Thursday, March 23, 2006

Frothy Private Equity and Banking Market?

Go where the money is, or so goes the saying. In the latest trend of post-MBA dream jobs, private equity and hedge funds seem to be at the top of every future Gordon Gecko's shortlist. Of course not ever polished 30-year old is KKR or Carlyle material, but that doesn't stop the masses from trying. Why the big push? The likeliest theory is that MBAs are being turned off by the time committment associated with i-banking. The traditional path seems to be for someone to bite the bullet and do banking as an analyst for two to three years after undergrad before venturing into private equity or going back to business school. Business schools traditionally have not been active recruiting grounds for private equity firms given that most shops don't hire too many post-MBAs and the fact that the jobs are so coveted that there isn't a need to convince students to enter the LBO world through campus recruiting, but rather, students would actively find firms on their own. With a large amount of endowment, high net worth, and pension money flowing into private equity firms and hedge funds, however, many in the industry are wondering if a bubble might be developing. It is true that the hedge fund and private equity markets have become the industry "du jour" for people to buzz about at cocktail parties, but as with most trends, too many people jump in, things get overheated, deals begin selling for frothy prices, and a one unlikely correction in the market becomes a reality.

Check out two interesting articles:

NY Sun on the Harvard MBAs and their drive to break into the private equity business

A Harvard MBA says that too many Harvard MBAs pursuing finance jobs. That means that a stock market correction is imminent.


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