JPMorgan Chase & Co. bosses grew curious last summer as they clocked an unusual number of absences at the training sessions that kicked off their ultra-competitive junior analyst program.
The reason, they discovered: new recruits had skipped the mandatory onboarding to interview at private equity firms for their second jobs — even though they were just days into their first.
The practice is known as “on-cycle” recruitment, where buyout shops enlist investment-banking analysts for roles typically starting one or two years later. Their overtures have crept ever earlier, angering banks who invest millions to train junior employees only to see them picked off by private equity firms as soon as those programs end.
Goldman Sachs Group Inc. became the latest bank to try to ward off offers, with plans to require new analysts to certify every three months that they haven’t already lined up jobs elsewhere. The effort followed JPMorgan, which last month threatened to fire candidates who accepted future-dated positions.
The developments raise questions about whether this marks a reversal of the controversial practice, which has persisted for years despite bursts of effort to stamp it out. After JPMorgan’s edict, some buyout firms heeded the warning, with Apollo Global Management telling prospective candidates it was delaying hiring, explaining it was too early to ask students to make career decisions. General Atlantic and TPG Inc. followed suit, halting recruitment for their 2027 classes this year, according to people familiar with the matter, who asked not to be identified discussing private information.
Representatives for JPMorgan, TPG and General Atlantic declined to comment.
Payout Promise
Bank analyst programs have long been viewed as the gateway to a lucrative Wall Street career. But in recent years, many have completed the training and headed straight to private equity firms, lured by the promise of more sizeable payouts and the perception there’s less grunt work involved.
Banks have made efforts to stem departures, with pledges to improve work-life balance, protect weekends and hike salaries. They’ve taken a hard line too: Morgan Stanley attempted to block first-year investment bankers from talking to recruiters from other firms over a decade ago. But the firm swiftly abandoned the effort after some analysts complained — and ultimately ignored — the policy.
It’s complicated for banks, which count buyout shops among their biggest clients. So far this year, private equity firms have accounted for about a quarter of investment-banking M&A revenue, according to Dealogic. It also raises conflict of interest concerns, since junior bankers are privy to a bank’s confidential information while being committed to their future jobs at private equity firms.
JPMorgan Chief Executive Officer Jamie Dimon has called on-cycle recruitment unethical.
“It puts the kid in a terrible position, and so I think that’s wrong,” he told an audience at Georgetown University last year. “It puts us in a bad position and it puts us in a conflicted position. You are already working for somewhere else and you’re dealing with highly confidential information from JPMorgan. And I just don’t like it.”
The sentiment resonated through the industry. When Apollo announced it wouldn’t interview or extend offers to the class of 2027 this year, CEO Marc Rowan said asking students to make career decisions before they understand their options “doesn’t serve them or our industry.”
Amity Search Partners, a recruitment firm for investment managers, told prospective candidates in an email that the developments would give them “more room for preparation, reflection, and a more thoughtful approach to recruiting.”
Back in 2010, private equity firms typically waited for junior bankers to have completed about 11 months of training before poaching efforts started, but that’s steadily narrowed. The pandemic also had an impact, allowing juniors to stealthily take interviews from home. Odyssey Search Partners found that private equity giants began recruiting less than a month into their training programs in some cases, it said in an analysis published in 2023.
“There’s a finite pool of candidates, and a lot of private equity firms — it creates a situation where firms don’t want to miss out on hiring top talent,” Adam Kahn, a managing partner at Odyssey, said. “It’s unclear how much will fundamentally change: There needs to be a big concerted effort to make a change.”
Bathroom Stalls
That competition has led to some near comical episodes. Tom Ragland, who founded the recruiting firm Harrison Rush Group and places investment bankers in private equity roles, recounted bankers taking interviews via Zoom calls from office bathroom stalls. In at least once incident, the private equity firm took it as a positive sign of eagerness for the role. The banker didn’t ultimately get the job.
Ragland also had a word of caution for fresh graduates who are keen for a pit stop at a bank before landing a private equity role.
“A lot of these junior bankers are super overachievers; they go to the best schools,” he said. “A lot of them feel the next move is private equity, because that’s what everybody else is doing. Private equity is not a panacea. It’s still long hours and still takes a while to make decent money.”
The recruitment climb-down also comes as private equity firms face pressure from a prolonged deal drought, hampering the industry’s ability to exit investments at favorable prices.
Still, the prospect of some of the industry’s biggest paychecks makes private equity tempting for juniors. That’s thanks to carried interest, or carry as it’s more commonly known, which is essentially a share of performance fees that executives pocket themselves in exchange for managing companies and other investments.
The small irony of the practice used by private equity firms is that it takes a page from banks’ recruiting playbooks. The likes of JPMorgan and Goldman used to interview prospective interns more than a year in advance, at one point prompting pushback from university officials. It even caused a Goldman partner to quip that, at the rate they were going, the firms would soon start hiring interns at birth.
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