Growing fund sizes and fast-paced deals mean private equity teams need to grow just to stand still. As demand continues to outstrip supply, make sure you're working closely with your recruiter to sell your opportunities
The strong momentum PER enjoyed in the second half of 2020 has continued into 2021. We are seeing demand from our client base at an all-time high thanks to impressive overall market activity.
As well as the growing allocation of LPs to this consistently high-performing asset class, a number of factors are combining to drive activity levels. First, the industry has evolved to a new level of sophistication and competitiveness. Processes are faster, with more limited access and information, and valuations have reached levels not previously seen. This activity brings risks and the need for even more intense portfolio management, so larger teams are needed just to stand still. Above this, fund sizes continue to rise, driving more deployment and demand for more investors.
We continue to see new market entrants as international firms appreciate the attractions of the DACH market and look to establish local teams. New fund formation also continues, with many now targeting ambitious debut sizes at or near to €1bn. And then there is the ‘Baby Brother Fund’ phenomenon, with brands opening second or third strategies and needing to staff these separately from their flagship teams.
We are lucky to enjoy such a hot market, but this brings challenges as well. Most specifically that demand for talent outstrips supply, especially as firms look to rebalance teams down diversity lines.
Our role as recruiters has shifted subtly and we now ‘sell’ for our clients as much as we ‘buy’ for them, working harder to articulate not just the attractions of the individual role, but more broadly the culture and identity of the whole firm, as this is the level at which top candidates now seek to differentiate one opportunity from another.
Firms willing to open themselves to new recruits like this, and to take the time to do so patiently, are emerging as the winners. As in other key areas of private equity and venture capital, such as fundraising and deal sourcing, this exercise is tougher than it used to be, but the extra effort brings its own rewards.
This is an industry where people make the difference, so getting these decisions right is the foundation for the future.