Every generational crop of new MBA’s seem to concentrate on the perceived “hottest” job sector at their graduation. In the 1970’s it was the opportunity to go directly to middle management instead of “starting at the bottom.” During the 80’s, Wall Street had the new graduates attention. We’re all familiar with the dot-com experience of the 1990’s, which became the perceived fast track to riches for new MBA’s.
The glamour sectors of choice for the new Millennium are private equity and hedge funds.
The reported stories of private equity fund managers reaping huge compensation levels have mesmerized the MBA student population. This industry is also “fashionable” as we’re not dealing with waste management or a similar less than exciting commerce sector.
However, there are now concerns that the luster may be dimmed for new MBA graduates. Some experts contend that newly-conferred MBA’s may have missed the pinnacle of this industry.
Private equity, long a staple and major player in the investment arena, has historically operated under the radar. Managing and investing cash generated from non-publicly traded sources, private equity funds have had a major impact on start up and mezzanine funding.
Private equity leaders, like the Carlyle Group and the Blackstone Group, have made huge investments in organizations already listed in the market, often taking them private. Often interjecting new management groups into purchased companies, they have affected value increases, and then sold the redesigned company for impressive profits.
Outside of the obvious challenge, new MBA’s have been acting like moths to a flame because of the salary and bonus potential, sometimes in excess of $300-$400,000 per year, with private equity firms. Obviously, with a finite number of these opportunities, competition for these new business gurus has been tremendous. Graduate students are taking interesting measures to separate themselves from the massive crowd.
Many private equity “clubs” have sprung up on campuses and have enjoyed great popularity with private equity gurus-in-training. An even more compelling tactic, chronicled in a variety of business magazines and web sources, was the trek by some Tuck School of Business students to India to intern at private equity firms while foregoing a school vacation.
Even hedge funds, which only considered public companies with short term upside potential, now often favor more complicated entities that project far longer term positive results. This course of action requires investor patience, historically not a strong suit of the high-return conscious hedge fund managers and participants.
Unlike the classic buyouts of the 80’s and 90’s, which allowed the new majority stockholders to generate higher values quickly with structure and/or operational changes or deep reductions in staff, this new investment universe requires different methods.
The longer time frames investors are required to stay involved mandate that ownership establish expert management to implement old fashioned operational value creation and the patience to wait for the strategic improvement in results.
Whether the need for new MBA’s, lacking experience but heavy on theory, will continue in this evolving environment is open to question. As usual, the market will dictate its own direction in the future.
