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What You Need to Know About Entering the Private Equity Industry

Private Equity jobs are the most competitive and sought-after careers in finance. People from the financial sector move to Private Equity careers because it is:

  • Sociable and interesting work as your team analyzes a variety of different industries
  • The compensation-better salaries, enviable carried interest, and generous bonuses
  • Continual learning about different kinds of businesses and what is required for them to succeed.
  • Opportunities for relationship building and networking to help career progression

Given the benefits, there is no doubt that this field has fierce competition, so candidates need to ensure they meet all the requirements and have the right educational background. Let us start with the basics of private equity.

What is Private Equity?

Private equity firms, buy organizations and improve them, selling them for a profit. They raise capital to purchase these organizations from external investors called limited partners (LP). They are called private equity because the organizations bought are private or eventually become private due to the investment. A job in this industry is partly investing, partly operational, and partly fundraising.

Who are Outside Investors?

They can be:

  • Pension funds
  • Endowments
  • Family offices
  • Insurance firms
  • High-net-worth individuals

Private equity owners also invest their own money into the funds, this is to make sure that the outsiders and their interests are aligned. The money raised is then structured as a limited partnership and is managed by PE firms to invest in the organization for a minority or a majority stake.

Qualifications required for Private Equity

The qualifications required to become a private equity analyst or to seek a private equity career are a bachelor’s degree in finance, accounting, or any other related field and sometimes an MBA as well. There are certain entry-level positions available, but usually, experience working in finance is a requirement.

Private Equity skills

Private equity is no doubt a lucrative career but is notoriously competitive to get into. Working in this industry for beginners in PE would require one to:

  • Have good commercial judgment and critical thinking about investments and companies.
  • Financial modeling, analysis, deal structuring, and LBO modeling are required
  • Communication skills to work with financial teams

Private Equity Certifications

One prominent way to stand out against the competition is by earning private equity certifications. These certifications can benefit many beginners in PE as well as professionals who want to become involved with the industry, from those who will be in a supporting role to those who will be making the deals. A certification will offer a better understanding of the latest insights and will help prepare for unexpected changes in this field.

There are many finances and private equity certifications available to aid your career in this field, such as:

  • Chartered Financial Analyst (CFA)
  • Chartered Private Equity Professional (CPEPTM)
  • Certified Financial Planner(CFP)
  • Chartered Investment and Management Accountant (CIMA)

Candidates can earn any one of these or multiple certifications to know the latest skills and competencies required to sustain themselves in this field.

Compensation and Work-life balance in Private Equity

Earning great compensation by putting in fewer working hours in this field is a myth. A private equity analyst would typically work 10 to 12 hours a day, it all depends on the workload. However, compensation is the main attraction of this field. According to Preqin, PE associates and senior associates in the US receive a salary ranging between USD 100,000-250,000 per annum. This is a huge sum of money at the end of the day compared to other jobs.

Written By

I am Nicholas, a freelance writer, and a professional blogger, who enjoys enlightening others about unknown and little-known facts. I love to write on all general and professional topics.

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