Million Dollar Question: The Nuts and Bolts of Top Private Equity Firms

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The Nuts and Bolts

Private equity is a concept which is about the investment of private money in private companies or publicly listed companies. It involves investment schemes which lay down the details and the terms and conditions of the investment made.

 

General partners (GP) and limited partners (LP) are the two kinds of entities involved in the management of top private equity firms. The general partner is usually the firm and the employees who work there. On the other hand, the limited partners are referred to as pension funds banks, high net worth individuals (HNWI), and insurance companies. The limited partner, basically, is anyone who has spare money to invest.

 

The size of top private equity firms may vary depending upon the fund type, GP reputation, region in which the firm is based. The money involved with these private equity firms can be anywhere between the limits of $100M to $10B.

 

There are different types of funds that the GP deals in such as buyout, mezzanine (Preferred securities and subordinated debt), growth equity, venture capital, infrastructure funds, real estate, and investments in companies which are financially-challenged. These funds are basically focused on either one or more sectors. If no hard-core delineation is found among the sectors, the funds are called sector-agnostic.

 

Here is where the private equity professional enters. They are paid lavishly because they are involved in such high-risk investments. They help the equity firms in raising funds from the limited partners, sourcing and executing investments, and generating returns when investments are being exited from.

 

The roles and responsibilities of a private equity professional are to find a new capital source which can be raised. The LP has the minimum liability and funds are invested in a different set of companies called the portfolio companies. The LPs depend on GPs for the investment monetization.

 

There are not many professionals working with the leading private equity firms even at firms like Blackstone, Kohlberg Kravis and Roberts (KKR), Texas Pacific Group (TPG), and Sequoia Capital. The risk involved in the investments going wrong are very high and these firms search for a highly-talented private equity professional.

 

The professionals in private equity must be willing to work at odd hours with clients and while researching the market, must have a sound knowledge about various classes of equity and the portfolios, have decision-making abilities, and possess a sharp intuition.

 

The firms and the jobs in these firms have come a long way from the times when there used to be no jobs for associates. But the scenario has transformed today. There a lot of junior level and associate level positions for new graduates and post-graduates to enter the market. An excellent certification from reputed business schools and technical skills will help you clear the interviews and establish yourself on the lowest rung of the ladder. From there, you can slowly make an ascent to the highest echelons of the investment banking and private equity authority level.

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