The cofounder of $25 billion Centerbridge Partners explains what his firm looks for in next-gen talent and why you don't always need an MBA to be successful in private equity

• Business Insider caught up with Centerbridge Partners co-founder Jeff Aronson at SuperReturn in Berlin last week.
• We asked him about qualities he looks for in associates he hires at his 300-person firm; succession as his partner Mark Gallogly readies for retirement; and what concerns him about young PE execs today.
• "If you're 36 and you're hitting your stride, you haven't seen a cycle," he said. "Part of it is investing experience, and you don't know what you don't know. You learn when you make mistakes."
• "It's part of the quote 'traditional' path," he said about getting an MBA. "You go to a good school, then work at a bank, and then you work at a PE firm for a couple years and you go to business school. But that's certainly not required."
• Click here for more BI Prime stories.

New York City philanthropist and fund manager Jeff Aronson spends a lot of time thinking about the next generation of private-equity investors.

After all, his 15-year-old Centerbridge Partners is losing one of its most senior members as younger execs step up.

Mark Gallogly, the investor who served as an economic advisor to the Obama administration and once considered a run for New York City mayor, is set to retire from the firm this fall as he reportedly pursues other endeavors like public policy and climate change issues.

That means that Aronson, who chairs the board of trustees at John Hopkins University and also serves on the board of trustees at John Hopkins Medicine and New York University School of Law, will become the sole managing principal of the firm with more than $25 billion in assets under management.

Gallogly, 63, co-founded Centerbridge with Aronson in 2005 after leaving The Blackstone Group where he co-invested in deals alongside Aronson, who then worked in credit at Angelo Gordon & Co. The name "Centerbridge" came from the idea that they bridged private-equity, Gallogly's expertise, and credit, Aronson's focus, to the center.

Instead of moving to replace Gallogly, Centerbridge has quietly elevated leaders within the firm to prepare for his exit, including two co-heads of private-equity: Matthew Kabaker, a former senior advisor to Timothy Geithner while he was U.S. Treasury Secretary, and Steven Silver, a former managing director of Vestar Capital Partners.

"This is something that we have been planning and thinking about for a number of years," Aronson told Business Insider in a recent interview. "We thought it was important to give everyone a very long lead time. So we started talking about this years ago - no surprises."

What Centerbridge looks for in a hire

The firm, whose investments have included P.F. Chang's China Bistro, the chain of Chinese restaurants, which it sold in 2019 for $700 million, and Great Wolf Resorts, the family resort chain, which it co-owns with Blackstone, staffs some 300 people, including 100 investment professionals throughout New York City and London.

It has three main focuses: private-equity, credit and real estate. And it hires anywhere between five and 10 investment professionals a year as associates, who typically have two to three years experience at a large bank and an interest in turning to the buy-side.

"I'm looking for people who love investing for the sake of investing," Aronson said, as he prepares the firm for its next stage of evolution, hand-picking talent that best matches the culture of his firm while also maintaining top intellectual standards and investing judgment.

"It's almost like a hobby for them," he said of the ideal candidate who would fit in well at Centerbridge.

"I think a lot of people go into private-equity because they look at it as a path to wealth," he said. "But I think the people who are best at it love it intrinsically for what it is and it just so happens that you're good at it and it can be lucrative."

Next-gen private equity talent

Business Insider caught up with Aronson last week at the SuperReturn conference and sat with him for an interview about his views on Centerbridge's own succession, insights into his thinking about the firm's expanding talent base, as well as thoughts on the next generation of private-equity investors at large.

Aronson, busy from back-to-back meetings which he referred to as almost like "speed-dating" at SuperReturn, spoke with us as he caught up on lunch in a small conference room on the ground-floor of the InterContinental Hotel in Berlin.

Aronson, only a couple years younger than Gallogly at 61, is something of a legendary investor.

In 2012 and 2013, he returned more than $1 billion to investors in its Credit Partners hedge fund because Aronson and his team didn't see enough distressed opportunities to deploy their capital. "It is not our money," he told Institutional Investor at the time, of what the publication called a rare move. "If we can't find compelling investment ideas, the right thing to do is to give the money back to investors."

But despite his giving back, that doesn't mean he hasn't lived comfortably. He once shelled out $13 million for a ninth-floor co-op overlooking Central Park, according to the Observer.

Today, Centerbridge is considered one of the most prominent investing firms, with recent investments in GoHealth, the online health insurance markeplace, and Civitas Solutions Inc., a provider of home and community based healthcare for people with disabilities or other special needs.

'Investing is a team sport'

Aronson said that as Centerbridge has expanded its roster, it has worked hard to maintain a collaborative environment, with open-floor plan in its offices and communication between investors about deals. So anyone joining the firm should be a natural collaborator.

"Investing is a team sport," he said. "One of things I've learned is, if you can figure out a way to harness all that intellectual capital within a firm and move it in the same direction, it's really powerful. We all sit together. We believe that will lead to better decision making."

And mistakes, he said, are valuable.

One of his own mistakes came in the form of career selection early on.

Aronson initially thought he wanted to be an attorney specializing international law, with a vision he would travel the world, maybe jet off to London to negotiate a deal and stay in a nice hotel. With a JD from NYU School of Law, he became an associate at the corporate law firm of Stroock & Stroock & Lavan.

"I soon learned that international law meant staying in your office in Manhattan until 3am every night looking at a stack of documents," he said. "It just wasn't for me."

Learning what makes a company tick

Coming into investing from the legal world, Aronson learned the investing job on the fly. He was first an in-house lawyer at a mid-sized investment bank called LF Rothschild, until the stock market crashed and the firm imploded.

When two of the executives there launched a new firm, Angelo & Gordon, Aronson raised his hand and said he wanted to go with them.

He took night classes at NYU Stern while working at the firm, focused on "non-traditional" investments. "I don't think the phrase hedge fund even existed back then," he said. But he quickly learned of his fascination with the business of investing in his accounting and corporate finance classes.

"It's like doing puzzles," he said. "It's trying to understand a company and what makes it tick and how it operates."

As much as he loved night classes at Stern, Aronson is of the belief that you don't need an MBA to be a successful private-equity investor.

"I think it's part of the quote 'traditional' path," he said. "You go to a good school, then work at a bank, and then you work at a PE firm for a couple years and you go to business school. But that's certainly not required."

One thing is irreplaceable, though: experience.

It's actually what concerns him about young private-equity executives today, as the economic cycle moves later and later stage.

"If you started your career when you were 26, ten years ago, if you're 36 and you're hitting your stride, you haven't seen a cycle," he said. "Part of it is investing experience, and you don't know what you don't know. You learn when you make mistakes."