From MBA To CEO: Graduates Lead World’s Biggest Private Equity Firms

The co-founders and chief executives of some of the biggest private equity groups graduated from MBA programs. And Blackstone's CEO sends staff back to business school.

The chief executive of Blackstone, the world’s largest buyout fund manager, said that he encourages staff to go back to business school to gain maturity and “breadth”.

“Many of us do have MBAs,” said Stephen Schwarzman, CEO of the private equity group and an alumnus of Harvard Business School, during a televised visit to the Wall Street Journal.

The MBA graduate said there has been debate about the value of the degree at Blackstone, but that some of the people running the private equity firm’s major businesses have studied at business schools.

These include Blackstone’s president and chief operating officer Hamilton James who also earned an MBA at Harvard, and Laurence Tosi, the company’s financial chief who studied an MBA at Georgetown’s Mcdonough School of Business.

This is part of a wider trend at the top of some of the world’s biggest buyout houses.

Apollo Global Management co-founders Leon Black and Joshua Harris graduated from Harvard Business School, and Marc Rowan, a third Apollo co-founder, earned an MBA at Wharton business school.

Carlyle Group, the private equity firm which in February had $195 billion in assets under management, was co-founded by William Conway and Daniel D’Aniello, who studied MBA programs at Chicago’s Booth School of Business and Harvard, respectively.

Henry Kravis, co-CEO of KKR, the buyout house which has about $98 billion in assets under management, has an MBA from Columbia Business School.

Private equity firms have been tempting business school graduates away from banks, which have suffered from reputational damage and more regulation since the financial crisis.

Blackstone’s Stephen said: “What we found... Is that when you hired younger people without an MBA, usually they sort of hit some type of a sealing out around five years.”

He said that hires without an MBA tended to perform well in the early years but were missing a little maturity or some breadth later on.

“We encouraged them to go back [to business school],” he added. But firms like Blackstone are also increasingly popular among fresh graduates.

“Private equity is coming to the fore,” said Martyn Drage, financial services career consultant at Henley Business School.

At Stanford GSB, by far the largest portion of 2014’s MBA graduates who are working in financial services are at private equity firms, and they earn the highest annual salaries of any sector – $170,000.

Werner Bonadurer, faculty director of the MSC in Finance program at W.P Carey School of Business, said that people are moving into private equity firms because other areas are heavily regulated. “Less capped pay checks are there,” he added.

Pay at investment banks is set to fall and this is contributing to the flow of personnel into other areas of financial services, particularly MBA graduates who have had to pay rising tuition fees and other costs associated with the degree.  

Investment banks are now hunting grounds for private equity firms, said Paula Quinton-Jones, director of careers services at Hult International Business School.

“Candidates who come from an operational improvement background or [the] valuation [and] transaction area are sought after,” she said. “[Banking] sector experience is highly valued.”

Stephen, however, suggested that business school is not for everyone. Blackstone finds people who are such “natural athletes” that they can simply use the firm as their university, he said.   

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