New York: Wall Street’s newbies — investment banking analysts straight out of college who just hit the desk — have barely started one job when another starts beckoning.
Junior analysts a few weeks on the job can now expect a flurry of emails from headhunters for some of the most prestigious private equity firms in the world. The jobs they’re being recruited for can pay more than $200,000 (Dh734,600) a year and won’t start until 2019. The battle to hire the best of them is fiercer, and more urgent, than ever.
Buyout firms are tapping junior bankers earlier — advancing the annual recruiting cycle, the industry’s biggest window of hiring, for the fifth consecutive year after an agreement to hold back fell apart. The shift comes as a war for talent heats up in private equity, where firms are raising record amounts of capital from investors starved for yield while competing for talent against rivals and Silicon Valley technology companies. To lock down the brightest candidates, mega-funds such as KKR & Co, Warburg Pincus and Carlyle Group LP fill up their classes as early as the first day of interviews.
Headhunters start by firing off invitations for coffees and cocktails to junior bankers just months out of college. By December, their resumes are stacked on the desks of private equity firms such as Apollo Global Management LLC, Bain Capital, Blackstone Group LP, TPG and Golden Gate Capital.
During the most recent cycle, formal interviews started in January, said Julian Johnson, the executive vice-president of Sponsors for Educational Opportunity. SEO helps underrepresented candidates break into the industry.
That was the earliest recruiting start ever — about two weeks sooner than the previous year, and a full three months sooner than in 2013, when the major private equity firms stopped cooperating on timing after some broke out to recruit early.
‘Hold our breath’
“Someone always gets nervous” and starts recruiting first, said Josh Grauer, a partner at Dynamics Search Partners. Other firms then have to jump in immediately, their managing directors often forced to cancel business meetings last-minute to interview candidates.
“Every January, we hold our breath and hope it will start later,” said Susan Levine, the head of private equity recruiting in North America at Bain Capital.
The majority of the mega-funds fill up their spots within 96 hours, said SEO’s Johnson.
The jammed schedule means candidates have to decide on offers within hours. A junior banker at Morgan Stanley said she got her first offer at 6pm on the first day of recruiting, but it expired at midnight. She gave it up to continue her interviews with other firms, including one that started at 10pm. She asked not to be identified because the process is private.
“I feel for the candidates because the process is so frenetic it can sometimes be difficult for them to make thoughtful decisions,” Levine said.
Boston-based Bain doesn’t give “exploding offers” that expire within hours, she added. The firm fills about half of the class during the cycle, leaving the door open to candidates who are out of town or want to take more time to explore their options.
With private equity shops poaching bankers earlier and earlier, the relationship with banks is becoming more strained, said Patrick Curtis, the founder of Wall Street Oasis, a job advice forum for the finance community. It’s sometimes difficult for analysts to care about their job after securing an offer, he said.
“Banks put money into training and recruiting — all of a sudden they are taken away,” said Curtis.
At Goldman Sachs Group Inc, junior bankers have to be secretive about job-hunting because it could lead to their dismissal, people with knowledge of the matter said. A Goldman Sachs representative declined to comment on whether there’s a policy banning first-year bankers from accepting offers.
In late 2015, in an effort to retain more staff, Goldman Sachs decided to communicate its own promotion decisions to analysts earlier in their first year.
Other banks are more encouraging. Credit Suisse Group AG lists buy-side job postings in internal newsletters, according to documents seen by Bloomberg. The bank also hosts panels and invites second-year analysts who have secured offers to share their recruitment experiences.
To attract candidates, some boutique banks have gone so far as to brand themselves as a two-year training ground for lucrative private equity jobs. Managing directors at one of the largest boutiques boasted internally earlier this year about how they gave good recommendations to help analysts land jobs at investment firms, said one junior banker in New York, who asked not to be identified because the conversations were private.
“Managing directors don’t want to make private equity unhappy,” Curtis said. At banks like Credit Suisse, for example, buyout funds are major clients for their leveraged finance and financial sponsors businesses.
Going forward, there’s no telling how much sooner the recruitment schedule will creep. But one effect is becoming permanent, said Grauer: candidates don’t have much work experience to discuss in their interviews anymore.
“I’d like to think we’ve gotten to a point where it doesn’t get earlier,” Grauer said, adding that interviewees today don’t often know what they want professionally in the long term. “The days when they were able to talk about all their transactions are gone.”