The Dream Team Dynamics: Inside the World of Private Equity Professionals

A Newsletter from Aura on the Backgrounds of Private Equity Professionals

Private Equity companies heavily rely on their people as a key asset for success. After capital under management, human capital is considered the most important asset for a private equity fund.
In this article, we examine recent human capital trends among a set of top private equity firms by funds raised in the past 5 years worldwide. Read on to learn more about talent dynamics in the private equity space and how they correlate with fund performance.‍

The sample comprises the top 119 funds raised over the past five years. Of these, the majority (72%) are based in North America, around 18% are based in Europe, about 7% in Asia, and the remaining 3% are in South America, Australia, or the Middle East. Based on the 2023 HEC Dow Jones performance ranking of large and mid-market buyout funds, we also consider fund performance as "top-performing funds" in our sample that appeared on either of these two lists.

Where do Private Equity firms recruit from?

Private Equity firms have historically hired junior investment professionals (Analysts and Associates) from top investment banks and strategy consulting firms. Goldman Sachs, JP Morgan, Morgan Stanley, BAML, and Citi top the chart of companies PE Funds hire from on a global level.

However, consulting firms such as McKinsey & Company, The Boston Consulting Group (BCG), and Bain & Company, collectively known as "MBB", as well as EY, PwC, KPMG, and Deloitte also figure among the top sources of talent. Ex-MBB talent is much more prevalent in Europe than in the United States.

Ex-MBB talent at European Private Equity firms is almost double (7%) compared to the US (3%). Data shows a difference between this percentage across top-performing Funds and other Funds. Interestingly, ex-MBB hires are more than double at top-performing Funds compared to other Funds in Europe and the US.

What is the typical educational background of investment professionals, and how does this correlate to Fund performance?

Building on the report on the relevance of MBA graduates across industries, published by Aura in January, we confirm that MBAs are highly prevalent in this sector. In fact, around one-fifth of employees in this sample of top Private Equity Funds hold an MBA. But how does this play out based on geography, and how is it linked to Fund performance?

In the United States, top-performing Funds have a higher percentage of MBA graduates (27%) than other funds (19%). Over one-fourth of MBA graduates at top-performing Funds in the United States obtained their degree from Harvard Business School, while Harvard graduates at other Funds account for around one-fifth of all MBA graduates.

The top three MBA schools for Funds in the United States in this sample are top-ranking universities, i.e., Harvard, Wharton, and Stanford. However, if we consider European Funds, the picture looks different. Not only are MBA graduates less prevalent among investment professionals (only 13% of the total), but top-performing Funds have a lower percentage of MBA graduates compared to other funds. Among the professionals holding an MBA, INSEAD is the second-most coveted school, while Harvard tops the list as in the US.

Aside from MBAs, the data also shows that there is a difference in the highest educational level in general between top-performing funds and other funds, and that this varies between Europe and the US. US funds have the highest degree of investment professionals with a Bachelor's degree (64%), while in Europe, more than half of the investment professionals (52%) hold a Master's degree. PhDs appear to be more relevant in the US than in Europe, but top-performing funds in the US hire fewer PhDs than other funds.

How does seniority correlate with performance?

The average seniority of investment professionals at Private Equity firms is approximately 12 years. However, this is heavily skewed to the left, with most professionals being within the first decade of their career, specifically between their fourth and tenth year.

Interestingly, there is a slight difference between top-performing Funds and other Funds. Top-performing Funds also appear to have a higher proportion of professionals in junior roles (Analyst and Associate), with this difference being more accentuated the US than in Europe. In addition, junior roles are more prominent, and employees in junior roles at top-performing Funds appear to be earlier in their career by one year compared to other Funds.

In summary, by benchmarking Private Equity firms with Aura data, we obtain a data-driven guidance on how Private Equity firms optimize their talent acquisition and workforce strategies.

We uncovered that the best-performing Funds tend to recruit junior professionals from top-tier sources like investment banks and prestigious consulting firms, maintain a higher percentage of MBA graduates from world-class institutions, and build a mix weighted towards younger talent. Although factors such as investment strategy, industry focus, deal sourcing capabilities, and operational expertise also play a significant role in driving fund performance, analyses like this can inform more effective talent strategies aligned with performance objectives, which may ultimately lead to higher returns.

At Aura, we support this type of analysis by making workforce data readily available. This enables the comparison of relevant metrics between cohorts of companies and candidates to develop a deeper understanding of workforce trends and drive meaningful change.

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Beatrice Costa
Client Development, Aura