Private equity’s lure is a mix of prestige (Harvard, Dartmouth and Wharton alumni dominate), power (former U.S. President George H.W. Bush is amongst Carlyle’s advisers) and pay. Vice presidents routinely make upwards of $250,000 in cash compensation before the equity compensation is included.
Private equity’s appeal could be likened to the enduring popularity of the ancient Chinese card game, Mah Jongg, neither Byzantine rules nor limited seats has dampened the demand for on watchers to [hopefully] become players. Ready to “buy-in” into the buyout game? The Carlyle Group's recent push into Africa may be your biggest "tell" for a successful path to the industry.
MAPPING THE OPPORTUNITY … PATIENTLY
Undeterred by conventional logic, prestigious investment house, The Carlyle Group (“Carlyle”) recently established an office in Johannesburg, South Africa from which Carlyle will execute its pan-African investment strategy. The firm's press release is here. With 53 countries and over 1,000 languages Africa is far from monolithic. Discerning the differences require patient scouting and pragmatic research before entering any investment on the continent. The promise of astronomic returns in Africa is tempered by localized political and legal risk. The best investment managers emphasize deep research or as investment firm Greylock touts “boots on the ground research not just spreadsheet, desk investing". Carlyle’s decision to enter the African market was no different: it was the culmination of years of preparation and partnerships.
In approaching any ultra-competitive industry, knowing the taxonomy of the industry is critical. Recruiting firms, the "gatekeepers", are essential to filtering thousands of candidates for private equity firms. PE firms routinely hire recruiters such as GloCap, OxBridge and SG Partners. Recruiting specialists, such as Henkel Search Partners, that focus on early career opportunities can be particularly helpful. Distinctions within private equity also need to be appreciated. The difference between leveraged buyout, mezzanine investing, distressed investing etc. is significant in both technique and personnel attributes. Furthermore, patiently acquiring the skillset and nurturing the social networks will aid in your pathway to alternative investments. NYU Stern Business School has recently responded to providing its students and alumni the opportunity to foster relationships withing the Africa investing community by hosting its first Stern Africa Forum this year.
HUBRIS MASKING AS CONFIDENCE?
Relying on outdated, short-form descriptions of opportunities abound. “Black swans”, a term used as a metaphor representing outliers from the conventional wisdom, is widely used. For instance, many still see Africa as one region uniformly mired in the destitution. Carlyle’s decision raised eyebrows from many in the investment community because it was a tacit acknowledgement of an anachronistic investment thesis that had kept many professionals at bay. Should Carlyle achieve terrific returns in Africa will it be deemed a “black swan” or perhaps some new acronym created to market the new frontier capital region: A- BRIC?
The mere mention of your intent to pursue a career in private equity will illicit nay-sayers who are confident in their common logic. Is it really confidence to stay within the confines of a well-trodden road? After mapping the opportunity, confidence is needed to travel a rocky road to remarkability. School selection, self-assessment and experience are key to success. Top schools, such as Dartmouth’s Tuck Center for Private Equity, concur on the need an authentic, dynamic assessment of skills to have a bedrock of confidence to rely on. Resist the urge to embrace hubris by regurgitating the belief that your prospects are hopeless and that there can be no other path to a successful career.
HISTORY SHAPES PERCEPTION; CHOICE DETERMINES THE FUTURE
Other firms such as Zephyr Holdings, Actis and Greylock have long been active investors on the continent. However Carlyle’s recent decision to set up shop in South Africa is seen as a watershed moment. What changed? An informed, influential player made a choice.
Nairobi, Kenya and Addis Ababa Ethiopia, areas historically torn by war and famine, are now choosing to become the hot bed of the technologists and entrepreneurs. South Africa, just 20 years removed from Aprthied and with a human capital pool hobbled by decades of an oppressive Bantu education system, is by all accounts resurgent. Carlyle’s timing seems impeccable.
It is your choice as to the future you wish to create regardless of your perceived history. Additionally, despite have the “right” school, pedigree skills etc. your timing to enter the private equity industry has to be appropriate. As a general rule, after fundraising PE shops are more likely to hire new candidates. Another important time period in the private equity recruiting cycle is the beginning of the year, January through March, initial interviews. Offers are typically extended several months or a year after the initial contact. Also smaller firms are not bound to rigid recruiting structure and can be more agile with their hiring needs. On a granular level, your skill set and track record have to match the fund’s current investment style and focus.
MAKING YOUR OWN ALTERNATIVE PATHWAY
Aren’t private equity funds, well... supposed to be private – as in on the private markets? Carlyle seems to have taken a different route in following its other brethren KKR and Blackstone will become a public firm. Carlyle’s much anticipated initial public offering (IPO) should happen later this year. The structured, gilded path to private equity will elude most of us: that is born to wealth and connections and prepped from boarding school to Ivy League graduate studies. The alternative path requires sacrifice both in terms of time, money and effort. Forethought, planning, resilience and strategic timing are all strategies. A few impactful tactics to accomplish this goal include:
- Consider internships and pro bono assignments to new funds to gain valuable track record.
- Enlist professional advisors (e.g. Crimson Oak), niche specialized recruiters and take industry courses to enhance your candidacy.
- Focus on different players within the private equity eco-system that may be more willing to give you an opportunity, for example your local City Pension Fund, will typically have an allocation for alternative (including private equity) investments.
Private equity is both demonized and glorified. Grueling hours are as much the norm as is above average compensation. Its professionals are cast in two extremes: mercenary cost-cutters and corporate raiders or funders of innovation and growth engines for troubled companies. Finding your own alternative pathway also means being guided by your own set of ethics. Something which no school nor professional advisor can ever fully imbue. Grow & Lead.