From frustration to elation: What Wall Street thinks about the potential death of the private equity recruiting race

Investment giants Apollo and General Atlantic sent shockwaves through Wall Street this week when they pulled out of the private equity industry’s annual rat race for junior talent.

Now, the question on everybody’s lips is: What happens next? Is the private equity industry’s widely criticized recruiting process for junior talent on the verge of collapse — or just on pause? Who stands to gain — or lose — the most from the new normal?

BI spoke with junior bankers, Wall Street leaders, and recruiters to find out what they think about the industry’s biggest recruiting upheaval in recent memory — and where they think things will go from here.

Most agreed that the industry’s hiring practices need to be reined in, including young bankers reeling from the sudden shift in hiring plans.

“As someone in the epicenter of it, it’s a good thing that we’re becoming a little more rational,” one recent graduate told Business Insider. “I understand they don’t want to hire someone who hasn’t worked a day in their life. It’s slightly frustrating is all.”

Whether it lasts is another question.

Short-term pain

Private equity firms have long relied on investment banks to train their junior talent. But competition for talent has heated up, pushing recruiting timelines ever earlier.

Last year’s recruiting process, known as “on-cycle,” kicked off before most grads had even started their banking jobs. This year, it showed signs of creeping up even more, with informational interview requests arriving in inboxes during college graduation ceremonies, as Business Insider reported.

Then came the backlash: JPMorgan this month warned that it would fire junior bankers who accepted PE roles within the first 18 months of their investment banking analyst jobs. Days later, Apollo backed out of recruiting 2027 associates this year, followed swiftly by General Atlantic.

While the recruiting pause appears to be a victory for JPMorgan’s CEO Jamie Dimon — it came as a blow to aspiring dealmakers who have waited years for this moment.

One reason is that preparing for an interview with a private equity firm is a lot of work. The recent graduate said some of his classmates have spent the better part of their senior year getting up to speed.

“Had we known this was going to happen, we probably would’ve spent the last few weeks and months differently,” the graduate said.

He asked to remain anonymous to protect his current career as a junior investment banker — a job he had yet to start.

Long-term gain

Those who spoke to BI largely supported delaying the private equity recruiting process from now on, saying it would ease pressure on young professionals.

“I’m very happy about it,” said a current investment banking intern. “It delays this crucial decision that we have to make at such a young age about industries we don’t have much real experience in.”

Robin Judson, founder of headhunting firm Robin Judson Partners, agreed: “It will level the playing field for analysts, so that those who don’t have undergraduate business degrees have time to acquire the skills needed to compete for private equity jobs.”

It’s also a win for banks, which may now have a chance to convince young talent to stick around after their investment banking analyst programs end — a concern JPMorgan’s Dimon raised when he blasted PE recruiting during a talk at Georgetown University.

“The other thing I don’t like,” he told the crowd, “a lot of you work at JPMorgan, and you take a job from private equity before you even start with us.”

One investment banking executive told BI that the private equity firms have “created a system where our employees are afraid to talk to us about what they’re doing.”

“At the end of the day, I try to make sure that our people feel comfortable talking to us, but they don’t because they just don’t know how we’re going to react, and they’re also told not to,” he said.

What the future holds

Where things go from here is anyone’s guess. The graduate said he doesn’t expect to interview with the largest private equity firms this summer, citing Apollo’s influence.

“Apollo is the industry leader in a lot of ways,” he said. “To go against them on something like this, I don’t think any of the big firms will.”

A recruiter who asked to remain anonymous to protect his relationships with private equity firms called the pullback “a nail in the coffin” of the industry’s race for talent.

“It’s a rare thing for a buyside firm to comment on the process — especially to say they won’t be participating in the game of going earlier and earlier,” he said.

To be sure, things could change. The same Wall Street headhunter said that by bowing out, Apollo and General Atlantic could create an opportunity for other firms to hire.

“First-year bankers will face the tricky decision of ‘do I interview now with a subset of firms or wait, so I can meet some of the big guys?'” he said.

A former junior banker, who now works in private equity, said she’s skeptical of a radical and long-lasting shift in the process.

“They may not recruit this year, but come January, I expect them to fill their class,” she said.

Still others said they hope this sparks even more change, including from the banks.

“I think it’s going to be a transformational change in the way PE and maybe even broader recruiting works,” said the incoming analyst. “Maybe the banks will start going a little later.”

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