Business management graduates who want to build a career in finance generally go into investment banking. But the “buy-side” now presents an attractive employment destination, too, with institutions such as private equity (PE) funds, hedge funds, and asset managers recruiting MBAs.
Traditional wisdom has it that graduates from b-schools that have deep relationships with investment banks, such as the Ivy League institutions in the US, the London Business School in the UK, and INSEAD in Europe and Asia, are more likely than other MBAs to land jobs in PE and venture capital (VC) companies. Of course, companies in the US are more likely than those in other parts of the world to repose faith in MBAs.
Generally, business schools that have good finance streams offer strong courses in PE and VC. PE is a subset of finance and is closely linked to VC (where investors invest in new businesses) and to leveraged buyouts, where investors acquire stakes in companies that already exist.
A majority of MBA students of top schools seem to prefer careers in PE or VC. The reason is clear: these sectors offer the highest salaries. Which b-schools produce graduates that are recruits of choice for PE/VC firms? The answer also addresses the question, what are the b-schools that have offer the best PE and VC courses? Here are some top schools in a nutshell.
Top MBA programs for private equity and venture capital
The Booth School of Business of the University of Chicago in Illinois has a major focus on the areas of PE and VC. It has two student clubs, which host conferences and mock interviews. The Polsky Center for Entrepreneurship that provides networking opportunities for students.
Columbia Business School (CBS)
The Columbia Business School of the Columbia University, New York City, has strong ties with the industry, and the school’s private-equity course is a favorite among students who want to go into PE after they graduate.
The CUHK Business School of the Chinese University of Hong Kong can choose PE electives from the MBA program’s finance stream. Thirteen percent of its class of 2014 were recruited by PE or VC firms, according to Find MBA. Though, in 2017, it went down to about 6%.
About 18 percent of students of Harvard Business School, Harvard, Massachusetts, went into PE or VC industries in 2017. Many HBS graduates have acquired top positions in renowned investment management firms.
INSEAD’s European campus at Fontainebleau, France, is an ideal networking center for PE students and has provided talent to many PE firms in the UK.
The Kellogg School of Management of the Northwestern University, Evanston, Illinois, offers electives related to the finance and PE sectors. The Heizer Center for Private Equity and Venture Capital is Kellogg’s home for research in this field, and funds research by Kellogg faculty.
London is the center of the world for students interested in PE, and probably no school has a better advantage than the London Business School, given its location. The LBS, which has PE and VC firms located close to it, hosts the Coller Institute of Private Equity, which provides research and networking opportunities to students.
The Stanford Graduate School of Business in California sends about 15 percent of its class to the PE, venture capital, or leveraged buyout sectors. The GSB boasts a PE club and electives that specializes on the sector.
MBA students from the Tuck School of Business of Dartmouth College in Hanover, New Hampshire, are increasingly being recruited by PE firms. The school’s Center for Private Equity and Entrepreneurship specially incubates students for the PE sector.
Wharton School of the University of Pennsylvania, Philadelphia, sends about 9 percent of its graduates to the PE, VC, and leveraged buyout sectors and typically earn high salaries.
In 2017, Stanford, Harvard, and Wharton sent the highest number of students to PE and VC firms—16 percent, 18 percent, and 14 percent of their class, respectively. In the same year, Booth sent about 7 percent, Kellogg 4 percent, and Columbia 6 percent, respectively, to these sectors.
High salary, bonus
Also in 2015, a CBS MBA secured a slot in private equity with a guaranteed bonus of $467,000 in his first year. A Stanford MBA in finance secured a starting salary of $267,000 apart from a signing bonus and other guaranteed compensation. The average salary of Stanford MBAs who found jobs in PE sector was $152,500, with an average sign-on bonus of $25,000 and other guaranteed bonus of $140,000.
Interesting data from 2013, based on research by PitchBook Platform, says that five business schools accounted for 60 percent of the professional ranks of the 200 PE and VC firms surveyed. HBS contributed 26.1 percent of professionals at PE firms and 24.4 percent at VC firms. Wharton graduates comprised 11.2 percent of staff at PE firms and 8.4 percent at V firms; Stanford GSB 7.7 percent and 17.1 percent, respectively, Booth 6.6 percent and 4.3 percent, respectively, and Kellogg 5.6 percent and 4 percent, respectively.
PitchBook describes the hiring of MBAs at PE and VC firms as a “classic chicken and egg situation.” Do big PE and VC firms hire people because they graduated from top b-schools? Or do the top schools select candidates because of their prior connection with PE/VC firms and because they are more likely to be recruited by these firms after they graduate? It might be a little bit of chicken and a little bit of egg, according to PitchBook.
The presence of b-school graduates at top PE and VC companies is certainly a good pointer to the quality and reputation of MBA programs with strong finance and related streams. Once again, here’s some data that may be slightly graying but still quite interesting.
In 2014, P&Q studied LinkedIn profiles to find out which b-schools contributed the highest number of employees to the top nine PE companies. HBS again came on top with 269 graduates employed at the nine firms, followed by Wharton with 242 graduates, and CBS with 133 graduates.
Booth, well-known for its finance faculty, had 42 graduates in these nine firms. Stanford had 76, Kellogg 31, MIT 25, Tuck 17, Duke 16, and NYU 99. The firms rated as the top nine were TPG Capital, Carlyle Group, Blackstone Group, KKR, Warburg Pincus, Advent International, Apollo Management, Bail Capital, and CVC Capital.
PE/VC Courses and clubs at bschools
What do PE/VC courses at the top b-schools offer? At HBS, for example, the course provides an overview of the industry, profiles of the main players, how they work, the sources of capital, the problems they face, and the opportunities for innovation in the world of PE and VC. It prepares the student for a wide range of jobs and career paths such as corporate manager, entrepreneur, banker, advisor, or regulator.
At Kellogg, the “VC/PE pathway” equips students with the analytical framework and tools to conduct related transactions, complete mergers and acquisitions, and facilitate corporate restructuring. The course throws light on potential sources of value that investors can tap. Students can choose specialization tracks depending on whether they are interested in VC, growth equity, or leveraged buyouts.
Besides courses, b-schools also provide platforms for students intending to focus on PE/VC. Wharton, for example, runs a PE and VC club where over 700 professionals from diverse backgrounds discuss career and other professional opportunities and in the field for the benefit of students. At Booth, the student-led Private Equity Group supplements innovative courses, research, and guidance provided by faculty in finance, strategy, and entrepreneurship, and provides practical experience and networking opportunities.
Besides, work experience in investment banking, asset management, consulting, etc., which most MBAs at top schools aiming at working in PE/VC would already have anyway, it is an advantage to be fluent in European languages such as French, German, and Italian, and to know how to use accounting and other software.
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