Private equity funds of funds to hire

Can't get a job in private equity? How about joining a fund of private equity funds? Recruiters say such funds are hiring.

HSBC Republic Investments, the private banking division of the HSBC group, is the latest to enter the fray. Last week it revealed plans to set up a private equity business, and there are reports that it will offer a fund of private equity funds later this year.

Major existing players in the sector include Pantheon Ventures, HarbourVest Partners, Partners Group, Unigestion, and Capital Dynamics.

The managing director of one private equity search firm says funds of private equity funds have increased their appetite for staff. "The industry is a lot more visible than it used to be, and people are more willing to consider a career there," he says. "Funds of funds used to be considered the poor relation to direct private equity investors, but that's changed over time."

The bad news for any private equity rejects hoping to reinvent themselves, is that funds of funds have become just as choosy. "They want bright young things from consulting or banking, fund managers, or people from the private equity industry." The best time to make your move is soon after an MBA, says the MD: "If you're seven or eight years into a career with no experience of private equity, you can probably forget it."

The other bad news is that private equity funds of funds don't pay as much as standard private equity funds. Carried interest, or the share of the profits given to managers, is typically 12% to 15%, compared to 20% at private equity funds. Bonuses and salaries are also less: if someone in a direct private investor were paid a base of 100,000 and a bonus of 100,000, their counterpart in a fund of funds might get an 80,000 base and a 50,000 bonus.

On the upside, hours are more predictable and often shorter. "Working in a fund of funds may not be as well paid, but long term it's a lot more liveable," says the recruiter.

Private equity funds are generally closed to average private investors. But individuals can grab a slice of the action by placing their money in funds of private equity funds, which spread the risk by investing strategically across the private equity industry.