Who invests in private equity?
Who can invest? A private equity fund is typically open only to accredited investors and qualified clients. Accredited investors and qualified clients include institutional investors, such as insurance companies, university endowments and pension funds, and high income and net worth individuals.
Private equity can also come from high-net-worth individuals eager to see outsized returns. The private equity industry comprises institutional investors, such as pension funds, and large private equity firms funded by accredited investors.
Private equity firms usually look for entry-level associates with at least two years of experience within the banking industry. Investment bankers usually follow the PE firm career path as their next job and typically have a bachelor's degree in finance, accounting, economics, and other related fields.
Because private equity investments take a long-term approach to capitalising new businesses, developing innovative business models and restructuring distressed businesses, they tend not to have high correlations with public equity funds, making them a desirable diversifier in investment portfolios.
Most private equity money comes from institutional investors, such as pension funds, sovereign wealth funds, endowments, and insurance companies, although many family offices and high-net-worth individuals also invest directly or through fund-of-funds intermediaries.
There are several ways to branch into private equity investing, including through mutual funds, exchange-traded funds, SPACs, and crowdfunding. However, keep in mind that many private equity opportunities are only offered to qualified investors and may require a sizable minimum commitment as well as a high net worth.
After you have a fine-tuned business plan, look for private investors. Start small, working through your professional and personal networks. Try your chamber of commerce, small business community groups, and local trade associations. You can also seek private investors through business capital brokers.
While ZipRecruiter is seeing annual salaries as high as $277,500 and as low as $43,500, the majority of Vice President Private Equity salaries currently range between $115,000 (25th percentile) to $190,000 (75th percentile) with top earners (90th percentile) making $244,500 annually across the United States.
Not only do private equity firms have extremely particular job requirements, they also offer relatively few roles. To get into a private equity firm, you not only need the “right” background and education, you also have to be a solid fit with the existing team, and be ready to ace the private equity interviews.
The average base compensation among US CEOs surveyed for this report was $510,000 in 2023, and the average cash bonus received in 2022 was $390,000, for a total average cash compensation of $908,000.
Is BlackRock a private equity firm?
Private equity is a core pillar of BlackRock's alternatives platform. BlackRock's Private Equity teams manage USD$41.9 billion in capital commitments across direct, primary, secondary and co-investments.
Many private equity funds require a minimum commitment of $10 million or more. Through Morgan Stanley, however, you can participate in many of these funds for a minimum of $250,000.
What are the cons of private equity investing? Private equity investments are illiquid: Investor's funds are locked for a certain period. As such, investors in private equity must have a long-term investment horizon and be willing to hold their investments for a few years, if not more.
To break into private equity, a strong educational background is essential. Most professionals have degrees in finance, business, or related fields. Relevant experience in areas like investment banking or consulting is highly regarded.
Private equity firms make money through carried interest, management fees, and dividend recaps. Carried interest: This is the profit paid to a fund's general partners (GPs).
Private equity is often grouped with venture capital and hedge funds as an alternative investment. Investors in this asset class are usually required to commit significant capital for years, which is why access to such investments is limited to institutions and individuals with high net worth.
In addition to meeting the minimum investment requirements of private equity funds, you'll also need to be an accredited investor, meaning your net worth — alone or combined with a spouse — is over $1 million or your annual income was higher than $200,000 in each of the last two years.
Risk of loss: Overall, private equity investments involve a high degree of risk and may result in partial or total loss of capital.
A fair percentage for an investor will depend on a variety of factors, including the type of investment, the level of risk, and the expected return. For equity investments, a fair percentage for an investor is typically between 10% and 25%.
To be clear, banks has two ways to invest in private equity deals: they can act as the equity investor, or, as both the equity investor and the debt financier. In this paper, we refer to the first type of investments as “bank-affiliated” deals, and the second type as “parent-financed” deals.
How do you pay private investors?
There are a few different ways that companies can repay investors. The most common is through equity, which is when the company sells shares of stock to raise capital. This is often done through an initial public offering (IPO), but can also happen through secondary market transactions.
| Position Title | Typical Age Range | Base Salary + Bonus (USD) |
|---|---|---|
| Senior Associate | 26-32 | $250-$400K |
| Vice President (VP) | 30-35 | $350-$500K |
| Director or Principal | 33-39 | $500-$800K |
| Managing Director (MD) or Partner | 36+ | $700-$2M |
For the vast majority of first-year private equity associates, the base salary is around $135k to $155k. Then, based on fund performance, bonuses tend to range from 100% to 150% of the base salary.
$353K. How accurate is an average base pay range of $267K-$477K/yr? Your input helps Glassdoor refine our pay estimates over time.
Investment banking and private equity are two of the most prestigious and competitive areas in finance, offering significant opportunities for advancement and high compensation.
