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2014 MBA Guide to Hiring in the Private Equity, Venture Capital and Hedge Fund Industries

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Glocap Search is a leading buy-side recruiting firm that has been finding talent for investment management firms for nearly 20 years, and has placed over 1000 professionals into front-office investment roles in the US and around the world. The presentation contains advice and information on the hiring market for PE/VC and hedge funds, tailored for MBAs (though much is be relevant for other job seekers or job switchers in the investment management industry). Sections cover the current market for buy-side hiring, job-seeking tactics, making a fit with the right buy-side employer and a guide to compensation.

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2014 MBA Guide to Hiring in the Private Equity, Venture Capital and Hedge Fund Industries

  1. 1. MBA Hiring Outlook for the Buyside GLOCAP Q4 2014
  2. 2. GLOCAP Glocap Search – at a glance Established in 1997 and headquartered in New York City, Glocap Search is a recruiting firm focused on helping the buyside; Glocap has placed over 1000 investment professionals into investment management firms ranging from start- ups to PE mega-funds, leading VCs and the world’s largest hedge funds; given this, Glocap is one of the world’s largest and longest-serving buyside recruiters  3 offices nationwide, 40+ staff  Over 1 million candidates  Client retention rate of >90%, with deep penetration (for example, having placed people at 30 of the 40 largest HFs, and most of the top VCs)  Chiefly staffed by ex-industry professionals, top college grads and MBAs  Focus on pre- and post-MBA recruiting into investment professional roles (and other roles like strategy positions, marketing, COO/CFO roles)
  3. 3. GLOCAP Some Key Points about MBA Hiring  The MBA market for buyside recruiting remains competitive; it’s hard to transition into the industry (for 1st years, a relevant summer internship is key, regardless of prior experience)  Be proactive with funds as early as possible and stay in close contact with them throughout the year as their needs become clearer; be patient, do homework on opportunities and network  Recruiters can be a useful part of a job search: sign up on glocap.com and request to receive post-MBA roles now so that you may see opportunities that we start working on throughout the year
  4. 4. GLOCAP A Few Stats to Consider LEAVING B-SCHOOL WITHOUT A JOB?  At the top business schools, up to 25% of students don’t have job offers by graduation; by the fall, this drops to below 10% - but many settle (taking offers that aren’t always ideal) WHAT TOOLS TO USE TO JOB SEARCH?  At the top business schools, while 50% - 75% of job acceptances come from school facilitated opportunities (campus recruiting, internships through school, etc.) it means 25-50% came from student facilitated opportunities (networking, recruiters, summer internships found by the student, etc.) – it’s very important to do both! WHAT ARE THE OPPORTUNITIES OFF-CAMPUS?  Most funds don’t come to campus; many are not actively looking for MBAs. In the Hedge Fund space for example, bschools rarely have more than 30 HFs coming to campus, though the universe of registered HFs is now over 10,000
  5. 5. GLOCAP Agenda  State of the PE/VC/Hedge Fund Industry  The Job Market and the Competition  Getting a Job on the Buyside  Compensation
  6. 6. GLOCAP State of the Industry
  7. 7. GLOCAP U.S. PE Deal Flow by Quarter Source: PitchBook, as of 6/30/14 Deal-making has held fairly steady over the last few quarters$51 $28 $34 $55 $76 $86 $78 $135 $96 $86 $95 $120 $89 $91 $93 $178 $83 $101 $120 $151 $108 409 366 365 443 535 493 504 700 612 595 578 632 610 563 557 814 547 552 678 633 589 0 100 200 300 400 500 600 700 800 900 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2009 2010 2011 2012 2013 2014 Capital Invested ($B) # of Deals Closed
  8. 8. GLOCAP U.S. VC Deal Flow by Quarter Capital invested hit a post dot-com boom record in 2Q 2014 $6.5 $7.8 $6.6 $6.7 $10.6 $9.8 $10.2 $9.1 $9.1 $10.3 $8.7 $8.4 $8.8 $9.3 $9.1 $9.8 $12.5 $16.4 954 1,003 938 993 1,277 1,2021,229 1,175 1,4841,469 1,355 1,301 1,437 1,383 1,294 1,1621,155 1,117 0 200 400 600 800 1,000 1,200 1,400 1,600 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2010 2011 2012 2013 2014 Capital Invested ($B) # of Deals Closed Source: PitchBook
  9. 9. GLOCAP Hedge Fund Industry Assets Industry Assets remain at record levels, now estimated at $2.8T
  10. 10. GLOCAP Post-2009, the numbers of HFs have continued to slowly grow Estimated #s of Hedge Funds
  11. 11. GLOCAP Most of the funds are sub $100m; the largest, $5Bn+ funds control 2/3rd of the AUM Hedge Funds #s and Sizes
  12. 12. GLOCAP The Job Market & The Competition
  13. 13. GLOCAP There is a lot of competition amongst candidates from other top MBA Programs # MBAs in ‘15 class with Full Time PE/VC Investing Experience 2015 2014 2013 2012 2011 2010 2009 2008 Harvard 113 123 118 133 125 105 104 98 Wharton 92 83 98 84 79 77 49 42 Stanford 69 60 64 56 52 50 47 51 Booth 28 29 21 24 23 19 11 10 TOTAL 302 295 301 297 279 251 211 201
  14. 14. GLOCAP Recruiting Perspective on PE  Only a subset of MBAs with prior PE experience return to the buyside. As a result, more candidates are going the operating, consulting or entrepreneurial routes.  Two schools reported ~55% of 2013 MBAs returned to the buyside after graduation  In 2012, 65% of MBAs returned to the buyside  These numbers are down from 85+% who returned to the buyside prior to the downturn in 2008/9.  For MBAs with previous PE experience  PE internship opportunities seem to be decreasing over the past few years, although there are still funds using them as an extended interview process  MBAs are increasingly looking to diversify their experiences over the summer with internships in operations/consulting rather than more PE investing opportunities  For MBAs without previous PE experience  For those who broke into the industry after graduation, specifically those with two to four yrs of investment banking/consulting experience plus a summer PE internship fared best  There aren’t many of them, but a small number of these summer internships do turn into full time offers
  15. 15. GLOCAP  While still highly valued, having an MBA is not as much of a pre-requisite for obtaining or staying in VC long-term, unlike the PE job market  Venture capital firms are increasingly looking at people with more varied backgrounds  People accepting post-MBA VC jobs are those who have typically two years of banking or consulting followed by a few years of VC, start-up or operating experience within a technology firm (for example, Dropbox, Google, Facebook or Microsoft)  VC firms are looking for candidates with strong networks and a willingness to source  Firms are looking for more specific tech knowledge and vertical expertise  Those recruiting for post-MBA VC jobs are often recruiting against laterals (people with four to five years of post-MBA experience without an MBA) as well as people who have one to two years post-MBA Recruiting Perspective on VC
  16. 16. GLOCAP Recruiting Perspective on Hedge Funds Tailwinds:  The majority of hiring at hedge funds is at the junior and mid-levels (i.e. 2-8 years of experience, where most MBAs are)  These hires are relatively cheap, come in trained and do the majority of the heavy lifting  Junior bench is typically the first to see rebound in demand  Hedge funds are showing a growing interest in MBA talent  Larger, more established platforms increasingly on campus  Broader MBA skills and perspectives are being valued, in addition to investment/trading skills, as are fundamental PE skills  Big picture perspectives, risk considerations, extensive research experience  2014 showed instances of successfully negotiated comp packages by MBA graduates  Including guarantees and sign-ons  Some 2015 MBAs have already received offers from their summer internships at hedge funds
  17. 17. GLOCAP  An MBA still does not provide a SIGNIFICANT competitive advantage to hedge fund candidates  Despite increasing interest from select hedge funds for MBA talent, the vast majority still do not place a premium on the degree  There are instances in which MBA candidates are selected against (attitude, financial expectations, time out of the market)  The competition is as fierce as ever. You are up against:  Lateral hedge fund candidates  PE / VC candidates who want to move to the public markets  CFA / Master’s candidates  Majority of candidates who transition to a hedge fund from b-school have previous buy-side experience (HF, PE, long-only)  Few candidates with only investment banking, consulting, industry or “other” backgrounds successfully make the transition (summer internship is key)  Bottom line: you have to REALLY want it Recruiting Perspective on Hedge Funds Headwinds:
  18. 18. GLOCAP Getting a Job on the Buyside
  19. 19. GLOCAP Tips on Career Transitioning In our experience, you can typically only change one element of your career path at a time. For example, thinking about GEOGRAPHY, INDUSTRY and STRATEGY/SECTOR… STARTING EXPERIENCE TRANSITION TRANSITION US, HF, Credit London, HF, Credit US, HF, Cross-Asset US, PE, Industrials US, PE, Energy/Power US, HF, Industrials Japan, PE, Tech US, HF, L/S Equity generalist OR OR Reasonable Reasonable Challenging
  20. 20. GLOCAP General Tips on Getting a Buyside Job  CLARIFY GOALS AND IDENTIFY TARGETS  Know what you want, and be efficient with your time  Identify industry focus/expertise, investment stage and size of fund  Research funds that have hired MBAs in the past and know what they look for  DO YOUR HOMEWORK  Know what your strengths are; identify and convey your edge to show differentiation  Know your deals, speak to your roles  Prepare investment ideas  DEMONSTRATE YOUR PASSION  Offer to do project work/ consult (perhaps for free if you can do that)  Don’t rely on your resume for them to be impressed; it’s a door-opener at best  The best positioning is you’re not ‘looking for a job’; you’re looking to invest on their platform and add to their team which will improve that firm’s performance
  21. 21. GLOCAP Then…NETWORK Undergrad Bschool Alumni Former Employer Recruiters People like to help their own . . . the worst they can do is say no Fraternity / Sorority Industry events
  22. 22. GLOCAP International Perspective  RETURNING NATIONALS ARE OFTEN IN DEMAND  You have the language, the cultural understanding and the network, plus the US experience  IF YOU WANT TO STAY IN THE US  How does your background differentiate you? E.g. you’re from Asia and want to stay in the US and focus on Consumer sector investments, you can make the case you’re well-placed to understand the drivers of global consumer demand given your background  If you have family/ties to the US, play them up – firms want to see a commitment that you’re here for the long-term  NEW H1B VISAS ARE IN SHORT SUPPLY  But use OPT time  H1B transfers are pretty straightforward (be ready to educate firms not familiar with the process, and offer to pay and handle the paperwork)  If you’re a US citizen or Green card holder but this wouldn’t be obvious from your background, then highlight this in your resume! Firms aren’t allowed to ask about this, and generally look to hire the best regardless of citizenship status, but it can only help you
  23. 23. GLOCAP Hedge Fund and Venture Capital hiring occurs less systematically and more often occurs in Q1/Q2 of your second year For Hedge Funds, many people graduate without a job and pick up a strong position over the summer, in the fall The PE MBA Recruiting Cycle 1st Semester Aug – early Oct: Mega/Large PE Funds Oct – Dec: Large and middle market funds 2nd Semester Middle market and smaller funds Post Grad Just in time hiring needs Most larger funds with predictable annual hiring needs and a focus on pedigree come to market first – but there are more exceptions to that rule each year Large/ Upper Middle Market funds with unfilled spots and mid-size funds whose hiring needs have become apparent by later in the 1st semester Mid-size and smaller funds that may not have known needs prior to the new year and that are not as anxious about specific candidate characteristics Typically smaller funds with unforeseen hiring needs, although there have been notable exceptions in recent years Start of hiringEnd of hiring
  24. 24. GLOCAP Compensation
  25. 25. GLOCAP Compensation Data – PE/VC  Overall compensation has remained flat since the 2008/2009 downturn  Generally speaking, fund size drives buyside fund compensation for post-MBA graduates  PE PE compensation for recent MBA graduates  Many but not all PE funds offer MBAs carry within the first year of employment  VC  More variance in the total compensation figures in VC  Typically pay at a discount to traditional PE funds (sometimes as much as 30%+ lower  Usually structure comp for a higher base and lower target bonus  PE firms are more likely to give a sign on bonus than VC firms but it does vary  Many Investment Banks have announced they will increase Analyst comp (i.e. GS plans to increase base by 20%), we expect this to cause firms to revaluate compensation in the near term GLOCAP <$300M $300 - $750M $750M to $2B $2B to $5B Megafund Base $100K - $125K $110K - $135K $135K - $165K $140K - $175K $150K - $200K+ Bonus 75% - 125% 90% - 150% 100% - 150% 100% - 150% 125% - 200%+ Total $200 - $275k $225 - $300k $275 - $375k $315 - $425k $400 - $525k+
  26. 26. GLOCAP Compensation Data – Hedge Funds  For the MBA class of 2014, base packages were typically in the $125k-$175k range and all-in compensation expectation $240k- $450k  Several instances of successfully negotiated packages to include a sign-on (often $25-30k)  BUT typically few instances of bonus guarantees, more typically ‘bonus guidance’ GLOCAP Small <$500M Mid $500M - $4Bln Large $4Bln+ Base $125K - $175K $150K - $225K $150K - $275K Bonus $125K - $400K $250K - $850K $340K - $1.4M Total $250K - $575k $400K - $1.1M $490K - $1.7M *Compensation data for a “Level II” professional or ‘Idea Generator’ at mid-performing funds, based on 2014 comp data 2014 Compensation data for “Idea Generators”* On average, 5-10% up on 2013 for top performers
  27. 27. GLOCAP The Key Points in Conclusion  The MBA market for buyside recruiting remains competitive; it’s hard to transition into the industry (for 1st years, a relevant summer internship is vital)  Be proactive with funds as early as possible and stay in close contact with them throughout the year as their needs become clearer; be patient, do homework on opportunities and network  Recruiters can be a useful part of a job search: sign up on glocap.com and request to receive post-MBA roles now so that you may see opportunities that we start working on throughout the year
  28. 28. GLOCAP MBA Recruiting Contacts HEDGE FUNDS Anthony Keizner (NY), anthony@glocap.com Kristin Sartorius (MBA coordinator), sartorius@glocap.com PE/VC Diane Tseng (SF), tseng@glocap.com Sarah Moffet (SF), moffet@glocap.com Pamela Lang (NY), lang@glocap.com Kelley Finlayson (NY), finlayson@glocap.com 212.333.6400 JOB SEEKERS – CREATE A CONFIDENTIAL PROFILE AT www.glocap.com AND SIGN UP TO RECEIVE NEW BUYSIDE JOB POSTINGS

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