This is why hedge funds are better than private equity for M&A analysts
June 13, 2018
Markets may rise and fall. Summit meetings between world leaders may be un-scheduled and then rescheduled. But in a world where so much is uncertain, there is one thing at least that can be relied upon year in and year out: most investment banking analysts will leave for jobs in private equity.
Just how many banking analysts follow this rite of passage? According to data from LongRidge Partners, an executive search firm specializing in the alternative investment industry, around 70% of analysts among the leading investment banks will leave for PE. That translates to around 400-500 each year. By contrast, barely 7% of banking analysts focus on hedge fund opportunities.
It shouldn’t be a surprise that so many follow the path to PE. In many respects it’s simply the most well-lit and well-traveled. Many analysts, though (perhaps most) proceed to this point in their careers almost on auto-pilot. Banking-summer-internship-to-banking-analyst-program-to-PE-associate. But what then? Those PE associate contracts are typically only for two years. According to LongRidge, again, fewer than one in five PE associates remains in PE, while as many as half go to business school (another move that has some hallmarks of the ‘auto-pilot’ effect).