Analysts and associates exceed PE budgets

Rising pay for investment banking analysts and associates is placing them beyond the reach of mid-market private equity funds according to a search consultant working in the sector.

"The premium to hire a third year analyst from an investment bank is now huge," says Ben Aymé, a consultant at financial services search firm The Veni Group. "Private equity funds are having to pay guarantees of 120,000 to 130,000 just to bring in junior bankers with two to three years of experience."

In the mid term, Aymé says the pay hike has the potential to drive funds' demand for lower cost MBA students. In the short term, he says some like HG Capital are refocusing on hiring people from elsewhere.

Strategy consultants and accountancy firms are the favourite hunting grounds. "UK funds used to hire accountants historically," says Aymé. "They then turned to strategy consultants, and then to bankers. Now that bankers are prohibitively expensive, they're turning back to accountants and consultants again."

Ayme's claims risk contradicting those of recruiters who say private equity funds increasingly favour bankers that can cope with the demands of complex financial structures. However, he says big LBO funds continue to scour investment banks for employees - it's only mid-market players that are balking at the rising cost.