Wall Street banks and private equity’s tussle over junior talent

0:00What happens next in the story of money? Nuveen has spent over 125 years helping clients answer this question. By investing in the growth of businesses, real estate, infrastructure and natural capital, we continue to deepen our expertise across income and alternatives so investors can confidently write the next chapter of their own portfolio stories. Nuveen. Invest like the future is watching. Visit nuveen.com slash future to learn more. Investing involves risk. Principal loss is possible.

0:31It's summer. And if you're an investment bank like Goldman Sachs or JP Morgan, that means one thing.

0:39Sujeet Indap: Every July, a select group of recent college grads who are looking to break into finance start trainee programs for jobs as investment banking analysts. They want people who are hugely interested in finance, sort of obsessed with it. and they also want young kids who are very, very smart, who are coming from Ivy League schools and who are willing to dedicate a lot of time to the bank. Now, these investment banks start recruiting early. They tend to offer jobs to students while they're still in college. It's a playbook that's worked well for them for a long time. But lately, that plan has been disrupted by another type of firm, private equity.

1:23The issue is that the private equity firms are basically picking off the best talent from the banks before those individuals have even started working at the bank. You heard that right. Private equity firms are offering jobs to grads before they even start working at their investment banks. This means these grads are already committing to a future gig when they've barely started their present one.

1:49Sujeet Indap: They're simply hiring people who signed up to work at investment banks, who have not started at investment banks, but presumably have an interest in finance. And they're willing to take the risk that this early in their career will not only be great investment bankers, but also great private equity investors. And needless to say, this competition over grads has rankled both sectors. So everyone's calendar has been accelerated. It is very intense and there's a stress to it that has definitely crept in in the last several years.

2:24I'm Michaela Tendera from the Financial Times. Today on Behind the Money, we're taking a peek inside the world of high finance recruiting and looking at what some recent changes to recruiting practices tells us about the future of Wall Street's top firms.

2:56All right, so I'm here with the FT's Wall Street editor, Sujeet Indap, and the FT's banking editor, Hortensa Aliye. Now, you've both been reporting on this for the past few months, So welcome, and I'm glad you're both back on the show. Great to be here. Thank you for having us. Of course. So to start off, Sujit, now not only are you the FT's Wall Street editor, but you yourself went through the investment banking recruitment gauntlet when you were an undergrad. Now, can you tell us a little bit about what that process was like for you back then?

3:34Sujeet Indap: Yeah, I was a bright young thing many, many, many years ago. And so, you know, I was not be disclosing what exact year. Yeah, it was. Let's just say early this century. Had the Titanic sunk yet? Early this century. And so I came out at a pretty good time in college. It was the dot com era, dot com boom. And there was a lot of IPOs, a lot of M &A. And a bunch of banks came to the small college I went to. And I submitted my resume, had some interviews. and early in my senior year, I got an offer to work in San Francisco at Merrill Lynch. And yeah, I was excited. I didn't know that much, but I was willing to work hard and this seemed like an exciting, fast-paced job and something that would look good on my resume.

4:20Sujeet Indap: That was the start of my professional career. And so once you were in this job, you know, for the uninitiated here, what's an investment banking analyst do just in their day-to-day? Yeah. So these investment banks have these very large grad trainee programs. And basically, they need armies of smart, eager, ideally talented 22-year-olds who just graduated from college to fill their junior ranks. And those jobs support investment banking transactions. So that's like IPOs, high-yield bond offerings, M &A transactions. And that work can be time-consuming and intensive. And these junior analysts, basically in exchange for working 70, 80, 90, 100 hours a week doing PowerPoint and Excel, they get great training in finance and transactions and working with big company boards of directors and CEOs.

5:22Sujeet Indap: And typically, that's like a two-year commitment. Now, I have to say the experience you described being recruited to Merrill Lynch sounds kind of different than this competition that's happening today. How would you compare them? I mean, I think the big picture thing is that this process of getting a job in finance in one of these supposedly elite investment banking analyst programs has just become much more accelerated and, if you will, intense. So, for example, in my instance, I got my job first semester of senior year. That was for the full-time position after graduation. There were some internships available when you were a junior, but that was much less prominent and wasn't really a prerequisite.

6:07Sujeet Indap: If we fast forward to now, however, many, many years later, that internship you do after your junior year is pretty much a prerequisite to get into the full-time analyst program. And then separately, that internship is earned during sophomore year. So more than a full year ahead of actually doing the internship, which leads to the full-time offer. So this is all sewn up, you know, in the first half of college. So everything has been pushed up. And as a consequence, I think the kids are much more stressed out about it. They're much more aware of it. They're thinking about their postgraduate job very early in their college tenure.

6:43So to recap, for college kids who are looking to start careers in finance, the process of breaking into investment banking has been creeping up earlier and earlier into students' time as undergraduates. But then there's also private equity. So, Sujit, how have they been finding junior employees?

7:03Sujeet Indap: So private equity firms historically have been much smaller than investment banks. And so what that meant was they did not have the resources to train workers themselves or didn't want to invest much in that effort since they weren't hiring that many people, relatively speaking. And so they relied on hiring their talent from investment banking trainee programs, which are much larger and have very formal development and learning. And that process has been around for a long time. And frankly, if you're in investment banking, you're likely to be interested in a similar finance job, which is private equity.

7:40Sujeet Indap: So there's a natural flow or direction that way. What's changed in recent years is that private equity firms are hiring their junior classes rather than those workers being one or two years into their banking trainee programs. They've pushed that calendar forward. So they're hiring those junior workers at the very outset of their banking programs or even before those banking trainee programs have even started. So that time between college graduation and starting the banking training program in July is that window when private equity is increasingly hiring their junior workers. So it sounds like this recruiting process has just really gone into overdrive then.

8:24Sujeet Indap: Yeah. So funny reporting story about it. So I called up a bunch of the firms who are known to be in this early calendar or this accelerated hiring cycle in June when this process kicks off early now. And I said, you're on this early calendar. I know it. You know it. Do you have any comment? And they all said the exact same thing to me. They didn't deny it because they couldn't deny it. They're definitely a part of this. But they said we, Firm X, never went first, as if that was a way to inoculate them from criticism. In fact, they were merely responding to some other unnamed firm that jumped and therefore they had to jump too.

9:06Sujeet Indap: They had no agency or power just to say no.

9:12So keeping all that in mind, let's jump into this friction that seemed to be increasing over the past several months. because, as we said, investment banking and P.E. recruitment has been happening earlier and earlier, and it's made some people not so happy. The other thing I don't like, I just want to mention, I know a lot of you, you work at J.P. Morgan, you take a job at a private equity shop before you even start with us.

9:36Sujeet Indap: It's crazy. Yeah. Okay, wait, I'm going to say something a little different. I think that's unethical. I don't like it. And I may eliminate it regardless of what the private equity guys say or the people in the company. First, I want patriots, not mercenaries. So, Hortensa, this is a clip of J.P. Morgan CEO Jamie Dimon speaking at a Georgetown University event last year. So what's Dimon really saying here? What he talked about at this speech that he gave was what we're doing is we're training them up and then they're going to private equity. and that's not really fair. He doesn't think it's morally right that these junior bankers accept jobs at J.P.

10:18Morgan and they work there for two years, but in the meantime have also accepted a job to work at any private equity firm. You are supposed to be fully committed to that job instead of sort of looking to the future and what you're going to be doing in a couple of years. Why does Diamond care so much about this? I mean, we are still just talking about pretty much the lowest rungs on the JP Morgan corporate ladder. So even if you are the CEO of a bank, you're constantly fostering talent, the people who are going to lead divisions. So it's very important that you have very talented, smart, ambitious people at your bank.

10:55The problem is that if you are getting these analysts and they already have job offers in two years time to go to a private equity firm, then you have sort of two issues. One is that they could start working on deals that involves their future employer. You mean like a conflict of interest somehow? Yeah. So this issue around the conflict of interest is basically comes from the fact that the private equity firms are huge clients of banks. So let's say you have a junior analyst who is working at J.P. Morgan and that junior analyst has accepted a job offer at Apollo. It is foreseeable that they may at some point be involved in a transaction that JP Morgan is either doing on behalf of Apollo or for another company that involves Apollo.

11:47And so what you will have is this junior analyst who's in their early 20s having access to very, very private and confidential information that involves their future employer whilst they're still at the bank. Hmm. Sure. So, yeah, conflict of interest is one concern for the top leadership at banks. But what's the other? The other one is that they might not be as dedicated to the role within the bank as they otherwise would be because they know that they already have a job offer elsewhere. So it creates this kind of multifaceted problem for the banks. And they've lent much heavier on the conflict of interest side because that's a very real prospect.

12:29But I think there is also some moral objection to it. You know, we shouldn't be training up analysts so that they can go and work somewhere else. Albeit one could argue that those are the rules of capitalism and the labor market. Right. Just that if you can get more money at another job, you should go there.

12:46Sujeet Indap: And I would just add to that. I mean, that mindset is really interesting to me, just having done the job and just observed it for a long time. in that these analyst programs have typically been two - or three-year commitments, and they're very intense. They're very demanding. It's a 24-7 job. And the sense was often from the employer's side that junior workers were going to be worked very, very hard. It would be very taxing. But in exchange for that training, they would get the chance to interview for these super elite jobs in private equity or hedge funds or whatever exit option. So this idea of loyalty and that these junior workers, you know, are being trained to go do another job somewhere else, that's always been part of the bargain.

13:34Sujeet Indap: And one reaction I had was if you want these analysts to stay, is that, you know, give them a better experience, treat them a little bit more nicely and try to earn their loyalty. And that is something Jamie Dimon and others perhaps should think more about too.

13:55The future of fixed income investing will continue to blur the lines between public and private markets. Nuveen's credit platform was built to navigate this shifting landscape, channeling capital toward the businesses, infrastructure and energy solutions that are shaping tomorrow's economy, all while aiming to deliver the resilience and returns that portfolios seek today. Nuveen. Invest like the future is watching. Visit nuveen.com slash future to learn more. Investing involves risk. Principal loss is possible. So as you heard, banks like JP Morgan have not really liked how PE firms are picking off their junior talent.

14:32And so last month, they decided to do something about it. JP Morgan sends out a letter to its incoming class of analysts and it says, we hope you are concluding your final year with enthusiasm, etc, etc. And it then says, avoiding potential confidence of interest is crucial to maintain the trust and confidence our clients place in us. So we have updated our policy regarding investment banking analysts accepting future dated job offers, that sort of code for jobs at private equity firms. Therefore, if you accept a position with another company before joining us or within your first 18 months, you will be provided notice and your employment with the firm will end.

15:13So in short, these analysts are being told that if they've accepted a job in the future with another firm, JP Morgan's going to fire them. But then days later, private equity firm Apollo Global Management comes out and says that it's going to delay recruiting for junior associates until next year.

15:32Sujeet Indap: Apollo jumped in first. They sent a letter to candidates who were starting their junior banking careers telling them that they were halting the process of hiring them in the early calendar, this early cycle that was about to get underway. And in fact, Apollo was going to push back their hiring for 2027 until next year, 2026, rather than making those decisions right now. And when Apollo announces this, I mean, it's sort of a domino effect, right? Then the other private equity firms come out and say, actually, we're also going to delay so-called on-cycle recruiting and we're going to wait for these graduates to spend at least a set period of time within the banks before we start going after them.

16:20So why did this all come to a head just in the last month or so? I guess it depends on who you ask. But what some people say is Jamie Dimon has a lot of influence on Wall Street. that won't be a shock to anyone. And while a lot of the banks were annoyed about this recruitment process, they didn't really say anything because, lest we forget, the private equity firms are some of their biggest clients, their biggest fee generators, and you don't really want to upset them or, you know, get into a back and forth. And as one person said to me, you know, only Jamie Diamond could really go out and do this.

16:59Sujeet Indap: Yeah. And I would just add to that, But Rortensa makes a good point. Jamie Dimon has the stature to actually change things in a way. And so does Apollo. Apollo was the first firm to say we're not going to participate in this. And that creates space for everyone else to follow them. Now, Rortensa, you said that some people will say that private equity firms backed off just because of what Jamie Dimon said and what JPMorgan told its incoming analysts. But what are other people saying or what else are you hearing? I think if you talk to some of the people inside the private equity firms, what they might say is, sure, that was part of it.

17:36But actually what's happened is that there's been a slowdown in dealmaking. The private equity industry is not growing in the same way that it has been over the past 10 or 15 years. I think what's happened over the past, let's say, three or four years is that interest rates have gone up, cash isn't that cheap to borrow, assets that they have on their books are not as great as the ones that they used to have. And so it's become much more difficult to exit them. And so you've seen this sort of like slowdown in the private equity industry. And actually, this is a nice, convenient way to placate the banks, but also we don't really need to hire as many people as we used to hire.

18:16Sujeet Indap: The future of that industry, as Rotenzo pointed out, is a little bit mixed or unclear at the moment because interest rates are high. Private equity firms are sitting on investments in companies that may not be doing so great. The IPO and M &A market has been largely shut down for years now. And then there's the advent of AI and just how the day-to-day work gets done and if that can dampen the need for junior talent. So all those forces are at play here. And that's all a backdrop to this talent debate. And both parties will make the case that this recruitment process was part of the sort of the natural cycle of things and that the banks will now likely be left with an overabundance of analysts.

19:02So I think that there was a sort of a push and pull from both sides. Well, do you think there's any truth to that? in terms of, you know, there being too many analysts left at the bank. We are at a place in the market where deal making is significantly below where it was a few years ago. And obviously what we had expected at the beginning of the year with Trump coming into the White House was that there would be this big deal boom that Annabelle Spirits were back. And that hasn't exactly played out, albeit it hasn't been, I think, as bad as people thought in light of the tariffs and uncertainty around geopolitics.

19:42I was literally speaking to someone today about this who said, because there's been such a focus on banks complaining about their analysts being poached by private equity, you know, we don't want to get to the other side where then there'll be all these stories about how banks are letting more analysts than ever go. I think that's sort of the dynamic that they're worried about. I think we also have to remember that U.S. banks are performing incredibly well. They want to invest in people. They want to grow, especially banks like J.P. Morgan and Goldman Sachs. So I don't think it's going to be a huge issue where they're going to wake up in a year's time and say, oh, no, we've got too many analysts left at the bank.

20:22So to take stock here a bit, Right now, there's this delicate truce of sorts, I guess we could say. Both sides, the banks and the private equity firms, have agreed to this pause on recruiting. But Suji, you've been speaking with some incoming investment banking analysts who were gearing up to start this P.E. recruitment cycle. So how did they react to this change?

20:48Sujeet Indap: We had reported last year when this started, there were people who were on vacations in Hawaii between graduating from college and moving to New York, and they got called to New York suddenly. So this year, many were prepared. They were ready to do the recruiting. They were really excited to do private equity in two years. And they feel like the rug has been pulled out underneath from them, only in that they were preparing to do this thing. They had come to New York early to do these interviews, and now the interviews aren't happening. and they're going to get pushed to a time when they're actually in investment banking and are going to be busy.

21:19Sujeet Indap: And so some definitely felt a sense of disappointment and betrayal. And they also noted very interestingly that these firms that have very prominently backed away from recruiting, they, until a few weeks ago, were preparing to do their recruiting and were doing all the pre-prep coffee chat information sessions and things like that. And they turned on a dime too. Okay. So who would you say is the winner here in this situation? I think everybody's a winner. The banks themselves get analysts who are now, at least for several months, going to be dedicated to the job. In a previous world, they were either getting a job before they started training or during training or their early days of banking.

22:01Sujeet Indap: They were running out for dentist appointments or often in the middle of the night for these interview sessions. Quote, unquote, dentist appointments. Or worse, you know, in the middle of the night, leaving the banking job, interviewing from midnight till 3 a.m. and then going back to work at 9 o 'clock in the morning the next day. So that creates space for the banks. The kids themselves, even though some of them want their jobs right now, get a little bit more time to breathe and learn how to be a banker. There actually is a lot to learn. So they're going to learn it now and can focus on that.

22:29Right. And then maybe the private equity hires will be more ready for those jobs later on. So how do you see this all playing out long term, both for the banks and the private equity firms?

22:43Sujeet Indap: I think some people have pointed out the idea that the private equity firms, in fact, will just bypass the investment banks and do recruiting directly from college, which has actually been a trend that's been underway now for some years, particularly amongst some large firms. But again, when I started this business, the banks were the training grounds for private equity workers almost exclusively. And the reason for that is the private equity firms were relatively small and they did not have the budget or the resources to train people en masse. Now they're so big that they have the economies of scale to do this on their own if they want to.

23:20Sujeet Indap: Some are doing that. And so that is a thing to watch. Are they going to show up on college campuses for juniors and seniors and say, don't go to work at Goldman Sachs. Come to KKR. Come to Blackstone. Come to Apollo. So our job is more interesting and you don't have to waste your time, if you want to call it that, in an investment banking job. Hortensa, Sujit, thanks for coming on the show. Thank you. Thanks for having us.

23:50Behind the Money is hosted and produced by me, Michaela Chandera. Our producer is Safiya Ethmed. Our intern is Michaela Sia. Sound design and mixing by Sam Giovinco. Original music is by Hannes Brown Topher Forges is the FT's acting co-head of audio Thanks for listening See you next week

24:21The future of fixed income investing will continue to blur the lines between public and private markets Nuveen's credit platform was built to navigate this shifting landscape channeling capital toward the businesses, infrastructure and energy solutions that are shaping tomorrow's economy, all while aiming to deliver the resilience and returns that portfolios seek today. Nuveen. Invest like the future is watching. Visit nuveen.com slash future to learn more. Investing involves risk. Principal loss is possible.