Posts Tagged ‘marketing’

Response to Comment from Blog

Tuesday, June 3rd, 2008

“In my job search I’m seeing quite a few “Private Equity Investor Relations Associate/Analyst” listings. Is there a clearly defined career path for these roles? Do the infrastructure roles enjoy the same “carry” opportunities as the investment side?”

Comment posted by Gary P. in response to an earlier blog posting. 

The career path for an Investor Relations professional is not very well defined within the Private Equity space; and this role can actually lead to many different roles including Director of Marketing, Chief Operations Officer, and Managing Partner.  To reach these higher level positions typically requires that the professional must join another firm where their rolodex will be extremely valuable, although this is not always the case.

An Investors Relations professional’s greatest value is their rolodex and their ability to raise assets using their rolodex.  As a more junior Investor Relations professional one learns “how the game of raising assets” is played. 

As you learn these skills, you will have constant interaction with both present clients and potential clients, including Investment Consultants; your network and rolodex will be constantly growing.  It is extremely important at that point to learn how to manage your rolodex effectively in order for you to provide a high level of service which will enable you to take your rolodex with you to another firm.

During the interview process both you and your rolodex will be interviewed. It is very important for you to truly understand your rolodex and both its strengths and weaknesses.  For instance do not interview with Real Estate strategy fund if your relationships focus on equity investments.   Many professionals will say understanding one’s rolodex sets apart a good Investor Relations/Marketing professional from a bad one. 

A good Investor Relations/Marketing professional understands how their entire firm operates and in many cases these professionals possess the keys to the assets i.e. client relationships and this is why they can become Chief Operating Officers or Managing Partners. 

Although most junior Investor Relations professionals do not receive a defined part of the “carry” they do receive a performance driven bonus usually based on a couple of stats including assets raised, assets kept, and the fund’s overall performance.  As an Investor Relations professional becomes more senior and starts to handle more marketing and operational duties within the firm they almost always have a defined percentage of the “carry.”

In regards to Infrastructure roles as a whole, these positions typically do not receive a defined part of the “carry” until they are more senior within the firm, such as Director of Marketing, CFO, COO, or Partner.  The lower level roles do receive a performance driven bonus which comes from the funds fee pool but they rarely are offered a defined percentage of the carry. The bonus is usually calculated by a combination of qualities including fund’s performance and employee’s performance.  The bonuses paid to more junior professionals are usually paid on a yearly basis and sometimes a small bonus is paid at the completion of a capital transaction.

Front Office Roles in Hedge Funds

Wednesday, May 14th, 2008

Front office Hedge Fund jobs include roles in portfolio management, research, marketing and investor relations.  These have always been the roles most professionals have strived to attain not only for the prestige that comes with the titles, but also the compensation which accompanies this prestige.  The question most professional have is how do I attain one of these roles?

Within a Hedge Fund there are two main career paths for these front office roles; the Portfolio Management/Research path and the Marketing/Investor Relations path.  I call these career paths because almost all front office position start out in the same areas and follow a progression to reach the more senior roles. For instance almost all Portfolio Manager start off in research.

Portfolio Management (PM) is the Holy Grail of Hedge Fund positions. This is the role most people dream about while sitting in their Economics 101 class in college.  These are the individuals you see profiled in the papers, not only for their investment ideas but increasingly for reports on their year end bonus checks-some as big as a billion dollars. 

In many cases the Portfolio Manager is also the founding partner of the firm, but these PM’s have had to follow the same career path and due their time as a Portfolio Manager for another firm before striking out on their own.  To attain this title you will have started off in the research department in most firms, and in a rare case the trading arena.  To be hired as a Research Analyst at a hedge fund, completion of an investment banking analyst program or equity research analyst program is typically a requisite.

Once you have started with a Hedge Fund the time it will take to become a Portfolio Manager depends on the firm.  I personally know of some firms which hope to turn Analysts into PM’s within 12 to 18 months.  Others firms believe in taking significantly more time to make this transition, still others will never turn an Analyst into a Portfolio Manager.  Once a Portfolio Manager has had some success they often decide at some point to strike out on their own in order to bring in bigger rewards while also increasing their risk profile.

The second path within a Hedge Fund is the Marketing/Investor Relations path.  This path is not nearly as structured as the Portfolio Manager path. The typical individual starts in an Investor Relations role learning how to work and communicate effectively with Accredited Investors including high net worth individuals, foundations, endowments and pensions.

Many professionals and investors may look at an Investor Relations role as reactive in nature, but the successful investor relations professional is always proactive. They are constantly servicing and communicating with the client. Strengthening the client relationship in good times can cause money to stay with the fund when the fund’s performance suffers. After a few years of servicing these clients and potential clients most Investor Relations professionals, especially those that have been proactive in their present role, will become marketers. 

The job of a Hedge Fund marketer is to gather assets for the firm.  This is done through many channels and usually includes a fair amount of travel and entertaining.  This is not usually a process which happens overnight and hence these Marketers have to stay very focused on their goal and follow a defined process.  It can take many meetings and conversations before a potential client is ready to invest.  Marketers are constantly meeting new people as well as following up and strengthening relationships with other potential clients.

The Investors Relations role teaches individuals how to work with clients but in a Marketing role they must both identify potential new clients and turn these new clients into investors. This is not an easy task and hence the compensation for these roles is typically very competitive and much higher then those of Investor Relations professionals.  As well marketing professionals usually have a performance driven component to their compensation.

Hopefully this posting will help you identify the career path you should follow to attain your goal within front office Hedge Fund positions.  Knowing that these paths exist and where they lead can help you make educated decisions as you advance your career in this space.

Final thought: The easiest way to see if these paths truly exist at your firm or a potential employer is to ask the senior individuals where they started in the firm.