During the early stages of expansion in the private equity industry, it attracted many young people just starting out in their careers. Wang Cheng (a pseudonym), a former private equity professional, is a case in point. According to his own summary, after graduating from a second-tier university, he was able to enter the private equity industry, "95% due to opportunity and luck."

However, as the private equity industry gradually became more regulated and small private equity firms began to fade from the scene, many young people who had enjoyed the dividends of the era but whose education and experience did not meet industry standards also exited along with their institutions.

In May last year, the "Private Equity Fund Registration and Filing Method" (hereinafter referred to as the "Method") was implemented, aiming to promote high-quality development in the private equity fund industry.

Against the backdrop of increased regulatory scrutiny, coupled with changes in the market environment, private equity funds are facing a reduction in scale and significant performance fluctuations. Not only have some private equity fund managers been "eliminated," but the performance of private equity products has also shown a clear divergence. Wang Cheng is one of them; as a former private equity researcher with a monthly income of over ten thousand, he now has no choice but to work as a food delivery rider as a transition. The mixed feelings involved can only be truly understood by him.

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The survival dilemma of small private equity firms: poor profitability.

In late May of this year, Wang Cheng posted a short video on Douyin with the cover reading "CFA holder, unemployed for six months, first day of delivering food."

CFA stands for Chartered Financial Analyst, which is widely recognized as the "golden pass" in today's securities investment and management industry.

"Would a seemingly high-standing financial professional become a food delivery rider after becoming unemployed?" This label, which does not match the imagination of netizens at all, attracted onlookers as soon as it was published.

During his unemployment and job search, he posted a self-media video just to vent his frustration. "I didn't expect it to have such a wide-reaching impact," Wang Cheng said in a conversation with a journalist from First Financial Daily, expressing his own surprise."You can't find a job delivering food, and it's normal; I thought it was incredible that you could get into private equity before," said a netizen in the comment section of Wang Cheng's video.

During his undergraduate studies, Wang Cheng passed the securities qualification certificate, fund qualification certificate, and investment consultant license. By widely distributing his resume, in 2019, Wang Cheng joined a small private equity firm with a scale of only 40 million.

"(That small private equity firm) is all the boss's own money, and to save costs, they would hire some fresh graduates and train them from scratch," he explained.

At that time, such small private equity firms were not uncommon.

According to the data from the Fund Industry Association, as of the end of 2018, there were a total of 24,400 private equity fund managers registered with the association. Based on scale, the association divides private equity firms into four intervals: above 5 billion yuan, 500 million to 5 billion yuan, 50 million to 5 billion yuan, and below 5 million yuan.

The number of managers in the first and second echelons accounts for 9% of the total number of sample managers, but the fund management scale accounts for about 83% of the total fund management scale of the sample managers.

Due to the small fund management scale, many small-scale private equity firms have poor profitability.

According to the data from the Fund Industry Association, the first echelon (with a scale above 5 billion yuan) has the best profit performance, with the number of profitable managers accounting for 88%, and the average net profit reaching 48.37 million yuan; among the first echelon, equity and venture capital managers outperform securities managers, with a net profit margin of 53% and a return on equity of 24%.

In the second echelon (with a scale between 500 million and 5 billion yuan), more than half of the managers are profitable, among which securities managers have an average net profit of over 4 million yuan, and equity and venture capital managers have an average net profit of over 10 million yuan.

It is more difficult for managers in the third (with a scale between 5 million and 500 million yuan) and fourth echelons (with a scale below 5 million yuan) to make a profit. The smaller asset management scale brings in income that cannot fully cover the daily operating expenses, leading to small-scale institutions being unable to offer higher salaries to their employees.Fund industry association data indicates that, as of the end of 2018, the average compensation for private fund managers in the third and fourth tiers was only 69,000 yuan and 31,900 yuan, respectively, significantly lower than that of managers in the first and second tiers. The salaries for newly hired employees are even lower.

As a newcomer to the industry, Wang Cheng's monthly salary was only 6,000 yuan at the time. However, in addition to the fixed salary, the company also offered certain commissions. "For example, if a fund product with a scale of one million yuan made a profit of 200,000 yuan this year, 20% of the 200,000 yuan would belong to the fund company, and then from the 'incentive fee' of 40,000 yuan, the fund manager would allocate another 20% to the researcher," Wang Cheng told the reporter.

The company's fund yield ranked in the top 10% of the industry, but due to some personal reasons, the impetuous young Wang Cheng left the job.

In his second job, Wang Cheng's monthly salary increased to 10,000 yuan, and the company's management scale was still less than 100 million yuan, with all funds coming from the boss himself. The boss was a "big retail investor" who had been investing in stocks for thirty years and had made a considerable amount of money. However, due to disagreements with the boss's investment philosophy and no professional opportunities, Wang Cheng left again.

The threshold for private equity has been significantly raised.

In November 2023, while working on his third job, Wang Cheng finally obtained the CFA certificate, but he still could not withstand the industry's reshuffling and eventually resigned. To this day, he has not been able to find a suitable job in the financial institution.

Wang Cheng's unemployment is related to himself as well as to the market and industry environment.

As the "Guidelines for the Operation of Private Securities Investment Funds" (hereinafter referred to as the "Guidelines") are approaching implementation, according to First Financial, some institutions have already shown signs of layoffs due to the impact of the new regulations. Some private equity practitioners have said that the intensity of layoffs in the private equity industry may further increase after August, with small private equity firms being the hardest hit.According to data from the China Securities Investment Fund Association (hereinafter referred to as "AMAC"), as of the end of May, there were 20,860 private fund managers in existence, including 8,240 in the securities category and 12,384 in equity and venture capital categories. In terms of total volume, there has been a certain degree of decline both month-on-month and year-on-year, with a reduction of 3,823 compared to historical peaks.

In May of this year, the "Regulations" have been in effect for one year. The "Regulations" require private fund managers to have a paid-in capital of no less than 10 million yuan, with strict requirements for the proportion of contributions by senior executives and their personal resumes. At the same time, they emphasize the information disclosure obligations of fund managers and strengthen the management of subscription and redemption of private securities funds.

Many institutions that cannot meet the new regulatory requirements have chosen to leave the industry.

Recently, it was rumored on the internet that a securities private fund manager in Shanghai was selling its qualifications for 650,000 yuan in a social circle, claiming that it is "in agreement with the industry and commerce association, with no abnormalities, and has five employees paying social security."

On May 11th, AMAC canceled the management qualifications of 96 private institutions in one go, all of which were "cancelled for no management in 12 months."

While a large number of institutions were being canceled, the entry threshold for the private equity industry was also increasing.

Data from AMAC shows that from January to April of this year, private fund managers filed 18, 6, 10, and 17 respectively, totaling 51. In contrast, in January 2023 alone, 54 were approved.

After interviewing more than a dozen companies, Wang Cheng found that there were very few jobs that perfectly matched his background, and he became increasingly anxious. Therefore, he wanted to take a transition job in food delivery, on one hand, to have some income to support his life; on the other hand, he also planned to continue applying for jobs while working.

In a previous interview, Wang Cheng expressed his desire to "turn his life around" in the financial industry. However, after several setbacks, Wang Cheng realized that in the financial industry, the gap in education is not something that a CFA certificate can bridge.

For practitioners in the private equity industry, a high level of education and graduation from a prestigious institution are the basic requirements. According to an incomplete survey by the Private Equity Ranking Network, at present, apart from some fund managers whose highest level of education is unknown, the majority of top private fund managers have a master's degree, accounting for 57%; those with a doctorate degree are next, at 12%.Specifically, the alma maters of fund managers are primarily concentrated in top domestic universities such as Peking University, Tsinghua University, Fudan University, Renmin University of China, Shanghai Jiao Tong University, Nankai University, Shanghai University of Finance and Economics, as well as North American institutions like Stanford University, Columbia University, Boston University, University of Toronto, and University of Chicago.

Among them, the highest number of top private equity fund managers graduated from Tsinghua University, Fudan University, Peking University, and Shanghai Jiao Tong University, with each having more than 20 top private equity fund managers from these institutions.

Prominent fund managers such as Deng Xiaofeng from Gao Yi Capital, Wang Chen from Jiu Kun Investment, Xu Shunan from Ino Asset Management, and Liu Xiaolong from Ju Ming Investment are all alumni of Tsinghua University; those who graduated from Fudan University include Yao Jiejun from Ying Shui Investment, Qiu Huiming from Ming Hong Investment, Guan Hua Yu from He Yuan Fund, and Jiang Hui from Xing Shi Investment; while Jie Huanyu from Ming Hong Investment, Yao Qi Cong from Jiu Kun Investment, Chen Panying from Si Xie Investment, and Shi Fan from Zhuhai Zhi Cheng Zhuo Yuan, who are all multi-billion quantitative private equity fund managers, graduated from Peking University.

Overall, after the phase of unregulated growth, the development of the private equity industry is undoubtedly moving towards standardization, and the educational background and personal quality of its practitioners are also improving.

On April 30th, the China Securities Investment Fund Association issued the "Guidelines," which cover various aspects of the private securities fund, including fundraising, investment, and operation. The "Guidelines" will come into effect on August 1, 2024.

For young people like Wang Cheng, after the private equity industry has been sifted by the tide, where to go next is a question he also has. "I want to wait and see," he said. Waiting patiently for the market to rebound and opportunities during the low period is not necessarily a bad choice.