This week we published a podcast with two of the most plugged-in headhunters in secondaries. We discussed – among various topics – the generational crisis in the sell-side advisory business.
If you haven’t listened to the 14-minute podcast yet, in which we covered who’s hiring, the widening of secondaries across asset classes and the skillsets required for GP-led investing, you can find it here and here.
The recruiters – Mary Gay Townsend and Simon Nixon from executive search firms Norgay Partners and Carpenter Farraday, respectively – say there is a supply-demand imbalance when it comes to filling senior sellside roles.
As headhunters, they are helping their clients address this by widening their potential talent pools: recruiting people from the buyside to join the sellside. This isn’t anything new – notable examples of such moves include PJT Park Hill’s Jonathan Costello (formerly of Morgan Stanley), Fairview Capital’s Pablo Calo (originally at PineBridge, before joining PJT Park Hill) and Mark McDonald, who joined Credit Suisse’s private fund group after stints at Keyhaven Capital and Pomona Capital and who has since returned to the buyside.
One thing persuading buyside professionals to join the sellside is the latter’s compensation structure, which is “very competitive”, Townsend told us. A mid-level investment professional who has just got married and has a mortgage may be waiting years before they receive their first carry cheque, especially if the fund they work for has a European-style whole fund carry structure. Jump to the sellside and chances are that mortgage could get paid off a whole lot quicker.
The demand for more sellside professionals is partly driven by a wave of new entrants into the market, as Townsend and Nixon were quick to point out. Investment banks – both bulge and boutique – are trying to capture new revenue streams by building internal sellside secondaries units alongside their existing private equity sponsors groups. Citi and Moelis are recent examples that spring to mind.
Entrants aside, the sellside feels far from overcrowded – conversations with market sources say, if anything, there aren’t enough advisors to work on the potential deals out there. But here’s an interesting data point: when Secondaries Investor conducted its first-ever advisory firm survey in 2015, we reached out to just a handful of advisors. This year we’ve contacted almost 40.
Ps Sister title Private Equity International is seeking nominations for its annual Future 40 leaders of private equity list. Know someone who should be on the list? Find details here.