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Topic Review (Newest First)
20-12-2011 04:46 PM
Unregistered I think the first 2 guys (gal?) debating about classification of PE industry really know their stuff even though they disagree at some points, hard to fake all the detailed insider knowledge.

The rest all outsiders trying to act expert - nothing of substance except shouting about high salaries & bonus.
20-12-2011 04:27 PM
Unregistered
Quote:
Originally Posted by Unregistered View Post
How come every thread I read through somehow shifts to topics on financial services/banking? Interesting..

Anyway since the latest discussion seems to be on PE, I wonder what all the hype is about? I'm from the sell-side and my seniors tell me that pay is much better here. So aside from work-life balance, compensation shoud favor sell-side roles (be it PE, Fund Mgmt or HF). Anyone care to validate this?

afaik, PE pays much better than IBD
20-12-2011 02:41 PM
Unregistered Sorry, I meant favor sell-side roles (vs buy-side roles PE, HF, FM).

Quote:
Originally Posted by Unregistered View Post
What talking you? Where got PE or HF hire sell-side one?
20-12-2011 01:50 PM
Unregistered
Quote:
Originally Posted by Unregistered View Post
I can't speak for the HF guys but for PE, if you do well, you get a cut (called carry interest) besides the normal salary which should be similar to financial industry rates. Associates get 80-100k USD/year. Partners draw about 400-500k USD/year. what you want is to hit a deal with a 10x multiple and that is where the big money comes in. Unless the fund is exceptional, most PE guys get their carry interest toward the end of the fund life. (8-10 years)
Most funds dun have a 8-10 years life. Carried interests are subject to complicated banking, deferral and clawback mechanisms. You cerntainly don't need to wait for 8-10 years until fold up to get them, otherwise who will want to join a company & wait 10 years for bonus.

By PE standards 10x multiple is slightly below average, not outstanding where big money comes in.

Obviously another outsider shooting through the hip.
20-12-2011 01:43 PM
Unregistered
Quote:
Originally Posted by Unregistered View Post
How come every thread I read through somehow shifts to topics on financial services/banking? Interesting..

Anyway since the latest discussion seems to be on PE, I wonder what all the hype is about? I'm from the sell-side and my seniors tell me that pay is much better here. So aside from work-life balance, compensation shoud favor sell-side roles (be it PE, Fund Mgmt or HF). Anyone care to validate this?
What talking you? Where got PE or HF hire sell-side one?
20-12-2011 01:35 PM
Unregistered
Quote:
Originally Posted by Unregistered View Post
How come every thread I read through somehow shifts to topics on financial services/banking? Interesting..

Anyway since the latest discussion seems to be on PE, I wonder what all the hype is about? I'm from the sell-side and my seniors tell me that pay is much better here. So aside from work-life balance, compensation shoud favor sell-side roles (be it PE, Fund Mgmt or HF). Anyone care to validate this?
PE, Hedge funds are buy-side business. The only sell-side aspect of this industry is during fund raising. Sell-side makes money quicker and faster. You are from the sell side, so you know better as well, typically it is very transaction based. I can't speak for the HF guys but for PE, if you do well, you get a cut (called carry interest) besides the normal salary which should be similar to financial industry rates. Associates get 80-100k USD/year. Partners draw about 400-500k USD/year. what you want is to hit a deal with a 10x multiple and that is where the big money comes in. Unless the fund is exceptional, most PE guys get their carry interest toward the end of the fund life. (8-10 years)
20-12-2011 10:11 AM
Unregistered How come every thread I read through somehow shifts to topics on financial services/banking? Interesting..

Anyway since the latest discussion seems to be on PE, I wonder what all the hype is about? I'm from the sell-side and my seniors tell me that pay is much better here. So aside from work-life balance, compensation shoud favor sell-side roles (be it PE, Fund Mgmt or HF). Anyone care to validate this?
20-12-2011 07:46 AM
workerbee
Quote:
Originally Posted by oneplusone View Post
The 2 of you above talk machiam like dam expert like that. How about telling us what position in which company and your annual salary and bonus first instead of all this rubbish about PE industry?

It is obvious you are just some low level executive in some SME trying to fantasize about being IB and finance industry.
I think the info provided is very interesting and not gave me some insight into the PE industry.

Your post? A typical response and zero value add.

Posts like the above are becoming an annoying pattern in these forums.
19-12-2011 06:34 PM
oneplusone The 2 of you above talk machiam like dam expert like that. How about telling us what position in which company and your annual salary and bonus first instead of all this rubbish about PE industry?

It is obvious you are just some low level executive in some SME trying to fantasize about being IB and finance industry.
14-12-2011 02:41 PM
Unregistered Hi there, thanks for sharing, but I differ from some of your views which I think are too black & white in a world where all sorts of hybrids exist:

Quote:
3) a PE firm is one where the entire fund is dedicated to Private Equity. Partners take active role (which include board positions) in the deals they invest and take it public or exit via trade sale.
Firstly from my observation, smaller firms tend to be more flexible and will seize whatever investment opportunities that come along as long as they think can get superior returns. They may start out with a focus on PE (the way you defined it) but invest in other instruments or tag along as joint junior partners when the opportunity arise.

I don’t see how a firm that ends up making some additional non-PE investments that results in a portfolio weightage of say 75% PE / 25% Others is suddenly not a PE firm. There is no international professional body that stipulates that a firm can only be called PE if 100% of its assets is in PE – I do agree that this is usually the practice in banks and large houses, but it is by no means a definition of what constitutes a PE firm itself.

As for your comment that partners take active role in ultimately unlocking value through IPO or M&A activity, that I do agree. But the problem with that is what exactly is meant by “active”? At what level of “activeness” does it qualify as a PE firm and at what level of “inactiveness” does it qualify as passive investor?

My own take is that control and influence in a firm can be roughly classified into 3 tiers:

a) Strategic level – Management of enterprise risk, capital allocation, capital structure, appointment of key executives
b) Business level – Formulation of key strategies like marketing, sales, supply chain management, R&D, etc.
c) Operational level – Nuts and bolts of the planning and executing of the company’s strategy

Depending on the investment and firm in question, deals can range from deep control even up to the operational level to just maintaining a strategic oversight, i.e. meet once every quarter during board meeting to approve and make decisions at the strategic level. Of course there are a lot of in betweens where partners make key decisions at the strategic level while maintaining a heavy influence at the business level.

There is also the question of control vs influence. Depending on the structure of the deal in question, a firm with an investment can end up just being one of the several key stakeholders that can influence decision, but not the sole authorizer. At what level of the sliding scale between control and influence does a firm cross over to become “active” and qualify as a “PE firm”?

Of interest also is that there is a debate now over what sort of property fund is considered as private equity since they seem to share some common characteristics of "nomral" PE fund while still having perculiarities unique to the real estate industry.

What I’m trying to articulate from all this is that while there are some general characteristics that most people can agree on what makes a Private Equity firm, I would not agree to box them up into defining traits such as "portfolio must be 100% private equity investments". There are always shades and hybrids in any industry as every company is unique and will not fall in nicely into solid well defined boxes.

Quote:
4) very few firms can survive by taking on one asset class.
From my observation, many small firms are surviving precisely because they take niche in a particular asset class or industry. Their claimed specialization in specific instruments is also usually their unique value proposition. I hardly see any small firms that go about on a broad based approach diversifying across multiple asset classes in their funds, this is the area of mutual funds and they will be outclassed by the BBs due to branding and access to capital.

Quote:
5) family foundations or a few rich individuals can come together with a few hundred million to form a fund. But most of them take on a portfolio approach and spread their investment across various asset classes. They are fund managers and they definitely will not take board positions in several companies. Their private equity are at most passive. Again, these are not PE firms.
Larger foundations sometimes have a specific team that focuses on PE that is separate from the general fund, but they are quite few and I think it’s probably not a good example, thus will retract my statement with apologies.
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