CFA & Private Equity.

CFA General
#21

There are many, many, many more MBAs from top B schools than charterholders.

#22

I was going to make this same point.

This is also a big reason why when I see "MBA " on a biz card, I think ‘wow what a dbag’

#23

Yes, this bothers me too. But these are usually people from a no-name MBA program, no?. I don’t think someone from a T15 MBA program would put MBA after their name.

#24

There may be 150k new MBAs in the US *every year* but there are only 5,600 new *top 7* US MBAs (assuming 800 per class) every year. You’re not competing against the 144,400 non-top MBAs for a PE job. On the other hand, all CFA Charterholders are the same (same brand, same test) so the CFA has less of a “branding effect” if that is what you think will get you a PE job.

#25

Talking about the CFA charter and PE is meaningless. Less than 5% of people in PE are charterholders (wild-ass guess). The whole point of the CFA is for people to engage in fundamental analysis of securities, not do deals. Therefore, comparing the “prestige” of a top MBA vs. that of a CFA charterholder is meaningless. Now if you want to compare a CFA charterholder gunning for a top buyside “stock-picking” role vs. that of a top10 MBA candidate…then you’re comparing apples to apples a little more.

#26

I want to know Greenman’s opinion about the CFP in PE.

#27

I’ve meet a ton of CFAs working for PE FoFs, tons. But i’ve also seen a ton of top MBAs in PE FoFs as well.

I’ve seen this career path -

  1. Find a local HNW, family office, big endowment, investment consulting firm and get on their PE team. Pass all levels of the CFA while you’re there. 2-5 Years

  2. Jump to a great PE FoF shop where they actually do co-investments, you’ll get to know the big PE firms pretty well at this point. 2-5 Years

  3. Jump to a BIG SWF who do lots and lots of co-investments or even do their own deals i.e. Ontario Teachers (don’t know about CalPERs or TRS but i bet they do a lot of co-investments). 1+ Year

  4. Jump to a PE shop, you should have enough real PE experience at this point. Might be able to get here from #2 as well.

Can you tell me what is a “turn of leverage” without googling it? If not, I suggest you do more research.

#28

I work with a ton of PE firms and very rarely deal with charterholders, or at least they don’t use the initials or put it in their bios. I constantly deal with folks from 10 ten MBA programs and generally see a very high concentration of one or two schools at each firm. For example, Firm A looks like it hires almost exclusively from Wharton and Firm B looks like it hires almost exclusively from MIT. As others have mentioned, most PE guys seem to have made a stop in IB first. The big exception I see personally is PhD’s who worked in pharma and made the jump to PE due to their ability to understand the science of new drugs if that’s what that particular PE firm focuses on.

#29

I think you know my opinion about the CFP in a corporate finance setting, and you’re being snide and argumentative.

#30

In short, the answer to your question is NO, the CFA will not be helpful to a private equity career, especially given where you are in your career path (i.e. in your early days). I spent several years before business school working in private equity / leveraged buyouts and offer the following observations that are particularly pertinent to pre-MBA candidates:

  • What matters most is your ability to understand and execute a deal.

  • What matters almost as much is your ability to think critically about whether an investment makes sense for the firm. This involves not only understanding the merits and risks of the asset in its current state, but also what you’d plan to do with it once you owned it (i.e. how do you grow the business and make it more valuable) and ultimately how you can make money via leverage and whether the transaction makes sense for an LBO mandate anyway. I say “almost as much” as the first point because at the pre-MBA level, you’ll be tapped to do things like company and industry due diligence and you’ll be doing that more and more once you prove yourself. However, on the onset, you need to show that you can build LBO and M&A models quickly and without supervision. That’s why people coming from investments banking are the most natural targets for PE hires, not to mention that as a private equity professional you will be dealing with bankers all the time (whether it’s in evaluating potential deals, getting through the diligence process, negotiations, and ultimately execution of a deal).

I didn’t spend a lot of time reading the 30+ comments earlier but since I have worked in equity research, private equity, and now hedge funds, I’m just drawing upon my personal perspectives to answer your question. But in short I agree with what 1BigStudMuffin and higgmond have said. If you want to get into PE, you either need to do what you can to get into investment banking (learn modeling, network aggressively, etc. since I assume you don’t work in banking right now), or get into consulting or equity research and just make yourself as savvy about analyzing businesses as possible AND learn how to build LBO models in your spare time. Lastly if you can get your hands on any investment memoranda from any banker/PE friends, it will be good practice to learn how to read them and formulate an investment opinion (always note that these memos put the company in the best possible light so developing a discerning eye for these materials is critical to being a successful PE investor).

#31

WOW Numi, thanks a ton for such a comprehensive post… This really set my strategy in place. Thank you. You are right, I do not currently work in finance and hence am trying to get the CFA as a possible leverage to get finance interviews… Thanks for the post once again.

P.S. I’ve sent you a linkedin request assuming that its OK. Just in case you wonder who it is :slight_smile:

#32

I just want to thank Numi and all other members for being part of this AF community and contributing to the forum. Helps a lot!

#33

Since you said you work in the IT sector, if you feel you can add something to a PE firm that focuses strictly on Technology that is where I would focus my time. I also work with a lot of PE firms and depending on the firm they seem to be populated with employees with degrees directly related to their Investment criteria.

#34

From my experience, living in Toronto, Note: it’s a far different industry than the one in US, the people working in PE DO have their CFAs and MBAs. They do it, just like I will because that’s the norm, it’s like going to university in 1990, it’s just something you do. Did going to university land anyone a job back then? I don’t think so, but it was a necessity, because putting two people together: one from university and one from high school, the university grad looks better. Therefore the CFA will do that, it’ll make you look better. But ofcourse, only compared to those without CFAs. The number of CFA holders is rising and the industry is competitive. So you’ll be exactly average, I think it’s experience that’s king, it’s what you’ve done vs what you’ve taught. But having said that, IMO the CFA is still very necessary

#35

From all my research, the problem with most people who want to go into PE is they want to go megafund like KKR which pays you the big benjamins. Those places care 99.9% about your MBA’s pedigree simply because you will know future CEOs of Fortune 500 companies, and that will help you land and close a deal.

#36

Dear …

You ur mind is genious about this field because u all knowlede abou it and also u pass CFA exam . u did right here private equity to all student help of read of ur forum…

Best Regards

Saurabh Singh

#37

Mind = Blown

#38

In PE the CFA doesn’t mean much… all they care is that you can MODEL like a god! Your modeling skills need to be above average. I work with some guys who can pretty much be financial modeling professors. These guys are CFA charterholders but they didn’t graduate from an ivy which hurts them.

The guys that work in PE doing deals have extensive modeling and investment experience. You can’t acquire these skills without eating, breathing, and dream about DCFs, LBOs, merger modeling on a daily basis. Also, having a support team to help you learn from your mistakes is huge.

Good luck!

#39

Being a graduate of one of top GE’s top training programs, I can tell you that you can accomplish your goals via targeting the PE sector internally at GE. There are many avenues to do so:

  • GE Lending Platforms allow you (with sufficient networking) to transition to GE Equity or GE Sponsor Finance businesses but you have to do your time. With the experience gained and dealing with PE firms, you have a much better chance at getting a foot in the door as the next step. I have personally worked in one of the segments and since most of the modelling is being done by the associates at the PE firms, you are running the #s using GE based models which is not the same as developing it from scratch but a good knowledge of how the models work and scenario/sensitivity analysis is critical.

  • Other ways to get in are middle market funds leveraged funds in the MidWest and the Equity Funds out west such as the Peacock Equity Fund and some newer VC funds in the Energy sector (harder to get into with most candidates having PE experience and from top tier grad level programs).

  • On a non GE basis, you may stand a better chance at the smaller boutique companies/funds and gain sufficient experience in time to try for the bigger ones. Again, networking is critical in this approach…every approach for that matter.

I have several friends and ex colleagues who are now working for such funds/business segments and some at Mezz and Leveraged Funds.

If you want it bad enough, you got to give it a shot!! Right place right time always trumps anything else!

Good Luck.

#40

i really like PE, i am currently doing ER. plan to float PE when i am through with CFA but going by what i read here, i think i need MBA along side. can anyone advice on any B-school i can do online. or can i go for executive MBA?