How to Get into Private Equity with Little to No Experience?

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  • Post last modified:November 19, 2022

Private equity is one of the toughest career paths in the financial industry. However, it is also true that it is one of the most lucrative and rewarding careers. But how to get a career in this industry? How to get into private equity with little to no experience?

To jumpstart your career in private equity, it would be best to get a job in the financial sector right after you graduate. You can then try to transition laterally into investment banking. After that, do a lot of networking and even more studying in your time.

Read on to learn more about how to get into private equity with little to no experience.

How to Get into Private Equity with Little to No Experience?

how to get into private equity

Private equity is an alternative form of investment that usually deals with capital that you can’t find in the public exchange. In private equity, the funds and the investors directly deal with private companies. Usually, they get involved in the public company buyouts, leading to delisting the once public equity.

Institution and retail investors supply the capital for private equity. This capital is used to fund new technology, company acquisitions, expansion of a company’s working capital, and others.

Private equity funds have Limited Partners. These are the people who own 99% of the shares. They have limited liability when it comes to operations. The remaining 1% is with the General Partners. They have full liability while being responsible for executing trades and general operations.

Requirements You Have to Meet

To break into private equity, there are certain requirements you have to meet. You can get into this highly lucrative field with these requirements:

  • You are a UG in finance or any other field of finance – You should also come from a well-known institution.
  • If you’re an investment banking analyst for an investment bank or an in-between bank.
  • You are already in a small private equity firm, and you want to transfer to a bigger company.
  • You have a strong background in investment banking, corporate development, corporate restructuring, or strategy consulting.

If you don’t fit in any one of the categories mentioned above, getting into private equity will be extremely difficult. You can still try, though. However, note that the odds of you getting into even the smaller private equity firms will be slim to none.

Tips For Getting Into Private Equity

There are also important factors to consider if you want to be part of the private equity industry. Some of the most critical points are:

Age Might Be a Problem

If you want to get an entry position in private equity, you will have a better chance of being under 30. However, if you want a more senior position with enough relevant experience under your belt, then age does not matter at all.

Experience Helps

Most people who went into private equity needed a couple of years of experience in finance before they can join. However, there is one exception. This is if you managed to score an internship in a private equity firm while being an undergraduate.

Do multiple internships in as many private equity firms as you can to have the edge over others. It is why you need to be good at networking. Knowing people in private equity will mean lesser barriers to climb over.

Education Requirements for a Private Equity Career

To break into private equity, you also need to have the following educational requirements:

1. Masters in Finance

If you want to get into private equity, the most important college degree you need to go for is a Master’s in Finance. Almost 27% of people in private equity hold a Master’s degree. If you’re currently pursuing a Bachelor’s degree in Finance, strongly consider getting a Master’s in the same course.

2. An MBA from a Top School

Private equity firms are very picky when choosing associates. As mentioned earlier, you will need an MBA in Finance to get your foot in the door. However, note that not just any MBA will do. You need to get your Master’s degree from a top school in banking and finance.

In the US and Europe, there are only a handful of educational institutes with top-notch banking and finance courses. These include Harvard, Wharton, Stanford, Oxford, Cambridge, and the like.

If you have the means to, consider getting an MBA from any one of the universities mentioned earlier.

3. Chartered Financial Analyst

You can also aim to become a CFA (Chartered Financial Analyst) first, so you can get into private equity later. However, I must warn you that becoming a CFA is not for the faint of heart. You will need four years of full-time relevant work experience. There are also three reasonably tough levels you need to clear.

Also, note that pursuing a CFA degree does come with a lot of benefits. For one, you will have a lot of career options, not just in private equity. You can go into investment banking, equity research, and hedge fund managing, among many others.

4. CAIA, ACA, and Other Similar Certifications

Aside from getting a CFA degree, aim for additional qualifications, too. Some examples are Chartered Alternative Investment Analyst (CAIA) and Associate Chartered Accountant (ACA) certifications. Even though only 2% of private equity professionals have CAIA or ACA degrees, they are still helpful in getting past the interviewing process.

Required Skills for a Private Equity Career

how to get into private equity without banking experience

It also helps if you have all the skills needed to get into the private equity field. The three particular skills you need to be good at are:

1. Technical Skills

These are the most basic skills you should work on to get into the private equity scene. These skills cover the following:

  • Financial analysis,
  • Financial modeling,
  • Valuation,
  • Deal structuring, and
  • Due diligence, among many others.

If you do not know of any of these areas, start taking online courses for them as soon as possible. Sign up for courses that you can repeat as many times as you want until you master the said skill.

2. Networking Skills

Networking is one of the most important skills you should learn if you want a career in private equity. It helps even if you are not from a prestigious school and your career path until now is not that appealing for most private equity firms. If you have a decent background with excellent networking skills, you may have a shot at getting into private equity.

How do you develop your networking skills? First, you need to be upright and have confidence in your abilities. Communicate briefly but professionally, and immediately state what you have to offer.

To become a networking expert, structure your story, then use it everywhere you can. It could be when sending an email or personalizing a phone call. Use it when speaking face-to-face with the senior officers of a private equity firm, too. As a result, you’ll speak with no hesitation, thereby sending your message across clearly.

In the beginning, you will receive quite a lot of rejections. However, with time and practice, you will be much better at networking.

3. Cold Calling

Many people do not consider cold calling a skill, but it actually is. There are only a few who can claim that they are masters at it. You can consider cold calling as an extension of networking. If you are seeking a career in private equity, then cold calling is your best friend.

Although you can send emails to different private equity firms, they will reply with their contact numbers. However, you will most likely receive a rejection letter. If you call the HR personnel directly, though, your success rate will likely rise significantly. Start with the smaller private equity funds where the recruitment process is not quite as structured.

The objective of cold calling is to get an interview. This is where you need to apply your networking skills to the fullest. Now, there is a good chance that you will not clear the interview, but avoid quitting just yet. Offer to become an intern for a couple of months.

This means you will only be there to learn how to do the job so that you won’t get paid. However, you can add the experience to your resume later. It will greatly increase your value. You can also take the chance to impress the people working there, increasing the chance of the company hiring you.

Connect with Corporate Private Equity Headhunters

get a private equity career

Here’s the thing, you will not find private equity openings in your usual online job portals. Private equity firms are small in terms of workforce. That said, they usually do not have their HR department to take care of hiring additional personnel. They depend mostly on corporate headhunters to scout for potential additions to their ranks.

It would be in your best interest to locate them and make yourself known with that in mind. This is also a good time for you to apply your networking skills. If you have a couple of headhunters on your side, you can easily get into any private equity firm you like.

Mentioned are just a small fraction of the skills you need to use if you want to get into the lucrative field of private equity. Sharpen such skills as much as you can. That way, you can get the attention of private equity firms.

What Can You Do If You Don’t Fit the Requirements?

Can you still break into private equity even if you do not have the requirements stated earlier? If you are passionate and have a lot of enthusiasm for private equity, here are a couple of options you can try:

  1. If you have banking experience but are over 40 years of age, you can still join a private equity firm as a consultant. Alternatively, you can work as an operating partner.
  2. An MBA with relevant experience in banking and finance (particularly investment banking), consider joining as a post-MBA associate.
  3. You can also consider going into real estate positions first to make it easier to get into private equity – A good stepping stone would be commercial real estate brokerage.

How Do Private Equity Firms Make Money?

Private equity firms mainly receive their revenues from management fees. Fee structures will depend on the individual firms. However, they usually include management and performance fees. Some companies charge a 2% yearly management fee on managed assets. They also charge around 20% of the profits made from assets’ sales.

Positions within a private equity firm are few and far between. When a position does open, dozens of people will pounce at the chance to get it, and for a good reason. Take into consideration a firm that has over a billion dollars in assets under management.

This size of a company would have no more than two dozen investment professionals under their employ. And just 20% of the company’s gross profits can generate millions of dollars in fees. It is why many investment professionals would love nothing more than to break into private equity firms.

In a mid-market private equity firm that deals with $50 to $500 million in equity, associates usually rake in salaries within the low six-figure amounts. Meanwhile, a vice-president could earn up to half a million. Now, a principal can earn at least a million.

Conclusion – How to Get into Private Equity

To improve your chances of breaking into the private equity industry, get a strong job in finance right after you graduate. Once you are in, do your best to transition laterally into investment banking.

It also helps to do many cold calls and use your networking skills most of the time. You may also need to sacrifice much of your free time, but it will be worth it when you get into private equity.

The road going to a gratifying private equity job will be rough. You may also encounter a few barriers on your way. Despite that, note that if you persevere and work hard, you can get into this prestigious industry even if you do not have most of the requirements.