Investment bankers move into private equity, but the window of opportunity is small and the competition is intense. Yes, the work-life balance is better and – longer-term – the pay exceeds investment banking, but if you haven’t made the switch by the time you reach associate level, then you are already too ‘old’.
At least that’s the theory. In China, more young investment bankers have been switching to private equity only to return again months later. Assuming you want to move as a senior banker, is the door already closed? Maybe not. These are the concessions you have to make.
1. Prepare for a (big) salary cut
Asian private equity firms pay less than anywhere else in the world, even when carried interest is taken into account, and in China senior buy-side professionals should expect around $314k. This is less than senior investment bankers who can expect as high as $469k. You need to adjust your expectations, says Sara Yue, a consultant at the search firm Cornerstone Global Partners. “It could be a lot,” she says. “Maybe as much as half if you join an RMB fund.”
2. Highlight your deal experience
You’re rarely involved with bringing in the deals until you reach the senior ranks, but in China the expectation is that associates in private equity should be able to source new deals. This is one of the reasons why so many juniors are moving back to the sell-side again. Senior bankers should have no problems with this so the transition across to the buy-side will be smoother. Highlight this during the application process.
3. Find the right sector
China’s private equity firms are struggling to hire in certain sectors. If you’re a banker with experience in TMT, healthcare or consumer and retail then expect your services to be in demand, notes Nick Shen, a Shanghai-based associate director at the search firm Executive Access. Technology is particularly hot in China – for the first nine months of 2015, M&A volumes hit $97.7bn, according to Dealogic data.
4. Build useful networks
Experience aside, both Yue and Shen have advised senior bankers to focus more on building up a network that can bring in future deals and finance. This takes time, and experience is one thing senior bankers have. Many of them have already got good networks. If a senior banker is able to demonstrate how he can convert his networks and resources into deals, private equity firms could hire them.
5. Head for start-ups
Breaking into bigger firms is more difficult than securing a role at newer firms, even if the risk of joining a start up is greater. “You can aim for some newly established funds too,” Shen of Executive Access suggests. According to figures from the Asset Management Association of China, by the end of September 2015, there are 20,383 private equity funds registered in China and 12,738 were formed in the past year.