Private equity recruiting: changing focus

Fundraising, investor relations and client services roles have been the focus of recruitment within private equity in recent years. But, with many GPs having now completed fundraising efforts, firms are in investment mode or, increasingly, working hard to realise their assets. Against this backdrop, recruitment demand in the current market is shifting away from those with two or more years of industry experience and instead towards entry-level roles for associates who can assist in deal-doing, manage company information and provide comprehensive financial analysis as part of the origination process.

"Most of the fundraising slots have died down and the focus now is on good data," says Gail McManus, managing director at Private Equity Recruitment. "There are a few more analyst programmes in private equity now – they always need those extra pairs of hands in the business."

While this might suggest that the industry is seeing a shift away from the spate of partner hiring and succession planning seen in the last few years to a more stable platform in the middle levels of private equity firms, the reality is slightly different. Rather than growing businesses from the bottom up, these positions are only created for short-term gain, says McManus: "Somebody joins for two to three years but they're on a programme where they probably won't stay for longer. It's good experience for people but then they'll probably go on to another private equity firm or to do an MBA."

As McManus points out, only a few people from these US-style "associate pools" can be promoted, fostering what the company probably hopes will be its next rising stars, highlighting the importance of hiring junior-level staff and developing them into partners over time.

A quick glance at Palamon's recent spate of departures, however, indicates that this strategy is not always as beneficial as has previously been assumed. Last year saw the company lose five people, from investment director Owen Wilson, who left to join Electra Partners, to partner Holger Kleingarn who joined HIG Capital Partners. In a December 2013 interview with unquote", Palamon CEO Louis Elson commented that he expects people to leave and that it tends to be a natural consequence of teaching and mentoring.

Southern Europe and diversity
The move away from mid-level hires to a greater need for grass-roots growth is not the only trend starting to emerge in private equity recruitment. According to McManus, Southern Europe is seeing a resurgence in hiring activity, highlighting the increase in expected dealflow in the region. "This is the first time in ages we've seen any interest in the Italian market. More of a southern European focus seems to be creeping back after not hearing anything about them [Spain or Italy] for years." Spain in particular is attracting interest from both private equity giants and institutional investors.

The second trend does not seem to be based on economic recovery, but rather on wider social roles. "The biggest demand," according to McManus, "is for gender diversity. What our clients tell us is that they need more women to provide a more balanced mix in the business."

This will be music to the ears of EQT managing partner Thomas von Koch, who urged fellow participants at the EVCA Symposium in Vienna last week to foster diversity: "Gender equality is another issue catching up on private equity," he said. "The industry really lacks here and we have a long way to go, but opportunities are huge."

The industry's recognition of its male dominance feeds into the wider issues around private equity's public reputation. This is surely a positive step and will hopefully ensure that it provides observers such as Tamara Mellon with fewer reasons to attack. The former accessories editor of Vogue magazine and co-founder of footwear company Jimmy Choo, Mellon recently slammed the asset class for being too male-dominated and highlighted the differences between the way men and women treat each other in the boardroom.

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