Sat, Aug 29, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Private Equity Strategies

The Next Generation: Private Equity in The Classroom

Tuesday, January 22, 2013

By: Bailey McCann, Private Equity Strategies

Private Equity is often considered one of those industries in which jobs are best learned by doing, rather than by sitting in a classroom.  However, nearly all of the world's top-tier business schools offer at least a few classes in private equity, if not a more formal curriculum track that students can pursue.  These same schools have also been working to provide academic research on the industry although historically, private equity academic research has lagged other financial fields. Now, that may start to change as firms are required to register with regulators and investors demand more transparency. Taken together, these demands may also lead to more and better data for academia.

"Barriers to data have been a major issue all along," says Professor Josh Lerner, Jacob H. Schiff Professor of Investment Banking at Harvard Business School. He notes that prior to registration requirements, general partners were loath to offer up data to anyone, including impartial researchers.

Professors, Eli Talmor, Florin Vasvari of the London School of Business and authors of the key textbook on the industry, International Private Equity, agree. In interviews with Private Equity Strategies, all of the men note that while business schools can teach around a lack of data, it hampers the production of papers and the growth of academic understanding of the field.  Talmor points to recent developments in the private sector, with companies like Preqin or Thompson Reuters developing large data banks as bright spots on the horizon for data starved researchers.

"Also, the emergence of research institutions such as the Coller Institute helps to promote and financially support research. But, GPs are generally not transparent. Fund of funds have been more open in sharing their datasets on an anonymized basis," Talmor says.

In the US, Lerner, the author of three books himself (The Venture Capital Cycle, The Money of Invention, and Boulevard of Broken Dreams) also backs the Private Capital Research Institute which is working to provide academic work in the field.  "The question is whether PCRI or other efforts take off, or if we can create some sort of a standard database. Often the data we can get now, where it is available isn't clean, so we have to spend time on that before we can begin to draw conclusions," he says.

Right now, research is largely focused on the data points most readily available - performance, and factors that create this performance. However, Talmor says more work is needed on issues such as how private equity funds generate value, the impact of investing in private equity, and what risk management really looks like in the field.

Despite the lag in research, all of the professors note that the level of student interest in private equity remains strong.
 

"Many students are now avoiding careers in banking and are more interested in entrepreneurial paths," Talmor says. "Private equity fits in as providing the glamor and clout of institutional finance with the excitement and innovation of entrepreneurship. Our classes at LBS are oversubscribed."

Harvard also offers a yearlong program in private equity, which has evolved since Professor Lerner introduced his first class on the subject in 1993.  Yet, the path out of school and into private equity may be challenging for students who are not already connected to a firm. Talmor notes that recent graduates may have a hard time connecting with funds, especially smaller funds and that the overall lack of attrition in the industry can make competition steep.

For those with less experience they may consider junior analyst positions or getting involved with private equity in other ways to build out their skill set.  Working on a turnaround or selling a company to a private equity firm can add to an individual's background, but developing connections and finding ways to stand out are critical. "There are many paths into private equity. Prior experience makes a difference," Talmor says.

 
This article was published in Opalesque's Private Equity Strategies our monthly research update on the global private equity landscape including all sectors and market caps.
Private Equity Strategies
Private Equity Strategies
Private Equity Strategies


Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Hedge funds suddenly find real money is back in Argentina's debt, Elon Musk buys more SolarCity stock following hedge fund manager short, BlackRock plans to get into rental-home financing[more]

    Hedge funds suddenly find real money is back in Argentina's debt From Bloomberg.com: The real money is back in Argentina. Before the country’s default in July 2014 (its second in 13 years), most long-term investors abandoned its bond market. As they rushed out, Argentina became a favorit

  2. Activist News - Carl Icahn has snapped up a huge stake in Freeport-McMoRan, and the stock is ripping, Meet Europe's best activist investor[more]

    Carl Icahn has snapped up a huge stake in Freeport-McMoRan, and the stock is ripping From Businessinsider.com: Carl Icahn has picked his next target: Freeport-McMoRan. Icahn and a group of other investors have snapped up an 8.46% stake in mining company Freeport-McMoRan, according to a j

  3. North America - Hedge fund manager Ray Dalio’s challenge to the Fed[more]

    From Newyorker.com: For some reason, Janet Yellen, the chair of the Federal Reserve, decided to skip this year’s annual Fed conference in Jackson Hole, where monetary policymakers from the United States and abroad get together with some prominent academics to discuss the big issues of the moment. Th

  4. Performance - Hedge funds set to bank millions by short selling during London share slump, The China market chaos has made this hedge fund its most money in 2 years, Odey hedge fund said to surge 9% betting against China, Hedge funds with long-held bearish views on China rack up profits, Hedge funds in U.S. seen curbing damage from August turbulence, Hedge funds collect on their predictions of a fall, How did managed futures do while the Dow was down 1000[more]

    Hedge funds set to bank millions by short selling during London share slump From TheGuardian.com: Hedge funds are set to bank tens of millions of pounds from the slump in share prices in London, having bet almost £18bn that the FTSE 100 would fall. The funds making the bets include Lansd

  5. Opalesque Exclusive: John C Head IV leaves alternative investment firm Gallery Capital, David Harrison joins as co-CIO[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: John C Head IV, former president and co-founder of Gallery Capital Management, an alternative inv

banner