The Accounting & Finance Functions in Private Equity
Welcome to our guide to Accounting careers in this rewarding sector
What are the accounting and finance functions in Private Equity?
Similar to investment roles, the finance functions in private equity are both competitive and rewarding, with the potential to be highly lucrative career choices, depending on the firm you join. Our clients are not just in private equity, but include alternative investments as well as private debt funds and venture capital funds. These are the markets where we focus most of our work. The finance functions in these markets, while certainly different to the investment side, provide many career options and routes to the C-Suite as CFO.
Which university should I attend? What should I study?
With a degree being the absolute minimum requirement, attending a top university will always stand you in good stead in the private equity sector. The quality of the university you attend is arguably even more important than your choice of degree, as private equity firms place great emphasis on traditional prestige and tend to prefer Oxbridge and other red brick universities.
The ideal combination for a role in the finance function of a PE firm would therefore be a numeracy-related degree such as mathematics, accounting, business or economics from a reputable university. That being said, if your university is high enough in the rankings, your degree choice matters less. For example, a degree in History of Art from Leeds University might count for more than a numeracy-related degree from a much lower ranked university. Conversely, if you are not attending a red brick university, selecting a numeracy-related degree will consequently be more advantageous.
If you are still in the early stages of your accounting career, your academic record will count for a lot, but once you are a bit further into your career and you have a decent amount of work experience behind you, this will take precedence in determining your suitability for the role. Your academic results – while still important and always taken into consideration – will slowly take more of a back seat over time as your career develops.
The Big 4 vs the Top 20
The accounting firms known as the ‘Big 4’ are: Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY) and KPMG. These firms are the undisputed leaders in the accountancy industry both in terms of revenue and workforce.
When private equity firms are looking to hire someone for a finance function at the newly qualified level, chances are they are taking them straight out of an accounting firm – and usually one of the abovementioned Big 4. Moving beyond the Big 4, the top twenty accounting firms are probably as far a net as our clients are willing to cast looking for new talent. That said, while most of our clients favour the Big 4 for private equity accounting roles, it does happen that clients sometimes look for people from smaller firms for various reasons.
In this already competitive field, geography also plays a role with a strong preference for London recruitment. Therefore, working in a practice firm in London is certainly more advantageous than somewhere further afield.
What industry should I audit?
Private equity firms generally prefer someone with experience of auditing private equity of a fund manager business at the fund or corporate level, but would also consider someone with experience of auditing broader financial services businesses, such as asset managers or hedge funds.
It becomes challenging when a candidate does not have any financial services audit or client experience. They certainly need their other attributes to be stellar to even get through the door, which would include an exceptional academic record and truly impressive interpersonal skills. These situations do not happen often, but it is possible for someone without the perfect auditing experience to seize a rare opportunity. Ultimately it is about the relationships with our clients and if the level of trust is there, the chance might just present itself.
Recruiting at this level is an incredibly competitive landscape, so the right background and experience counts for a huge amount. Ultimately it is about best in class, and our clients consider best in class to be someone who has audited their world and who understands their market before they have even set foot in the building. Recruitment for private equity accounting roles in particular, is very much based on fit and not just on technical accounting expertise. Neither the corporate nor fund accounting roles are top level technical roles, so other attributes tend to play a bigger role in the selection process, such as soft skills, intellectual curiosity, emotional intelligence, the right attitude and good communication skills.
The popular saying “You can learn new skills, but your personality is your personality” encapsulates the approach to the PE finance functions as the technical skills can always be taught but the interpersonal skills must shine through in the interview. Your CV, where you studied and your academic record get your foot in the door and get you through to the interview stage, but what will get you the job is how well you build rapport with people. Team fit and culture are crucial in the private equity finance functions as most times the finance teams are smaller, between five and thirty people, and therefore work more closely together.
The candidates we place in this sector tend to thrive in a modern fast-paced work environment, and certainly don’t fit the old school stereotype of the boring bean counter.
I’ve qualified as an accountant (ACA, ACCA, CIMA), so what now?
Generally, our clients do not have a particular favourite among the three professional qualification bodies ACA, ACCA and CIMA. However, in the majority of cases the first two qualifications are related to accounting firms.
Interestingly, we find that most candidates who have worked in a Big 4 setting and have audited private equity do not want to be accountants, but are rather looking to join the investment teams. This is despite the varied and lucrative accounting roles on offer in private equity. For candidates not hailing from the Big 4, a typical career path is far more likely in an accounting function – although a lot depends on what skills or work experience you have and what your aspirations are.
There are two key points to bear in mind as you contemplate your path forward:
- Not all accounting roles are created equal
- Moving from audit to a front office role is not that easy.
By working in a smaller private equity firm, whether you work in corporate or fund accounting, your role will inevitable be broader and more varied. In a corporate accounting function, this would typically include all accounting elements (financial accounts, management accounts, tax, regulatory etc) rather than being restricted to just one area.
On the other hand, you get to learn about the structure of funds and their underlying investments in fund accounting roles. You could get to work closely on new and existing deals with the investment team. The fund accounting role can also be a springboard into investor relations where you would perform a more commercial function during a period of fundraising.
Overall, the accounting roles in this sector provide a multitude of opportunities to progress and grow within the finance functions, creating a rewarding career.
Fund vs Corporate Accounting
You’ve done your three year training or you’ve worked in practice, so now what? What roles are next for you in a typical finance function in a private equity firm? In reality, there are really only two routes to follow as an entry level into this world:
- Fund accounting role – preparing or often reviewing the accounts for the funds which the private equity firm manages
- Corporate accounting role – preparing the internal accounts of the private equity firm.
Most finance function roles in private equity firms are usually concentrated in fund accounting. The uniquely complex and legally challenging nature of private equity fund accounting requires a specialist skill set as it is a complicated function that is not replicated in the same format anywhere else. But it is what most people are attracted to, and more importantly, that is where the demand lies.
People with accounts preparation experience generally see themselves as more suited to the corporate accounting roles. This includes people from outsourcing teams or financial accounting teams in practice. We don’t tend to place many Big 4 auditors into those corporate accounting roles as they often do not have the accounts preparation experience and they are more geared towards fund accounting roles. The big firms are very much audit led, so if you are in an audit role, you are not really preparing accounts for your clients, you are simply auditing the accounts. The smaller the practice firm, the more likely you are to be as involved in preparing accounts as you are in auditing them.
Many of our clients prefer candidates who have actually prepared accounts because at the more junior level of entry, the chances are high that they will be doing more hands on preparation roles. This is why not every private equity firm is looking for a Big 4 auditor, but rather looking further afield at smaller firms to find candidates with broader experience.
Those are the two routes typically available for entry into the finance functions. Some firms will offer roles where you do both in equal measure but by and large, you are doing one or the other.
Where can my finance career go in private equity? How do I become a CFO?
Like most jobs in most industries, you enter the market at a certain level and if you show the right degree of ability, aptitude and commerciality then you will rise through the ranks. Finance has a solid traditional path, inasmuch as you can come in at an accounting level and progress to the pinnacle as a Chief Financial Officer (CFO) of the type of firm that you have joined. You can do that in either fund accounting or corporate accounting, but once you hit the top you will most likely have had a smattering of both in your career up to that point.
The typical career journey starts with a newly qualified accountant, then a more senior accountant, a Financial Controller (either Financial Controller or a Fund Controller), and beyond that a Finance Director, Head of Finance and ultimately CFO. The general timeline for this career journey is usually between ten to fifteen years, but it can easily take longer than that.
The route is similar to other industries and rising through the ranks includes building experience, seeking new challenges, taking on responsibilities, getting out of your comfort zone as you build you career and getting the all-important managerial and leadership experience. Working for different sizes of businesses will also broaden your experience and increase your opportunities. There are a handful of very large firms in this sector with the remaining sector made up of a lot of smaller firms, so your path – depending on what size firm you gravitate towards – will obviously be very different depending on your choice of firm. However, the basic route to CFO is still the same in that you must follow a certain path to get to a certain level.
The CFO role demands leadership skills, a strategic mindset, strong financial and cashflow planning as well as excellent communication and collaboration skills. It is not always just about overseeing finance, which is the core part of what they do, but it is providing strategy and business advice to the leadership team. CFO roles in most firms are often the unofficial number two or three in the business and they are crucial to the running of the business.
Now that you have a better understanding of the finance functions in private equity, you can see what interesting opportunities there are in accounting within the PE and alternative investment markets.
If you would like to discuss this in more detail with us, please get in touch. With our wide-ranging client base from niche boutique specialists and smaller Family Offices, to diversified multi-fund investment firms, we have a reputation for providing the very best talent to the UK market.