Under 34 year-olds in finance have no idea what’s coming

Ella (left) and Maja – Equity Research Associate

We’ve been here before. It’s something of a trope that whenever things turn bad in the markets, some wisecrack points out that an entire generation have been fed on a diet of milk and honey and has no idea what it’s like to eat earth and leaves. Usually, this is stated in relation to trading jobs. Now, it’s being said in relation to private equity jobs too.

“If you are under 34 years old, you have never invested in your career in a rising rate environment or a down market environment,” Scott Kleinman, co-president of Apollo Global told attendees at the Milken Institute Global Conference in Beverly Hills last week. Reporting from the conference, the Financial Times said Apollo’s chief executive, Marc Rowan, has a running joke that on the same theme: “You’ve worked for me for 10 years and I still don’t know if you are a good investor.”

While this may be conference banter, it has a whiff of truth. Today’s 34 year-olds were 20 when the financial crisis struck, and therefore still at university. Most won’t have worked in private equity until they were 25 or 26 at least. The crisis was on in the eurozone, but then Mario Draghi stepped in and declared his willingness to do “whatever it takes.”

This time around, there’s unlikely to be a similar saviour. The FT says the Milken Conference was peppered with mutterings about “recession”, “correction” and being in “a dark place.” Rowan said markets haven’t finished falling; Kleinman said the Fed will trigger a recession as it attempts to quash inflation. There’s a worry that the cash coming into private equity will slow and that reduced enthusiasm for junk bonds will impact LBOs. 

For the moment at least, none of this seems to be impacting private equity hiring or pay. The recent private equity recruitment round in New York was wild, with firms interviewing multiple candidates overnight in an attempt to gain an advantage. When it released its results last week, Apollo said it hired 185 people in the first quarter and that it’s expanding in Asia in particular. Already known for paying well, Apollo hiked spending on compensation by 24% last year. Apollo associates, aged around 28 years-old, are now paid $550k for what they complain are 20-hour days. 

That’s a lot to pay for someone who’s never been really tested and who might not turn out to be all that good when they are. Unfortunately, though, most of the private equity professionals with the right sort of experience are now lounging about in Long Island. – The FT says the conference organizers were reminiscing about funding a deal between Singer and machinery giant International Harvester which took place last time inflation was surging and the Federal Reserve was raising rates. The year was 1984.

 Sarah Butcher – Read more on efinancialcareers.nl

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