Private Equity Careers
What is a Private Equity Analyst?
Private equity is capital that’s not listed on the stock market. Private equity firms use investor capital to make purchases of businesses and other investments with the goal of making a profit. Private Equity Analysts create deal origination and manage portfolio oversight. They create, maintain, and develop relationships with investment professionals to secure investment transactions. They work mostly with institutional investors who can dedicate large sums of money and long periods of time to ensure a profitable turnaround. Because privatizing companies is incredibly profitable, Private Equity Analysts have many opportunities to invest for their clients.
What is a Private Equity Analyst Responsible For?
Private Equity Analysts manage investment funds and portfolios of private companies. They research companies, both successful and those in distress, to determine valuation. Their equity research includes reviewing company management and locating potential for bringing a return on investment for investors.
Private equity firms must meet strict regulations outlined by the Securities and Exchange Commission. Regulations include reporting information on their size, their services, investors, employees, and potential conflicts of interest. Private Equity Analysts are accountable to investors and also government regulators and legislators.
Private Equity Analysts should expect to work at any of the following tasks:
- Provide analytical and asset valuation
- Provide strategic development and acquisition opportunities
- Perform detailed financial review for potential new investments
- Recommend strategies to achieve the highest return on investment
- Manage trading activities
- Monitor portfolios
- Create corporate presentations
- Develop reports
- Monitor business growth
- Create financial models
- Implement strategies to maximize profits
- Ensure company compliance with all regulations
- Assess risk management
- Assess stock value
- Ensure fulfillment of profit margins
- Conduct private equity fundraising
To be successful as a Private Equity Analyst, prospects will need to develop the following skills:
- Strong Analytical Skills. Private Equity Analysts should possess strong knowledge of varied industries and business models. They must analyze financial information and perform financial modeling as well as use strong forecasting abilities to make investment recommendations. They review executive management of companies considered for profitable investment, and they must compare the company’s performance, success, and viability against industry standards to determine a valuation.
- Negotiation and Networking Skills. Finding deals and then approaching potential companies for acquisition and investment potential involve excellent communication skills. Additionally, Private Equity Analysts must foster and maintain strong relations with portfolio companies, reflecting a positive image of the private equity firm that they represent. They must be able to convey investment strategies very clearly to executive staff, but they must also be comfortable with speaking to employees at all levels of the company without offense or alienation.
- Strong Industry Knowledge. Private Equity Analysts must be well-versed in the management and performance of various industries and be able to accurately review and asses their business models. Excellent business judgement and investment knowledge is a must to determine company direction and potential for equity investment.
Where Do Private Equity Analysts Work?
Private Equity Analysts work for private investment firms. These firms are normally set up as limited partnerships, and they reach out to large investors such as union pension plans, employee retirement funds, insurance companies, university endowments, charities, and even extremely wealthy individuals to raise capital.
What Other Career Options are Available to Private Equity Analysts?
Most career options available to Private Equity Analysts abide within the hierarchy of the firms they are employed in. They include:
Analysts
An Analyst, or Associate, is typically the entry-level position at a private equity firm. Analysts work with spreadsheets to determine the economics of company buyouts. They also source new deals, prepare investment materials for senior partners, and coordinate research. They also research companies and their portfolios to find profitable investment opportunities for their firms. Their reporting includes company valuation, financial review, and potential for profitable investing. They research the financial fundamentals of companies to determine which companies have the strongest potential to be very profitable.
The Senior Analyst compiles the information created by the Junior Analysts to determine key investment decisions. Based on key research, the Senior Analyst manages client portfolios, sources deals, handles transactions, and fields calls from investors. The Senior Analyst also reviews all research and refers potential deals to executive staff for deal consideration.
Vice Presidents and Principals
Vice Presidents and Principals of private equity firms supervise the Associates and Analysts as well as assist Managing Directors and Partners in the creation of investment strategies. They also negotiate deals with target companies, carrying the bulk of responsibility for negotiations for the firm.
Managing Directors and Partners
As the senior executives of private equity firms, Managing Directors and Partners are the ones who make the final decisions for the firm’s portfolio companies. They determine how to structure the deals, and they provide management guidance for the portfolio companies. Partners typically solicit investors and Directors manage individual funds, overseeing activities that lead to high dollar investment outcomes.
What Degree Do You Need to Become a Private Equity Analyst? What Do They Study?
Private Equity Analysts start their education with a Bachelor’s of Science degree in finance, accounting, statistics, economics, or mathematics. Private equity firms do not normally hire Analysts right out of college but usually hire after the Analyst has gained two to three years of experience as an investment banker analyst.
Candidates who want to pursue positions in the higher echelons in private equity firms should expect to complete a Master’s Degree in Business Administration to improve their chances of securing such positions.
How Much Money Does a Private Equity Analyst Earn?
Private Equity Analysts enjoy compensation that includes a base salary plus bonuses dependent on both fund performance and the Analyst’s performance. Because of the unpredictable nature of the financial industry, according to the private equity compensation site, salaries for Private Equity Analysts can vary widely. Entry-level salaries for Associates average $80,000 per year. Senior Analysts average $146,000 per year but Analysts with eight to ten years of experience can earn an annual base salary of around $150,000 to $200,000 plus a bonus structure of up to 90%.
Vice Presidents in private equity firms can earn approximately $300,000 to $800,00 per year and Managing Partners can earn about $500,000 and upward to millions per year. Those figures can rise dramatically after bonuses and carried interest payouts.
As with most positions in the field of finance, actual annual salary varies, depending on location, experience, and firm.