The Private Equity Boomlet

BusinessWeek has a cover piece on the ongoing private equity boom, which is probably just what insiders didn’t want. Among other things, the piece points to how partners get to participate personally in financings, plus the ardor among MBA sorts to enter the industry (and the remarkable pay packages some are obtaining there):

Business school students, meanwhile, are angling to get on the partner track. At
the University of Chicago, says Julie Morton, associate dean of MBA career
services, resume writing courses for private-equity candidates are
oversubscribed. Stanford University is seeing more interest. More 2005 Stanford
MBA grads went into private equity than any other area except consulting and
consumer products and services

These students, not yet wary of the
public life, are chasing the huge dollars in private equity. The median annual
compensation for a 2005 Harvard Business School grad who went to work for a
private-equity firm was $174,500, compared with $135,000 for the rest of the
class. Last year’s Stanford grads did better, with median total compensation of
$232,000, compared with $140,000 for the class. Some private-equity funds pay as
much as $300,000 to fresh MBAs
. [Emphasis mine]


  1. Franklin Stubbs says:

    I wonder if the preferences of ivy league MBA grads could function as some sort of contrary indicator, perhaps on par with the classic magazine cover indicator.
    Logic being that these guys are not true risk takers in any real sense. They want the BMW 740i and the house on Lakeshore Drive more than anything, and they paid big bucks for their door-opening biz school credential, so why shouldn’t they be entitled to a sure thing. Ye olde catch 22, of course, being that the grass is greenest and the risk is lowest in areas either peaking or peaked.

  2. Agreed. That was, in part, my point in snipping out that quote. Venture capital and e-commerce startups were the MBA go-tos in 1999, and private equity demonstrably is today.
    Sure, management consulting and investment banking never go away as choices, but a good contarian indicator might be any new-new thing that rises above that level of background noise.

  3. you could wonder, or you could just read the DDO…
    “The Harvard MBA Indicator says we’re still in frothy market conditions: at 30% of the class of 2005 going into market sensitive careers, I’ll still guess that 2006-7 sees that percentage go even higher …
    Soifer Consulting has the details: “If 10% or less of the year’s Harvard MBA class takes market-sensitive jobs (investment banking, investment management, sales & trading, venture capital, private equity or leveraged buy-outs), that’s a long-term ‘Buy’ signal. Conversely, if 30% or more do so, that’s a long-term ‘Sell’ signal.”

  4. Lovely, thanks Ed. You’re away ahead of the game, as always!