List Of The Best Private Equity Funds To Work For (2023)

Ah private equity, the promise land after investment banking. Every year, hundreds of fresh investment bankers try to break into private equity. But which private equity firms should you work hard to get a job at and which private equity firms should you avoid?

These days in your early 20s, everything is all about prestige and getting that “elite” investment banking offer, then that mega fund private equity offer, then business school and then back to mega fund private equity. But how do you know if that is the right choice for you? Just because everyone says it the path you should take, doesn’t make it the right one.

Success is not determined based on how large your fund

Let’s just get it straight and be real. Just because you are a Goldman/Morgan Stanley/JP Morgan/Lazard/Evercore/Moelis 22-year-old banker doesn’t mean you are better than everyone else. You’re just another 22-year-old making close to $200K per year working 60-120 hours per week with no time to do anything else. And same goes for any associate working at a mega-fund.

Once you get older you start to realize prestige doesn’t matter. Sure, can it help get your foot in the door at potential exit opportunities earlier in your career? Of course. But at the end of the day that doesn’t make you better than others and it doesn’t guarantee you success.

Success is determined by grit and persistence. Your ability to overcome and face challenges. To be beaten to the ground with no hope left and have the ability to fight back 10 times harder.

I worked at one of those “elite” investment banking firms and moved to a $40Bn+ mega fund afterward. And guess what? After breaking into that mega fund, I hated what I was doing, burned out very quickly, quit, and became unemployed for a few months. Was a big reality check and I was back to square one. Fortunately during those few months, I focused entirely on finding the right opportunity and investing style I wanted to pursue longer term. Can learn more about me here.

Different types of private equity funds

It is very important for you to believe in the fund’s investment approach in order to like what you do and be successful at it. Private equity funds differ in primarily two ways:

1. Fund Size
2. Investment Style

1. Fund Size

There are lower middle market private equity funds, middle market funds and mega-funds. Each type of fund differs primarily by the size of company that they invest in.

Lower Middle Market Private Equity Funds

Lower middle market private equity funds generally have fund sizes that range from around $100MM to $400MM and invest in companies that generate less than $10MM annually in EBITDA. Average purchase prices for these companies can range from $10MM to ~$50MM with equity checks from the sponsor around half of those figures.

Cash compensation at a lower middle market fund is typically at the low end, but carry percentages can be pretty meaningful depending on how much experience and value you bring to the firm. Overall pay after carried interest payments can vary meaningfully depending on the performance of each fund.

So while cash compensation annually is low, you can actually make a considerable amount of money at smaller funds depending on returns of the fund and your carry percentage. While most people would rather get a higher cash salary and bonus up front every year, the real money comes in the carry payments over the long run. 100% of the time if I knew I was at a very successful fund with a strong track record, I would prefer higher carry percentages over a higher annual cash salary/bonus.

Learn more about private equity salaries and bonuses and how carry interest payments work.

Middle Market Private Equity Funds

Scale matters a lot in this business in terms of how much a firm can pay its employees. Think about the economics. Middle market funds generally have fund sizes that range from $500MM to $2Bn, with total assets under management of ~$500MM to $5Bn.

Assuming these funds charge at least 1.5% management fees every year, that is around $7.5MM to $75MM every year of income right off the top that are primarily used to pay employees. The larger the fund, the more of the management fee pool there is to pay employees higher cash salaries and bonuses.

Because of this, annual cash compensation is higher than lower middle market funds and can be pretty lucrative for someone straight out of investment banking (think $250K-$300K for a first-year associate). Carry percentages are also pretty good at middle market shops

Mega Funds

These are the KKR/TPG/Carlyle/Apollos of the world that have massive scale and are involved in basically any large private equity deal you see in the headlines. They are the highest paying finance jobs that exist for any junior investment banker looking to break into private equity (think $300-$400k for a first-year Associate with two years of banking experience).

That said, given how large these funds have become, don’t expect to see much outperformance anymore in fund returns going forward. Yes, the reasons they are so big today is because they generated very good returns over the last two decades, but size is the ultimate killer of returns in the long run. The bigger the fund, the more your returns will look like the benchmark as you have to invest in larger and larger deals that are more competitive and priced more efficiently.

Think of compensation at these funds as more of a nice large annual coupon payment that grows slightly every year. As you get more senior in rank, you get carry, but don’t expect mega fund returns for each fund to be 2x MOIC (multiple on invested capital) going forward.

2. Investment Style

The second main differentiator of private equity funds is how they invest. Every fund has its own investment approach that typically falls within the categories below.

• Venture – early-stage companies with little revenues or profitability
• Growth – early-stage companies with accelerating revenue growth but little to no profitability
• Value – companies with good profitability, little to no growth, trading at low valuations
• Distressed – over-levered / mismanaged companies that likely need to be restructured
• Secondary – investing alongside other private equity firm deals (basically allocating capital and being a minority investor in private equity deals)
• Industry Specific Focus – Funds that invest only in a select number of industries (consumer/technology/industrial/oil & gas/real estate/etc.)

Most people early in their careers don’t think enough about what type of investment style they want to pursue – they focus too much on prestige and fund size. If you want a successful long-term career, you need to put more emphasis on what type of investment style makes the most sense and identify with the most.

I see a lot of investment bankers who join large private equity funds just because of the name and only last a couple of years. They end up going to business school and pivoting to a different industry. Maybe private equity wasn’t for them or maybe they just didn’t fully buy into the investment style at that fund.

Most of the big bucks in finance come from staying at a firm that has an edge and a good track record for a long time to the point where you start receiving carried interest payments. Sure, you can make mid six figures for a few years, but the big seven figure paychecks come when carried interest payments start flowing in. You need to join a fund that you want to stay at longer-term and really believe in the investment style, otherwise you won’t stick around long enough for these payments to come in.

Qualities of a top private equity fund

1. Track record of outperformance across at least three funds – sometimes firms get lucky and have amazing fund returns because they focused on a specific industry that is favored at that point in time or had a fund that started right after a big recession when valuations declined
2. Locked up capital – Don’t join a fund that doesn’t have locked up capital. It is already hard enough with all the competition to win deals. Not having a fund makes it even harder as sellers will question whether you have the capital to close and will choose other bidders over you. It is also much riskier from a stability standpoint as no management fees are flowing in every year to support the fund’s expenses.
3. Small to medium fund size – this is where my thoughts may differ from others. People think bigger is better in private equity, but the law of large numbers always comes into play when you think about how to make good returns. It is much easier to double a $1 billion fund than it is to double a $10-$15 billion fund. There is less competition in the middle market (although much more competitive now than it was decades ago) and valuations are lower.
4. Focus on niche sectors – given all the competition out there today and how much money has flown into private equity, a strategy that focuses on niche asset classes or industries can lead to very good performance.  
5. Good operating team – depending on the fund’s strategy, there needs to be a good team in place that can set a strategic plan for growth or a turnaround for companies in distressed.

Best private equity funds to work for

Best is a very subjective word and differs depending on what you value in terms of a careers. Below you will find the most well-known private equity funds that are the most sought after.

Top Mega Funds

• Blackstone
• KKR
• TPG
• Apollo
• Carlyle
• Apollo Global
• Bain Capital
• Warburg Pincus
• Hellman & Friedman
• Thoma Bravo
• Leonard Green
• General Atlantic
• Clearlake
• Advent International
• Clayton, Dubilier & Rice
• Silver Lake
• Apax Partners
• CVC Capital Partners
• EQT Partners
• Permira
• Vista Equity Partners

Top Middle Market Private Equity Funds

Some of these funds below you could consider mega funds as well given how large their latest fund sizes have been, but traditionally have been middle market focused.

• Thomas H Lee Partner
• L Catterton
• GTCE
• Audax
• HIG Capital
• American Securities
• Francisco Partners
• Madison Dearborn Partners
• Lindsay Goldberg
• HGGC
• CI Capital Partners
• Providence Equity Partners
• The Riverside Co.
• New Mountain Capital
• Abry Partners
• Berkshire Partners
• TSG Consumer
• JLL Partners
• Court Square Capital

Top Lower Middle Market Private Equity Firms

There are hundreds of lower middle market firms, so it is hard to gauge which ones are better than others. When deciding on whether to join one of these smaller shops, always look at historical track record of previous funds, the experience of the founders and whether their strategy makes sense (like do they have a specific expertise in a certain industry or is there a unique angle that differentiates them when making investments).

Benefits of working at a large private equity fund

There is a big difference between working at a large private equity fund / mega fund versus a small one.

• Compensation – By far the biggest reason why people want to join a mega fund is because it is the highest paying career path for someone with just a couple of years of banking experience (aside from joining a hedge fund that has an amazing year)
• Career development/training – mega funds do dozens upon dozens of deals and know how to most efficiently go through analyzing deals. You will be an expert at LBO modeling very quickly as you will evaluate dozens of deals during your time there.
• Exit opportunities – obviously with any big “prestigious” name in the industry, people know the firm you work for and the name brand gets your foot in the door at other places in the future. Just like having an investment banking background, people know that you get very good experience working at a mega fund.
• Culture – Depending on the culture of the firm, large private equity funds can be fun places to work (aside from the grueling hours). Like investment banking, you are around dozens of similar analysts/associates who just want to let off steam after work, and can make lifelong friends.
• Random perks – Like at any large firm, every so often you get free concert/sports/other event tickets from clients who do business with the fund.

Risks of working at a large private equity fund

• Hours – private equity is supposed to be the promise land, right? Wrong, be prepared to work like a dog again just like in investment baking churning through deal after deal. Mega fund don’t pay you above market for no reason. Of course, hours will vary depending on whether you are in the middle of a deal, but don’t expect to have much free time or the ability to travel or go to certain events whenever you want to. Mega fund private equity has one of the worst work life balances amongst finance careers.
• Replaceable – there are dozens of new associates every year at these mega funds. If they lose you, no sweat. They will replace you just as quickly as you were hired. At a large fund as an associate, you are a commodity that exists to churn through analysis after analysis.
• Feeling like a “cog in the wheel” – It’s hard to feel like you are contributing much to a firm’s success when there are so many people there. You have a small role to play, and that is to build models and presentations day in and day out.
• Harder to generate outperformance – the larger the fund the harder it is to meaningful outperform the index. It is as simple as that. Think about Warren Buffett and Berkshire Hathaway. He had amazing returns back when he was small and could invest in asset classes that were more likely to be mispriced (smaller/illiquid companies). But at a certain point, the fund is up against the law of large numbers, and making a 2.0x return on a very large fund becomes nearly impossible.  
• Working on auction processes that go nowhere – larger companies are more likely to be shopped in some sort of auction process. Unless you are willing to pay more than the next fund, you will do all this work building models and presentations for nothing. That is one big difference between private equity and working at a hedge fund is that at least at a hedge fund you know what prices are for securities every day and can make investment decisions without someone else getting in the way.

Benefits of working at a small private equity fund

Smaller funds are a bit different. In general, I always tell young finance people that it is best to join a well-known investment bank and a large fund early in your career to develop a good skillset and network, then later on 5-10 years into your career you can move to a smaller shop in an industry or investment style that you most identify with.  

That said, sometimes working at a small private equity fund makes sense and can be very lucrative.

• Learn multiple skillsets – given there are less bodies available, just like a startup to an extent, you will help out with many aspects of the firm and not just work on investing related work. Meaning you could work not only on investing related items, but fundraising, taxes, portfolio management, legal, etc. Some people may view this as a negative, but think one of the best skillsets for anyone is to be able to wear multiple hats and figure out things independently. Trust me, it’s nice to mix things up and work on non-investing work streams from time to time.
• Be more involved on each deal and the decision making– just like a bulge bracket investment bank, large funds may have multiple groups involved when completely a deal. Smaller funds let you be involved in all aspects of a deal from start to finish and your opinion matters more. Higher ups will listen to your opinion more.
• Easier to rise the ranks – with less people working in the fund, the chance of outperforming your peers is greater. If you work at a mega fund, there are dozens of very smart and driven associates that you have to compete with. But at a smaller fund, it is easier to be noticed.
• Lifestyle – given the slower pace of deal flow than mega funds, you will generally work less at a smaller fund.
• Potential for Higher Returns – Like I mentioned before, smaller funds have more likelihood to have better returns because you can invest in asset classes at lower valuations compared to larger deals which are more competitive.

Risks of working at a small private equity fund

• Compensation – expect less cash salary/bonus and more carried interest. If the fund does well then you will make a lot of money on the back end when carried payments flow through
• Culture – This really depends on each fund as cultures can differ greatly. But in general if you work at a place with < 10 people and most people work remote half the time, don’t expect the firm to be very social at all. People in their 20s care more about this as they want a fun place to work at, but once you are in 30s and start having a family, this doesn’t matter as much.  
• No “brand name” / less exit opportunities – self-explanatory. It’s harder to go from a small shop to a mega fund, but a lot easier to go from a mega fund to a smaller fund. That said, I have seen people transition to mega funds after working at middle market shops. If the fund has been around for a while (think about funds that raise max $500-$1Bn but have done this consistently for decades across multiple funds), then they are probably recognized by larger funds as their paths have crossed at some point.
• Less external resources and perks – don’t expect to have good access to third-party research or other external resources and don’t expect your vendors to take you out to fund events as often.
• Less job stability – This is not an issue if you join a fund that has locked up capital. The issue comes when you join a fund that has to fundraise for each deal that they go after as there is less job stability at those shops.

Working in private equity vs. hedge fund

Despite both being jobs in investing, working in private equity is very different that working at a hedge fund. Private equity firms have very different investing approaches, longer time horizons, and are actively involved in the strategic direction of each of their portfolio companies.

Before deciding on which path to take make sure to read Difference Between Private Equity, Hedge Funds and Venture Capital.

Private Equity Interviews

Private equity interviews usually start very early on after graduating from undergrad. Firms try to grab the best talent in banking as early as possible. Once on-cycle interviews start, offers are given out very quickly in less than a week or two.

To land a job in private equity you must start preparing very early on when you start your job in investment banking. Read the most common private equity interview questions and make sure you are well prepared before talking to recruiters.

At some point during the interview process, you may be asked to complete a full case study. Take home case studies are more common during off-cycle recruiting where you get a full week to basically analyze a business and provide your thoughts on whether its an attractive LBO target. Make sure to read the Best Private Equity Case Study Guide to learn everything you need to know to complete the case study.

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