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The ‘boring’ sector competing against banks and PE firms for young finance talent

Pension fund private equity

Pension funds are competing on pay

You’re a young finance professional who’s successfully seen off 300 other applicants to switch from investment banking into private equity. You have headhunters knocking at your door. The promise of a hefty carried interest pay day is in sight. Would you give it all up to work for a pension fund?

This is not such a silly question. Large pension funds are growing, they’re a stable employer, and pay is growing Share on twitter. What’s more, they’re hiring – recruiters point to a surge in demand for young private equity professionals with either venture capital or GP experience who can move across to the direct investments arms of large pension funds.

“We’re seeing more junior private equity professionals make this move,” says Hephzi Nicol, founding member of Kea Consultants which places young bankers into the alternatives industry. “They have a fixed pool of capital, there’s no dead patch during fund raising as you get in private equity firms and there’s a better work-life balance.”

Large pension funds have been scouting for talent in London and New York. Temasek, the Singaporean sovereign wealth fund, has been recruiting for its London office since opening the business last year, while South Korea’s Nation Pension Service has been hiring investment staff in foreign markets. Recruiters also suggest that the California Public Employees’ Retirement System (CalPERS) has been hiring as has the Canada Pension Plan (CPP).

Some recent hires point to this trend. Temasek, for example, has recently hired  Ara Yeromian as an associate director from private equity firm Ares Management, Steffan Wippler as a senior associate from Bank of America Merrill Lynch and Claire Ng, who was an investment banking analyst at Goldman Sachs.

“The hours are still long, but it’s unlikely that you’ll be doing too many all-nighters as you would in PE,” says Nicol. “And you’re not doing so much heavy lifting getting deals off the ground, it’s an appealing option for many.”

Pension funds are also recognising the need to pay more to compete with other parts of the financial sector. An entry level role – namely, those going in with a little private equity and investment banking experience under their belts – pays £70-85k ($108-130k), says Nicol, with a possible for a 50-75% bonus. Senior associate positions are more likely to pay £85-100k with a potential 100% bonus.

Pension fund assets are on the up. After a dip in 2008, global pension fund assets have been steadily increasing and are expected to have reached around $38 trillion in 2014, according to Deutsche Bank estimates.

 

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