In conversation with Tushar Garg, an Investment Professional at Godrej Fund Management. After working in sell side, transaction advisory he started his career in PE industry. We would like to understand the role of an Investment Professional at a PE industry from him and how to become one.
A brief perspective on the PE industry - large insurance houses, pension funds (and similar players) sit on a large corpus of funds. They generally are on a lookout to make a good risk-adjusted return on this corpus. Since this is a non-core activity for them they look for a manager (or general partners or PE funds) who can manage a portion of their funds by investing it in promising assets and providing an exit over a gestation period of 5-7 years. These PE funds are hired for their expertise to sense whether an asset is a good investment or not. Private Equity (PE) generally has 4 buckets of work: Being a lean team, my work revolves around all four bases the requirement and ongoing engagements.1. Fundraising: I would help the CEO in making pitch/marketing material to showcase to potential limited partners to help raise funds for our PE fund. This marketing material is very fund specific and generally talks about one's thesis of the geography (say a particular the fund is investing in India, then what is the rationale for that) and the asset-class (say a particular fund is investing only in infrastructure or real estate or somebody is sector agnostic) that the PE look into. Since many of the institutional limited partners are based out of India, the Indian PE funds can either adopt to raise funds in INR terms or can look into a hedging arrangement.
As I mentioned earlier, I am part of all the functions – so depending on which function- hat I am wearing on a particular day, my routine would differ. To give a flavor: I would generally start my day early, around 6 am, to look at any LP email or any immediate requirements that they have (since these are different time-zones, it helps to look at your mailbox early on). I would reach the office at 10 am. The first 3 hours are usually spent in typing out responses, doing analysis on a particular asset-class etc. and communicating the result/details to the LPs. The remaining time generally goes in evaluation phase - evaluating a potential deal on the table (since I am part of the real estate segment, these are generally land parcels or distresses real estate developer that I am looking at), I will look into the particular micro-market, surrounding areas and sense the rentals/prices going around in that area.
If the deal looks good, I would start the process mentioned above in the deployment section. In case there aren’t many deals in the pipeline, I would reach out to channel partners to get a sense of the market and what potential deals may be coming up. In case the CEO is about to pitch to a potential LP for further funding – I delve into the specific requirements of the investor (For example, whether the investor is looking into residential real estate, commercial real estate, or a mixed-use) and prepare some marketing material for same. The day generally ends around 9 pm. If need be, one has to be available 24 hours for deal execution! It is either of the activities and barely a mix of all three that happens on a particular day.
For a sector-agnostic or a non-real estate PE, this would generally entail reaching out to some investment bankers to get a sense of the deals that they have to pitch. You can evaluate them and then take a call on which one would you like to proceed further.
I was working in the sell-side earlier (transaction advisory) and was intrigued by the way the PE players are able to take such calls on the businesses. For this, I interacted with some of my friends in the PE industry and they mentioned that valuation bit comes at the end to evaluate an asset. Firstly, it is important to form a view on the industry and the asset and once you feel upbeat about that then we delve into the valuation. For me this was slightly an unchartered domain as being a CA, I would generally look at a company from a numbers perspective and may read a couple of industry reports. But to be able to recognize the value drivers in the business, I considered a classroom fashioned training and that’s when I went ahead for MBA. Once in the course, during the placement season, the PE fund came to hire from the campus and I was selected during the interview process.
While there are various technical skills that one should definitely know – valuation, 3- statement financial modeling, multiples etc. There are many softer aspects that should also be focused on and are very important:1. Market research – As I mentioned getting a sense of the industry is very important, and you can go to any extent for that (I have done a couple of telephonic interviews with people showcasing myself to be a reporter!) 2. Connect the dots – Be able to connect the various happenings in the market (impact of Brexit or US-China trade war on an Indian engineering / info-tech firm). This is important as you are making a projection on the potential returns from the asset and any market happening may have a bearing on that
There are both Pros and Cons to my profession.
Coming to the Pros, you get an amazing global experience since you keep traveling, learning and working with locals, which is equivalent to living and working in new countries. Since we get the weekends off, we are free to explore the cuisine, people and landscapes of a new country. Travel is extremely educational and can teach you real-life skills. Therefore, the exposure and experience you get is a plus point.
There are also a lot of cons as well, for instance, you are mostly away from your family when you are traveling. I am married to a cardiologist who is also extremely busy. We do not get a lot of time together, but we need to do what is best for our careers. Secondly, you have to be okay with jet lags, even if you are jet-lagged on Sunday, you have to go to work the next day and give your best. Thirdly, finding food especially if you are a vegetarian is another con associated with this profession. Also, working out when you are on a tight schedule and having that level of commitment is difficult at times. Lastly, studying while traveling is also very challenging and requires a sheer amount of dedication.
Generally, people in PE come from two backgrounds i.e. ex-management consultants and ex-investment bankers. As mentioned earlier, the role requires not only financial skillset but also an ability to connect the dots. Ideally, a candidate can look to join a Management Consulting industry and make a move after 3-4 years. Getting into an MC is also a competitive process and generally MCs hire from the B-Schools and seldom they hire fresher. On a separate note, PE is a very closed-door industry – hiring is largely driven by internal referrals or some good HR firms. So be mindful of that front!
For finance professionals, it would help to start with a sell-side role (investment banking, corporate finance, transaction advisory) that helps to brush up ones skillset and makes you realize the long-hours. Maybe it can also help one filter-out whether finance based consulting roles are a good fit or not. Post that probably try to get in touch with some recruitment consultant and reach out to people in the PE space to get a foot-door entry. Another way can also be to go to a B-school after your 2-3 years of work-ex and post Masters, trying out in a PE space or an MC space to later shift in PE.
PE is generally a lean structure and have few hierarchies, so do not focus on the designation one gets (I know people who have been associates for 5 years, but they are reasonably senior people in the industry).
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“I’m a Commerce graduate from St. Xavier’s College, Kolkata and have completed CA (Rank holder), CFA(USA), FRM(USA), CAIA(USA), CCRA, CIPM, AIM and CS. At present, I am a visiting faculty at St. Xavier’s College, NSE, BSE; B-Schools like iLead, BIBS along with several other institutes; am a full-time trainer for CFA, FRM and SFM – CA Final. Provide trainings at organizations like Tata Interactive Systems, Volvo-Eicher(VECV), Genpact, AIITA, EIRC-ICAI, Saregama, Quaker Chem, Century Ply, AUM Capital etc. on Finance and Advance Excel.