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Private-equity giants are ramping up MBA recruiting and looking beyond '2-2-2' promotions - here's which business schools are seeing the most hiring

Private-equity giants are ramping up MBA recruiting and looking beyond '2-2-2' promotions - here's which business schools are seeing the most hiring

Casey Sullivan

Business Insider surveyed 13 top business schools and found that private-equity firms are hiring MBAs more and more, and for a wider variety of roles.
The uptick shows how PE shops' evolution into juggernauts of investing across asset classes has created more demand for talent.
The so-called "Big 3" schools where PE shops have traditionally recruited most - Harvard, Stanford, and Wharton - saw some of the biggest increases in the number of students going into private-equity internships and full-time roles.
Todd Carson, a career advisor at Wharton, said that the biggest trend he sees is an increased appetite for megafunds to hire MBA summer interns.
Jamie Schein, assistant dean & director of the career management center at Stanford's business school, said growth equity and technology focused PE firms are becoming more open to students with consulting and tech backgrounds.
The compensation of PE's business school hires can run north of $350,000, for those lucky enough to receive a signing bonus, and other forms of pay on top of base salary, according to the schools' employment data.
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The biggest PE shops are doing more hiring from elite MBA programs, and they're filling spots for a wider variety of roles than in the past.

We surveyed 13 top business schools and spoke with some of their professors to understand the trends in where their graduates are going. The data showed an overall uptick in PE hires, and the schools also said that the trend has been towards bringing on people for a broader range of roles than in the past.

That all highlights how PE shops have evolved into juggernauts of investing across asset classes, and how their size and piles of unused investor dollars has created demand for roles in investor relations, ESG, and credit.

"What we can say is that there is definitely more varied opportunities in private equity," said Columbia Business School professor Donna Hitscherich.

"There is fundraising, investor relations, and the ESG aspect funds are having to deal with," she said.

B-School hiring signals PE's evolution

Traditionally, PE shops have only appeared on business school campuses every so often to recruit junior- to mid-level talent. And it hasn't been in the same regimented structure as other financial services firms, like big investment banks such as Morgan Stanley and Goldman Sachs.

Instead, PE firms tend to poach investment bank analysts as associates and then send them to business school. They might look for a vice president if they've just closed a fund and need help doing deals, but it's more on an on-demand basis rather than long-term planning.

In recent years, though, some megafunds like KKR and Blackstone have started to institutionalize their operations, creating or ramping up analyst classes of their own and hiring them straight out of college instead of relying solely on large investment banks.

The uptick in business school hiring shows that PE shops are expanding their net even further - a nod to the amount of capital is flowing to the private markets - and they appear to be pulling mostly from top business schools where they have traditionally recruited.

Of the 13 business schools Business Insider surveyed, the so-called "Big 3" schools where PE shops have traditionally recruited most - Harvard, Stanford, and Wharton - saw some of the biggest increases in the number of students going into private-equity internships and full-time roles.

There were other schools, though, that also saw significantly more of their student body going into private-equity, including Kellogg School of Management, Yale School of Management, and Tuck School of Business.

The compensation of PE's business school hires can run north of $350,000, for those lucky enough to receive a signing bonus, and other forms of pay on top of base salary, according to the schools' employment data.

To be sure, some business schools like MIT Sloan and Yale School of Management lumped private-equity and venture capital together as one employment category in reporting where their students landed. So in these instances, the uptick in students going into PE also included students going into venture capital.

And the data comes from 2019 employment reports by the business schools - the most recent available information - though professors and career advisors indicate that the PE hiring push is continuing in 2020.

Megafunds hiring MBA interns

Todd Carson, a career advisor at Wharton, said that the biggest trend he sees is an increased appetite for megafunds to hire MBA summer interns.

"Funds that didn't do that historically have opened up to that option," he said, putting the uptick on the fact that large PE shops have expanded into giant asset managers, with some going public over the past decade to reach a more diversified set of investors and launch into new asset classes.

This includes KKR, which listed publicly in 2010, Apollo Global Management in 2011, The Carlyle Group in 2012, and Ares Management in 2014. Those firms followed The Blackstone Group and Fortress Investment Group, which went public during the private-equity boom in 2007.

Nowadays firms are pushing to build their assets under management - which in turn, grows the amount of fees they earn - in a variety of areas. This includes private equity, real estate, credit, infrastructure, secondaries, among other areas. And at the same time, PE firms need industry specialists to improve the operations at their ever-expanding pie of portfolio companies.

"People sometimes have the myopic view of what private equity is," said Hitscherich. "There is a whole infrastructure that supports doing deals."

Besides that, publicly listed PE firms "need to show growth, which requires more talent and hence more formalized recruiting," said Carson, the Wharton advisor.

"Overall," he said, "it's a positive trend."

According to Wharton's employment data, the percentage of its students accepting PE internships has risen from 6.9 percent for the class of 2016 to 10.2 percent for the class of 2020.

And numerous schools are also filling more full-time jobs, too, employment data shows. And not just for PE professionals, but also roles in investor relations, credit and real estate, professors said.

Jamie Schein, assistant dean & director of the career management center at Stanford's business school, said growth equity and technology focused PE firms are becoming more open to students with consulting and tech backgrounds.

"We are also seeing firms recruiting our highly accomplished students with some P&L experience to accelerating operating path careers in their portfolio companies," Schein said.

Uneven spread

At the same time, the opportunities for business school students are limited, with the biggest hiring pushes confined to the very top schools.

Business schools such as NYU Stern, Michigan Ross and Duke Fuqua, have not seen the same growth in their students going into private-equity. Stern, for instance, saw an increase between 2017 and 2019 of their graduates going into full-time PE roles, but it was from 0.6 percent to 1.5 percent of class hires.

The University of Virginia Darden School of Business also reported a small percentage of its student body going into private-equity.

"At Darden, we end up with a handful of people going into private equity each year in one capacity or another," said Paul Reeder, a career advisor at Darden.

"Our numbers are not large enough that you can say there is a trend of this or that," he said. "What I do see in private equity recruiting is what I would consider to be a rather unfortunate rigidity in how they recruit, or who they recruit."

Reeder said that they typically look for students who fit a certain mold: two years banking experience, followed by two years private-equity experience, followed by business school. Or, in other words, students who are already steeped in the financial world and don't need to break in. This is known in the PE industry as the "2-2-2" model.

Business schools do not specify the backgrounds of MBA students who accept jobs in PE in reporting their employment data.

"Generally speaking, if you don't have that kind of resume coming into business school, then getting a PE job after business school is very difficult," he said.

Uptick

Still, though, plenty of business schools did report an uptick in PE hiring. And it wasn't just the megafunds seeking interns, either.

Smaller PE shops such as San Francisco-based Alpine Investors, Starwood Capital of Greenwich, Connecticut, and Chicago-based Tyree and D'Angelo, all picked up hires within Kellogg's graduating class of 2019, the school told Business Insider.

Jacob Balley, head of talent at Alpine Investors, confirmed that the firm is indeed hiring more MBAs who want to step into CEO and other C-Suite positions straight out of school - a push that he said has accelerated over the past three years.

Today, it has hired 40 such portfolio leaders directly from MBA programs, he said.

The firm "attracts candidates with common MBA backgrounds like finance, private equity and technology, but also opens it up to educators, professional athletes, and military veterans," he said.

Three came from Kellogg in 2019, contributing to an overall seven percent of its 2019 class taking PE roles, double the number of students who did so from 2018.

Other business schools outside of the "Big 3" such as Columbia Business School, Tuck, MIT Sloan and Yale School of Management, also showed increases in PE hiring over the past several years.

To the extent anyone is looking for advice on how to best approach the hiring process, professors said: start early, be aware of PE firms' deals, meet with alumni and work personal connections. And, of course, market your expertise.

"You need to figure out early on, what is your differentiating factor?," said Hitscherich, the Columbia professor. "Just being a smart person isn't it. There are lots of smart people."

To dig deeper into our findings, below is a school-by-school list of the data we gathered from 10 business schools that saw growth.