Training · PE-1 · Lesson 01 of 08
The private equity industry
The rule
Funds differ by size, strategy and mandate. A lower-middle-market buyout fund and a mega-cap growth fund hire for opposite reasons.
Strategies within private equity
'Private equity' covers several distinct strategies with different risk, skills and hiring profiles.
- ·Leveraged buyouts: control stakes in mature companies, using debt.
- ·Growth equity: minority stakes in fast-growing, often profitable companies, little debt.
- ·Venture capital: early-stage companies, high failure rates, power-law returns.
- ·Private credit: lending to sponsor-backed and mid-market companies.
- ·Secondaries: buying existing fund stakes or portfolios from other investors.
- ·Infrastructure and real assets: long-duration, yield-oriented investments.
Size tiers
Mega-funds manage tens of billions and buy large companies with complex financing; teams are specialised and deal processes are competitive auctions. Middle-market funds buy businesses worth roughly $100m–$1bn and rely more on operational improvement. Lower-middle-market funds buy smaller, often founder-owned companies where professionalising the business is the main lever.
How fund size shapes the work
A fund must deploy its capital in a reasonable number of deals. A $10bn fund writing $500m equity cheques needs about twenty deals; it cannot spend time on a $30m company. That constraint decides what the associate looks at every day.
- $500m fund
- $25–60m equity, EV $50–200m
- $3bn fund
- $150–300m equity, EV $400m–1.5bn
- $15bn fund
- $700m–1.5bn equity, EV $2–8bn
Sector and operating models
Some firms are generalists; others specialise by sector — software, healthcare, industrials — and build deep networks and pattern recognition. Many maintain operating partner teams of former executives who drive the value-creation plan after closing.
Researching a firm before applying
Know the current fund size and vintage, three recent deals with rough sizes, the strategy (buyout, growth) and any sector focus. Be able to say why you like one of their deals and what you would have worried about. That preparation alone separates you from most candidates.
Hold onto this
- ·Buyout, growth equity, venture, credit and secondaries are different risk jobs, not one job.
- ·Fund size dictates deal size, leverage and how much value must come from operations.
- ·Name the funds you are applying to, their last three deals and the check size.
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Education, not financial advice. Figures may be simplified for illustration.