One of the sought after targets of private equity firms every year is recently graduated trainees at investment banks who are fresh out of college and are less than a year into their two year apprenticeship program at Wall Street firms. Private equities make a strong pitch for these candidates who are typically in their early twenties as the firms believe that the grueling two year stint equip the junior bankers with the basic training and prepare them for key roles at private equities. While competition among private equities to hire top talent is nothing new, Wall Street Journal is reporting that this year competition has reached feverish pitch with some private equity firms starting the process months ahead of the normal hiring season.
Entry Level PE Associate Can Make $250K
The Wall Street Journal report cites people familiar with the hiring process as saying that private equities typically offer somewhere in the $250,000 to $300,000 a year range to these junior bankers most of whom hold degrees from Ivy league or other top universities. Among the private equity firms actively engaging with the trainees are Apollo Global Management and Centerbridge Partners.
The race to poach junior analysts is influenced by several factors as private equities compete with each other to take a first dib at those candidates considered to be cream of the lot. The financial crisis that hit Wall Street in 2008 has resulted in fewer students opting for career in finance while there has been an increase in students choosing tech jobs. Several leading universities including Harvard, Cornell, and Stanford have reported shift in preference among MBAs to technology jobs. This shrinking talent pool in Wall Street is partly attributed to the aggressive pitch by the private equities for junior analysts this year.
The report cites first year analysts whose internships with investment banks extend till the summer of 2015 receiving invitation for coffee from PE recruiters. Commenting on the extraordinary lengths to which the firms go to attract candidates, Patrick Curtis who runs a forum through his website Wall Street Oasis for candidates hoping to get into private equity says its becoming a joke.
Private Equity Sitting On Record $1 Trillion Cash Pile
A report by Bain points out that private equity funds are sitting on record cash pile as a surging stock market enabled many to exit several investments. The report says that escalating asset prices have made it difficult for private equities to find bargains. While the funds struggle to deploy capital, investors are adding to PE investments. The Bain report notes that undeployed capital with PE firms rose 12 percent to a record $1 trillion in 2013 on increased allocation from investors.
Impact On Job Market
The large cash cushion among private equities is a good sign for the job market. It is possible that firms with surplus funds may outbid other private equity firms for top talent. It is also possible that excess funds can provide flexibility to a PE firm to add certain positions which otherwise may not have been possible when funds are faced with cash crunch.
