One-way flow from banking to PE

Top talent is streaming from banking into private equity. Why are there so few moves in the opposite direction?

The Financial Times today highlights the exodus of banking heavy hitters to the booming private equity sector. Everyone from retired HBOS chief executive Sir James Crosby, to 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, has made the move. Admittedly, Studzinski is shifting to set up a corporate finance boutique, but it is under the auspices of Blackstone, a private equity firm, nevertheless.

What's the appeal of PE? The FT quotes one ex-banker turned private equity executive, who says it's all 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 PE world may also be factors impeding the flow of staff back into to banking. "It's not a very well trodden path," a corporate finance consultant at a City search firm tells eFinancialCareers. "It's hard to think of anyone who's made the reverse move."

Nevertheless, she says that corporate financiers who up sticks to become principal investors need to be aware that 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."

Deal flow is also an issue, says the consultant. "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."