculations, preparation of capital calls and distribution notices. At an entry level, he would need a bachelor’s degree in accounting and several years of accounting experience.
A controller would oversee fund accounting, office expenses and work with some of the firm’s portfolio companies as well. A manager of internal audit would help the firm maintain a robust audit system and assist with the firm’s overall risk management objectives. A director of finance for a large private equity firm might manage the fund’s accounting, taxation and reporting functions, and report directly to the firm’s CFO.
A marketing professional within a private equity firm would nurture relationships with deal flow sources, investment intermediaries, potential acquisition candidates and lending institutions. He or she would probably work with a managing director of the firm to identify investment and capital source targets, and manage the development of various marketing materials to reach them.
It’s important to note that there’s a growing trend among private equity companies to outsource many of these functions to third-party companies that specialize in fund administration. This trend is being driven by the increasing complexity of fund structures, along with institutional nvestors’ rising demands for information and transparency.
Next time we’ll look at the supporting roles within venture capital firms.
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