Private Equity Funds Turn to Bankers to Fill Gaps

Private equity's success is making it harder for the industry to hire experienced staff and is creating opportunities for outsiders.

David Howell, managing director at the recruitment firm EM Group, says senior staff at private equity funds have amassed huge amounts of carried interest over the past 24 months and are increasingly unwilling to move on as a result.

"It was much easier to pull people out a few years ago when carry was less substantial," he says.

Carried interest is based on the profits earned from a fund and paid out at the end of a fund's life every eight years or so. Typically divided between partners and senior staff, it can amount to many millions.

Howell says private equity pros that move to another fund before payday risk losing the whole amount. "These days carry is genuinely locking people in for around five years," he says.

The unwillingness of seasoned private equity pros to move into new roles is creating openings for people outside the industry. Howell says funds are looking more frequently at candidates from beyond the private equity world, with corporate financiers at the top of the list.

At the same time, he says strategy consultants, who were previously viewed as an alternative source of private equity talent, have fallen out of favor: "The level of gearing and financial complexity of private equity deals is so high now that funds are looking for people with a background in finance."