What are the job market’s dynamics?
It’s more of a buyer’s market than a candidate-driven market. The larger players like Ardian and Lexington Partners appeal to people for various reasons, but most of the well-established bigger firms have partnership structures which are quite immovable.
Increasingly, there are organisations that are looking for people with more direct secondaries capabilities. Candidates see that as more intellectually stimulating and professionally rewarding because the market for very large LP stakes is dominated by a handful of players. In larger organisations the ethos is more about team and not ‘star culture’, which has many benefits in retention and succession risk but can make it difficult for people to move up. People can sometimes find their positions can be very narrowly defined and process-oriented.
GP restructurings is an evolving market and there’s still a limited supply of candidates with a lot of experience.
What types of roles are you recruiting for?
Very often you get blended roles; there are organisations that still define fund, secondary, and co-investing together. They are always in demand simply because of the breadth of investments candidates will have the opportunity to work on. There’s also increasing demand from organisations for people with direct and co-investment skillsets. With increasing complexity in GP restructurings and related investment opportunities, firms are increasingly looking for people with direct private equity experience, rather than secondaries. Some funds have even been explicit in rebranding their strategies and taken any secondaries wording out of the name.
A lot of private equity firms, whatever their strategy, recruit from investment banks and the competition for good-quality M&A bankers is very high. Unfortunately for secondaries, most investment bankers, if they’re going to move on, will try move to direct investment funds – buying assets rather than secondaries.
Junior people misunderstand secondaries as an asset class, and it is more difficult to hire junior people for secondaries funds than it is at a higher level. Our company has a specific team covering secondaries investing as an asset class across real assets and private equity as we believe that it requires dedicated focus; we spend a lot of our time educating candidates about the strategy rather than presenting it as a poor relation to direct private equity investing.
How about hiring for advisory roles?
That’s a candidate’s market. The buyside has a significantly larger pool of potential people and at the senior level people aren’t incentivised to leave because they’ve got longer term incentives such as carried interest that will keep them in an organisation. There’s less candidate liquidity.
As GP-led transactions become more acceptable, there are increasing demands on advisors and therefore they have to grow. But those firms are having to be creative about how and when they hire, because if you’re working at a good firm with well-developed GP and LP relationships and there’s no incentive to leave, you might as well stay put. They will hire M&A bankers on the advisory side because there are similarities. Most of the advisors will hire up to vice-president level from M&A teams where there is some correlation between secondaries and banks’ financial institutions groups. They’re doing M&A transactions for asset managers and insurance companies, so sometimes they’re familiar with the underlying potential client base. They won’t understand secondaries but if they’re smart, [advisory firms] tend to take the view that they can train them. Given the demands and sometimes difficult working lives in banks M&A teams many candidates can be drawn to the idea of working in smaller specialised boutiques where they get more client interaction, are working in a fast-growing and dynamic market, and will see a huge variety of work.
How much can an associate starting out in secondaries expect to earn?
[On the buyside] anywhere between £80,000 ($105,000; €90,000) to £100,000. There isn’t a benchmark in the buyside because some firms are more specialised and smaller will pay more at the lower end but pay more in bonus. The biggest firms tend to be more in line with banking associate salaries. If they’re hiring third-year analysts from banks to call them associates, salaries will be between £55,000 and £65,000.
Associate in advisory range will be £70,000 to £120,000 with some variation between independent advisors and those sitting within banking platforms.
What’s your advice for young professionals wanting to get into secondaries?
People often understand secondaries at a high level but they don’t really understand why their skillset and experience applies.
If you’re doing an MBA, meet people who do the job and understand the job better. Find the time to meet people in it, understand what they do, understand what their day, week, month looks like. Speak to a wide range of people at the big players but also spend time understanding the smaller specialists.
Use LinkedIn to send a friendly note to someone relevant and say “I’m considering a career in your market, would you be able to spend some time with me to explain what you do and what the skillset required is?”
The market is changing. People need to understand that now there are so many variations of secondaries investing that they shouldn’t just consider it large LP interests. That’s not the case anymore. It is more akin, in some styles, to complex direct investments. As a junior in direct investments you might make one deal in two or three years, whereas in secondaries you’re doing a lot more.
On the GP-led side every project can be different, it’s not uniform. Every problem has a different solution. For anyone involved in that market, whether it’s advisory or investing, it can be quite interesting.
Simon Nixon is the managing director and founder of Carpenter Farraday, a UK-headquartered executive search firm. He spent two years in corporate litigation for an oil and gas company and before then worked in risk management for a global power infrastructure developer.