Top talent is streaming from banking into private equity. Why are there so few moves in the opposite direction?
Earlier this week, the Financial Times highlighted the exodus of banking heavy hitters to the booming private equity sector. Among them are retired HBOS chief executive Sir James Crosby; Sir George Mathewson, former chairman of Royal Bank of Scotland; and John Studzinski, former co-head of co-head of corporate banking and markets at HSBC. Although Studzinski is shifting to set up a corporate finance boutique, he is doing so under the auspices of Blackstone, a private equity firm.
What's the appeal of PE? The FT quotes one ex-banker turned private equity executive as saying it all comes down to quality of life: "You don't have as many meetings so you can be more creative. Private equity firms are normally small and you don't have to motivate thousands of staff." Creativity, independence, and a lack of bureaucracy in the private equity world may also be factors impeding the flow of staff back into to banking.
However, some recruiters point out that corporate financiers who switch to the role of principal investor should be aware the transition can be problematic. "Some corporate financiers are not terribly good at it. The mentality is very different - you're investing your own money and will be remunerated on the back of the long term success of those decisions, rather than short term advice," says one.
Deal flow can also be an issue, she adds. "In a typical year, a private equity fund will look at the same number of deals as an investment bank, but will complete far fewer. That can be a bit of a shock if you're a transaction junkie."