What is the value of an MBA in private equity?

ByHanover Team
Posting date: 17 May 2024

More and more candidates ask me every year whether they need to get an MBA to progress in private equity. But while getting an MBA used to be a given in PE, it is much less so now.

Until relatively recently, you needed an MBA to advance in private equity - even if you were already working in the industry. Specifically, if you were an Associate at a PE firm, you’d be required to leave and get an MBA before progressing further in your private equity career. Once completing your MBA, you would be hired by a PE firm as Vice President (in some cases Senior Associate), but it meant hitting pause on your career while continuing your education.

But MBA requirements seem to be loosening up with each passing year.

Does everyone in PE have an MBA? Not any more…

It’s still true that larger, more prestigious PE firms tend to prefer hiring MBA graduates for their VP levels (and above).  Even at the largest mega funds, however, the non-core teams, such as infrastructure or private credit, have started to relax the MBA requirement. Many middle-market and lower-middle market private equity firms have eliminated the requirement altogether. Why?

There has been a proliferation in the number of PE firms over the past 20 years.  According to McKinsey, there are around 7,000 private equity firms operating in the U.S., versus just under 1,500 in 2000. A myriad of large and small firms covering a variety of sectors, strategies and geographies cropped up that prioritize particular skill sets, backgrounds or even personal drive over an MBA


Many of these firms’ founders rose through the ranks without an MBA, so requiring it from the junior ranks is seen as contradictory

What is the dollar value of an MBA?

All of this poses the question of how you decide whether to pursue that vaunted degree if private equity is your end goal. 


First, let’s consider the financial impact. If you enrol full-time, tuition and living expenses can amount to around $200,000. Add two years of foregone wages and the opportunity cost is significant. 


Presumably, investing in an MBA will pay for itself in a few years - especially if you land a lucrative role with some hefty carried interest (deferred compensation in non-PE parlance).  To put real numbers around this, I canvassed a few dozen Senior Associates and VPs in private equity investing roles.


I had expected to see MBA graduates edge out their non-MBA peers in comp, but was surprised when the data showed similar earning levels for both groups. (Bear in mind that this was a decidedly unscientific sampling of PE professionals across a wide swath of fund sizes and geographies.)

Current ave compensation (inc. deferred comp/carried interest)




Senior Associate



Vice President



Current ave compensation 




Senior Associate



Vice President



So if getting an MBA isn’t going to guarantee higher earnings, why get one? Well, because it can still be a productive and positive two years full of learning and networking. It may open doors to mega funds and upper middle market funds that still have an MBA requirement, and if you’re someone on the periphery of PE, it can help you pivot squarely into your dream job.  I’ve rarely met candidates or peers who regretted getting an MBA.  Just make sure you’re making the choice based on a variety of factors, and not just compensation alone.

My advice to candidates

When I talk to candidates who are wrangling with the MBA decision, I typically offer this advice:

Undertaking a full-time MBA might be the right thing for you if it checks two or more of these boxes:

- You can afford to take two years off to complete your education
- You come from a non-PE background and want to pivot to PE
- You’re a highly gregarious person who will come out fully networked
- You’ve invested in the traditional path of two years of investment banking and two years as a PE Associate, and are targeting a mega fund as your life’s goal

Otherwise, a part-time MBA might be the way to go

Should PE firms relax the MBA requirement?

- Private equity firms should be considering this question seriously. What is the real reason behind the requirement? 

- Is it that candidates with MBA degrees genuinely bring more value to the business than those who rose through the ranks in other ways? 

- Is it a signalling device - that you only hire people who have survived the MBA gauntlet, ostensibly because they’re the best and the brightest? 

- Have you found employees with an MBA stay longer with your firm, or are natural leaders? 

There is no doubt that plenty of remarkably talented individuals come out of MBA programs to become highly productive, long-term members of the private equity community. But I would challenge any private equity clients committed to MBA hires to consider whether there are functions and funds that might benefit from some high-calibre non-MBA talent as well.  

With the current war for talent in the private equity space, Hanover is committed to helping our clients strategize around MBA and non-MBA talent in ways that will add jet fuel to their returns, build positive cultures and diversify their rosters for the long-term.     

Do you want to recruit top PE talent for your firm (with or without an MBA)? Contact us and let’s set up time for a call.

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