More unraveling in the private equity labor market

The NY Times is on the story: A Rush to Recruit Young Analysts, Only Months on the Job

"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.
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"Traditionally, these jobs do not begin immediately but a year and a half later, after analysts finish their two-year contracts.
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"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.”
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"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.
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"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.

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“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.

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"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.”

HT:: Eric Budish