Recruiting Trends- A Rush to Recruit Young Analyst

For Wall Street’s top young analysts, landing at a prestigious investment bank out of college was the easy part. Now comes the fierce competition to line up a high-paying job at a prominent buyout fund, just months into their first professional jobs.

When private equity recruiting season began in early April, junior analysts at banks like JPMorgan Chase and Morgan Stanley eagerly awaited calls from recruiters who could set up interviews at leading companies.

“I have had four interviews in two days,” said one young analyst at a large bank. (He, like most others interviewed for this article, agreed to speak only on the condition of anonymity.) “I’m getting more by the hour. I’ve slept 12 hours the last three nights, and I’m just holding on with work and interviews.”

It’s a careful song and dance. Young analysts are approached by executive search firms hired to fill anywhere from one opening at a hedge fund to a few spots at a middle-market private equity firm to more than 50 positions at big operations like Kohlberg Kravis Roberts, the Blackstone Group or the Carlyle Group. Traditionally, these jobs do not begin immediately but a year and a half later, after analysts finish their two-year contracts.

“Every year recruiters get hold of full lists of analysts in the top groups at the top banks,” said a second-year analyst at JPMorgan Chase who secured a private equity job a year ago. “Private equity funds want kids from the mergers and acquisitions, leveraged finance and financial sponsors groups so headhunters will call the main line at these desks and just recruit the analyst that picks up the phone.”
It is difficult for these analysts to resist when recruiters sell the promise of high salaries and better hours.

“Right now, major investment banks are so highly regulated that they are no longer the most exciting places to be,” said Skiddy von Stade, the chief executive of OneWire, a technology recruiting platform focusing on the financial services industry. “Private equity shops are smaller, leaner and much less bureaucratic. You’re given the leeway to be creative and take risks. You may put in long hours when there’s a lot of work, but you don’t have to put in the face time when things are slow.”

One second-year analyst at a large bank said she had hardly been exposed to working in the finance world when the rush to find a job on the “buy side” began.

“There’s a progression that people go through,” she said. “You’re two months in, you start getting calls from recruiters, and you feel left out if you’re not participating. It’s a very enticing concept to lock up a job and your ticket out of banking a year and a half out.”

She opted to skip the recruitment frenzy, waiting to commit to another job until she had more than a year of experience. Ultimately, she decided venture capital aligned more consistently with her career goals than private equity.

“I had a lot more time to find new opportunities, put in applications and really think about what I wanted to do,” she said.

Young bankers rely on recruiters for advice when navigating private equity firms’ cocktail parties, marathon meet-and-greets and exploding offers — opportunities that expire just a few hours after analysts learn they received an offer.

“If you’re far along with Blackstone or K.K.R. and you’re interviewing with Carlyle, they’ll tell you to absolutely name-drop,” said Kelsey Morgan, who was recruited by Carlyle from Credit Suisse in 2007 and is now the director of corporate development at the Interpublic Group. “Firms want to make sure they are picking a candidate who is loved by other firms as well.”

Because they are trying to place analysts with such little work experience, recruiters will look for anything to identify the cream of the crop. College grade-point averages, high school test scores and community service are all fair game, Ms. Morgan said.

“You’re working 100-hour weeks, and a recruiter wants to know what you do for fun and what nonprofits you work for,” she said. “I slept, did my laundry and called my mom. That’s all I really had time for.”

Efforts have been made to push back a process that has been inching ahead, earlier and earlier. Last year, a handful of top-flight private equity funds including Blackstone, Carlyle and Warburg Pincus tried to delay recruiting until analysts were halfway through their second year, according to multiple private equity executives.

The larger private equity funds waited, partly in response to big banks that were cracking down on recruiting. Goldman Sachs fired analysts who conceded they had lined up new positions in their first year, and Morgan Stanley banned first-year bankers from looking for new jobs, according to executives at both banks.

“There has been backlash,” said a former Goldman Sachs analyst who went through the recruiting process three years ago and is now an associate at a midmarket private equity fund. “You don’t really want your full investment banking analyst class checking out with a year and a half left on their contracts because they know they have another job lined up.”

The banks were not concerned about losing talent but frustrated with the conflicts of interest that emerge after analysts pledge themselves to another employer.

Ms. Morgan said the effect was more likely a subtle shift in attitude.

“Once you have an offer, maybe you don’t want to work late nights three, four or five nights a week,” she said. “Maybe you don’t want to hop on every single live deal.”

Morgan Stanley has since bowed to employee complaints, lifting its ban on first-year bankers’ job hunts this spring, according to two people briefed on the decision. Morgan Stanley declined to comment.

Instead of handing out two-year contracts, Goldman’s asset management and investment banking divisions recently opted to make college graduates full-time, permanent employees to bring on analysts more eager to make a long-term commitment to the company.

The change has not affected the bank’s ability to attract and retain top young talent, a Goldman spokesman, David Wells, said. He declined to comment on the effect of early recruiting efforts by private equity firms and hedge funds on bank policy.

The large buyout funds began ratcheting up recruitment drives last month, once again pursuing analysts in their first year.

The funds that agreed to wait felt they had lost top employees to hedge funds and middle-market shops that aggressively recruited first-year analysts, said a private equity executive who oversees his firm’s hiring efforts.

“It’s back to a knife fight in an alley,” the executive said. “And it’s not fair because these kids get barely any on-the-job training before a recruiter reaches out to them. We should just be recruiting these kids out of middle school. Forget high school, college and Goldman Sachs.”

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