Public History on Private Equity
According to the most recent Global Alternatives Survey by Towers Watson, private equity managers currently control 22 percent of the alternative investments market. This puts them in a strong position, behind the big leader, real estate, at 35 percent, but ahead of hedge funds, which control 21 percent of the market.
While most private equity firms shared concerns at the beginning of 2012, conditions are markedly better 7 months in. Recently, leading PE consultant Bain & Company released their Global Private Equity Report 2012 which explores and outlines the current state of the PE market. While 2011 presented some adverse market conditions 2012 has, lately, shown some very positive ones.
Of course, the market is still in transition. Before the 2008 financial crisis, PE firms benefited from highly liquid leveraged loan markets, which broadened intra-firm strategy options and allowed for optimized returns. All of this came to a halt after the crisis with little sign that those levels would be seen again. As such credit is still hard to come by relative to 2007, with some lenders withdrawing from the PE market entirely. On the other end, the initial public offering market is stunted by its private equity dependence, which discourages fund managers from getting involved entirely. The fact that an IPO like Facebook’s can flop has caused a general air of caution in the market. Still, as early as 2010, the value and volume of European buyouts started to increase and initial public offering markets are still cautiously taking on larger assets with proven sales and revenue.
More dangerous is that private equity investments take place in a few privileged firms, which in some cases have their own distinct hiring rings you may or may not be a part of. Sixty-eight percent of all capital invested in private equity goes to the top ten private equity managers. More importantly, the Towers Watson survey points out that most of this money is held by North American managers rather than those in other parts of the world.
Slim Pickings
What we see then is that, even though there’s slow growth in private equity, it’s consumed by a few big firms which means even fewer job opportunities. Why? Part of synergy in big business requires cutting back redundant staffing, so increased unemployment happens not only as small companies shrink, but also as big companies grow. As such, senior analysts become junior analysts, and eventually those fired are looking for new jobs – usually another step down the ladder.
Although it is slow right now breaking into private equity is possible. As always, show your strengths and your industry specializations, and give the employer something unique that puts you in the best position to analyze that industry. Good luck!
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