Considering a private markets career? The experts share their tips
The growth of private markets offers multiple routes to a rewarding and stimulating career. Here’s five pieces of advice from alternative investment professionals for candidates looking to break into the market.
Private markets have become one of the most exciting areas of the investment industry. The opportunities are vast, with investors across private debt, private equity, infrastructure and real estate all sitting on plenty of dry powder they are keen to put to work. (See Figure 1.)
This positive trajectory for the private market means there’s room for firms to add more talent to their teams. According to a May 2024 survey by Preqin, 89% of private capital firms plan to maintain or boost their headcount over the next 12 months. So how should those looking to enter a private markets career best position themselves?
#1 Know your market
The first step is to consider the unique characteristics of the private markets to understand what potential employers are looking for. While many private investment roles require the same skillset as in the public markets, the needs of employers will differ across different asset classes.
Private market strategies can be broadly split into three areas: private equity (comprising buyout, growth equity and venture capital), private debt (spanning direct lending and distressed debt) and real assets (which includes real estate and infrastructure). Each has different expectations when it comes to generating returns. Private debt investors, for example, prioritize a reliable income stream, while real asset investors look for regular income as well as inflation protection.
In private equity, employers often look for staff with outstanding interpersonal skills to handle direct interactions with portfolio companies.
“We look for an individual who’s inquisitive, and on the investment side, someone possessing soft skills to deal with company management, convince them about a new strategy and be able to win them over,” said Vicky Yick, Head of Greater China Private Wealth at Partners Group, who was speaking on CFA Institute’s Private Markets webinar series.
#2 Consider specialization
An industry focus may help to open doors, particularly in complex and emerging industries such as biotechnology or artificial intelligence. Private equity firms tend to value specialization, but it’s less essential in private credit, according to Kerrine Koh, Managing Director, Client Solutions and Country Head for Singapore at Hamilton Lane.
“In a private equity controlling shareholder buyout situation, the equity holder or the private equity sponsor is driving forward the business plan of the firm and trying to engage in the value creation process,” she told the webinar. “Whereas from the credit perspective, you are supporting some of the growth plans or M&A of that company, so that high level of specialization is usually not as much of a prerequisite.
This may change in the future, however, as the range of private credit strategies expands in areas such as asset-backed lending, real assets and consumer finance.
“In the years ahead, private credit will more aggressively try to take market share from banks in lending to machinery, aircraft financing, consumer lending and credit cards,” reckoned Koh. “Each of these are very specialized areas that have their own bankruptcy or foreclosure dynamics. I do think there will be more specialist managers for these.”
#3 Think outside the box
When it comes to private credit, firms are looking for people with a strong credit background, knowledge of corporate credit and experience with a wide range of debt products. But they also value an understanding of equity investments, and – importantly –company valuations.
“In many of our transactions, it's not just about looking at the cash flow generating capability of a business, but it’s also looking at the enterprise value of a business and how that covers the amount of debt we are lending,” Andrew Tan, Chief Executive Officer, Asia Pacific, Muzinich & Co told the audience. “A lot of deals we do are not your plain vanilla type of lending but involve some complexity in the corporate structure or in the financing, so we need the ability to problem-solve and find solutions.”
#4 Keep calm under pressure
Violet Xu, Chief Operating Officer at hedge fund Spathiphy Capital Management, emphasized that new starters will be expected to hit the ground running. Investment roles and non-investment functions – including settlement, trade matching and other tasks like corporate actions, fees and charges – each require the ability to respond quickly and calmly to unexpected situations.
“When you’re in a hedge fund, especially doing secondary markets-related strategies, a lot is beyond your control,” she said. “When there is a sudden war happening, or the market moves significantly, it may have an implication on your portfolio or on your risk control function. You need to step in to make sure the investment team is doing what they said they will be doing.”
#5 Be ready to adapt
It is a truism of investment management that past performance does not guarantee future success. Frank Huang, Head of Fund Research at New Harvest Wealth Securities Company Limited, argued that the best private fund managers are able to adapt continuously to changes in the market in order to stay ahead of the pack.
“In this industry, the environment, sectors and themes are constantly changing,” said Huang on the webinar. “If people cannot be adaptive, they will lose the game in the future. So being adaptive and not too stubborn is probably the most important thing to be a good investor for the long term.”
All fund managers also need to be able to keep their investors onside as market conditions evolve. Yick at Partners Group argues that this is particularly important in private assets.
“In terms of returns generated, there’s less of a dispersion in public markets, but in the private world, a manager’s performance dispersion is quite wide,” she said. “Who you invest in is actually as important as what you invest in.”
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