What qualifications do private equity firms require? CFA, MBA, ACA, Masters? (2024)

FAQs

Is CFA necessary for private equity? ›

A lot of limited partner private equity firms will hire undergraduates and then put them through the CFA. It's rare for direct investment firms to do the same. However, we also see a lot of junior investment bankers with CFA level one, as it shows both technical knowledge and evidence of commitment.”

Although most large private equity firms look exclusively for job candidates with an MBA, you can still get into a smaller firm without one. Smaller firms prefer candidates with an MBA, but it's not always a requirement.

Otherwise, to be selected by a top-notch private equity firm, you need to have outstanding skills and experience in private equity. Chartered Financial Analyst or CFA – Another qualification you can aim for is CFA.

Private Equity Jobs

Investment bankers usually follow the PE firm career path as their next job and typically have a bachelor's degree in finance, accounting, economics, and other related fields.

Candidates should have an bachelor's degree in an analytical major like finance, accounting, statistics, mathematics, or economics.

The traditional route into private equity involved two or three years in the analyst program of a major investment bank, followed by a top MBA, followed by a job as a private equity partner. Recently, though, top private equity firms (eg. Blackstone) have begun training their own graduates.

While an MBA degree can certainly hone a technical skill set necessary for a job in VC, there's a practice much more valuable for pursuing a career in the field.

Stanford GSB (12%) has the highest percentage of Class of 2022 venture capital job acceptances, followed by Wharton (8%) and HBS (7%). Stanford's high percentage is likely due to its close proximity and longstanding connections with the venture capital community in Silicon Valley.

An MBA is more costly to acquire than a CFA and typically requires being a full-time student, while someone studying for a CFA can simultaneously hold a full-time job. However, the tradeoff is that after completion, an MBA often gives a bigger boost to your earnings potential than a CFA.

How do I start a career in private equity? ›

To become a private equity analyst, you will need a bachelor's degree in accounting, finance or a related programme and sometimes an MBA as well. Entry-level positions are available, but usually experience working in the financial sector is a requirement.

While the CFA is the best designation to pursue in terms of investment knowledge, it certainly does not cover all of the aspects of financial planning. In very general terms, however, the CFA designation may help those in the corporate world more than those starting their own financial planning business.

Academic Excellence: Most Private Equity firms will not look at a candidate that has lower than a 3.0 GPA (more likely 3.5 GPA at top firms). Communication Skills: Ability to write and speak well suggests that you'll be successful working with clients and PE colleagues.

The first and only private equity firm to make the most desirable MBA employers list, Blackstone primarily recruits at top schools like Harvard, Wharton, Kellogg and Columbia.

The financial expertise acquired through investment banking can be applied in areas like asset management, private equity, venture capital, and hedge funds. Private equity offers a more attractive work/life balance but is also potentially even harder to break into.

Entry points: There are three main entry points for a career in venture capital: pre-MBA, post-MBA, and as a senior executive or partner. For the first option, one can either join a VC firm after graduating or gain experience in investment banking, business development, or sales.

Is private equity the most lucrative career? ›

Building a career in private equity is quite rewarding, one of the most lucrative in the finance sector. This above fact is due to a couple of reasons: You can earn a lot of money from it, it requires a lot of intelligence, and the working schedule is quite flexible.

In the United States, firm employees overseeing venture capital with current and potential businesses are likely to have a Master's degree in Business, or some field relating to finance. Students with this outlook can also pursue closely-related positions.

Finance proves to be a boon for HBS grads

Some of the highest earners are those who go into private equity; in 2022, they earned $175,000 median base salaries, $30,000 in signing bonuses and a whopping $175,000 in performance bonuses. That means HBS grads can make nearly $400,000 in their first year out of school.

Harvard reported the median salary for 2021 graduates was $150,500, with an expected bonus of $30,000. The school estimated students would pay $112,764 for one year of tuition — plus expenses — for the 2022-23 academic year. Students flocked to positions in consulting, private equity, and technology.

Harvard Business School has produced 64 billionaire alumni, the most by far of any graduate business school in the world, according to a new report from Wealth-X.

Business Analytics is the top paying MBA specialization in the present time. An MBA in Business Analytics is all about systematic analysis of data to reach valid conclusions and decisions.

While Harvard School of Business produces the largest number of graduates who serve as CEOs of Fortune 500 companies, an almost equal number of these CEOs earned an MBA at a virtually unknown school.

The typical job roles include portfolio management, research, consulting, risk analysis and risk management. The average base salary for a CFA is USD 126,000 and the total compensation of USD 177,000.

The pass rates for the CFA and CPA exams are similar, but the CFA certification typically takes candidates several years longer to obtain than the CPA certification. In that respect, the CFA certification is typically viewed as harder than the CPA because of the greater time commitment and work experience requirements.

What is better CFA or masters in finance? ›

If you are primarily interested in managing wealth for institutions or in an institution such as a mutual fund, then the CFA and/or a Master's are the most recognized. If you are primarily interested in working for a company as a financial analyst, financial manager or in a similar role then a Masters is a good choice.

Private equity employees are compensated for making good investment decisions. The larger and more successful the investment, the more money there is to go around. Mega funds offer large salaries in part because they manage large quantities of money.

For the vast majority of private equity associates, the base salary is around $135k-$155k. Then, based on fund performance, bonuses tend to range from 100% to 150% of the base salary.

The most common backgrounds for starting a private equity firm include: VPs or Principals at existing upper-middle-market (UMM) or mega-fund (MF) firms who are good at their jobs but disenchanted with the fund economics or promotion opportunities.

It's also expensive: there's a one-time enrollment fee along with exam and registration fees, plus the cost of books and study programs, and the income you're likely to lose while pursuing the credential. All in, you will spend anywhere from $2,500 to $8,500 and roughly two to four to years complete the CFA program.

In the U.S., CFA charterholders vary in the range of $56,500 and $120,500 per annum, with an average salary of $95,494. On the other hand, the salary of CFPs varies in the range of $62,500 and $94,500 per annum, with an average salary of $83,123.

The CFA charter prepares you for a variety of investment-related jobs, such as portfolio manager, risk manager, and research analyst. Seven percent of CFA charterholders even go on to be chief-level executives. In general, the CFA designation increases salaries by around 15-20%.

The average during a busy time for associates and analysts is usually around ~60-70 hours per week. But it's all dependent on how many deals and investments are on the go. The above hours will vary based on if there's a live deal.

Average Blackstone Consulting, Inc Human Resources Business Partner yearly pay in the United States is approximately $69,822, which is 22% below the national average.

Hours Distribution in Private Equity

So there's definitely a lot of work to go around in private equity. Again, you're going to be working on average ~65 hours. And mega funds tend to be slightly grindier.

What is the rule of 72 private equity? ›

The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to duplicate itself.

Private Equity Jobs, Career Progression & Salaries

It's extremely difficult to get into private equity, and once you're in, the job is stressful and requires long hours and sacrifices, especially when deals are in their final stages.

Compared to consultants, private equity professionals often have more influence and a more direct impact on the companies with which they work. With this power, however, comes greater accountability, as they're more deeply involved as company shareholders.

Hedge Fund Compensation:

Hedge fund compensation is more variable than private equity salaries + bonuses, but at the junior levels, you'll most likely earn a bit more in private equity.

Your odds at landing a Private Equity job at a top 10 firm is 1 in 300. As of October 2019, the US college population size of students pursing business degrees is 3.9 million,³ according to the National Center for Education Statistics.

Private equity associates are usually older individuals who started out and were successful in investment banking in their earlier years. While there is sometimes quicker money to be made in investment banking, usually associates in private equity have higher salaries and make more in the long term.

Earning a CFA is often a requirement for becoming a chief investment officer at an investment firm or public company; engaging in credit analysis, corporate accounting and auditing; or doing financial planning for high net-worth individuals.

Investment banking is a preferred career choice for CFA® Program candidates and CFA® charterholders.

Great quantitative skills with a proven track record, a deep understanding of the hedge fund industry as well specific firms, the right educational background, and certifications like a CFA, CAIA, or CHA (Chartered Hedge Fund Associate) are all helpful.

The four career pathways in the finance cluster are banking and related services, business financial management, financial and investment planning, and insurance services.

Do financial advisors need CFA? ›

CFA and CFP certifications are both common for financial advisors. For prospective clients, working with an advisor who has one or the other may not make a huge difference. Both certification programs teach applicants how to handle someone's financial future.

Do you need a CFA to be a financial analyst? No. Financial analysts do not need the CFA credential to work in the field, but employers may prefer individuals with certification.

An MBA is more costly to acquire than a CFA and typically requires being a full-time student, while someone studying for a CFA can simultaneously hold a full-time job. However, the tradeoff is that after completion, an MBA often gives a bigger boost to your earnings potential than a CFA.

The CFA programme, on the other hand, is more suited to professionals who need more specialised knowledge and expertise in the field of investment. Since the Masters in Finance is not a substitute for the CFA, some professionals prefer to obtain both designations.

Most investment banks prefer degrees in finance, accounting, business administration, and other business disciplines. Undergraduate degree subjects are less influential in the hiring process if a candidate has a master's degree in business administration, finance, or another highly relevant subject.

Hedge fund managers typically have a minimum of a bachelor's degree, although many companies prefer a master's degree. Hedge fund managers may have a degree in accounting, finance, economics or business administration.

That doesn't mean you have to have a degree in business or economics. In fact, many famous hedge fund managers are students of philosophy. Certain hedge funds require an MBA or CFA. Many people get both, but getting both is really a waste of time.

Education and Certifications

While a master's degree is not required to enter the field, many associates and higher-level M&A professionals have Master of Business Administration (MBA) degrees. Certifications like Chartered Financial Analyst (CFA) and Certified Public Account (CPA) can help you advance your M&A career.