It's possible that working in private equity is overrated

Private equity is the holy grail for most junior investment bankers. It is the Waitrose of supermarkets, the Chelsea of London boroughs, the Andrex of toilet papers. It may also be that its advantages are highly exaggerated.

The head of one recruitment firm, who has devoted his life to placing eager young bankers in PE funds (and therefore prefers to remain anonymous for the purposes of this article), says a lot of the analysts and associates who move into private equity have a misguided perspective on its pleasures.

"Everyone thinks private equity is utopia for an investment banker, but in the early days they're really not going to trust you to make decisions that will affect the carried interest of all the senior people working in the fund," he says.

He goes on: "Instead, they're going to have you doing lots of feasibility studies and lots of modelling around different scenarios. There's a huge fallout rate. Expectations are extremely high and they have no qualms about booting you out, especially in the 12-18 months before you become eligible for carried interest."

One comparatively junior private equity professional says it's not that bad: "The work's much more interesting than investment banking - there's no pitching and no marketing. At a senior level, you'll probably also end up spending less of your life on a plane."

The real issue with working in private equity in this day and age appears to be the discrepancy between traditional private equity salaries and the now elevated salaries of investment banking.

It doesn't help that carried interest - the real lure of working in private equity, is harder to come by than it used to be. Many funds only pay out carried interest when the entire fund has been invested and then successfully exited from its investments, a process which can take seven years or more. Even then, carry is only available if a specified hurdle rate is met.

The ideal is working for a fund that pays carry on a deal-by-deal basis, reducing the waiting time. Small cap funds are most likely to offer this arrangement. Failing this, some funds (such as CVC, allegedly), will pay carry based purely on the deals that an individual has worked on - meaning poor returns on colleagues' investments won't contaminate your pay for the next five years or more.