by Brian DeChesare Comments (29)

From Big 4 Accounting to Private Equity at a Canadian Pension Fund: A One-Way Ticket to Earning More and Becoming a Deal-Maker?

Private Equity at Pension Funds in Canada

A few of the previous interviews/articles I’ve done on Canada have attracted… a bit of controversy.

By “a bit,” I mean, of course, “lots of violent and hateful comments threatening myself and/or the interviewee.”

So the logical thing is to try it one more time.

This one’s a bit different from previous interviews, though, because our interviewee skipped investment banking altogether and moved straight from a Big 4 firm into private equity at a large pension fund – one of the top exit opportunities in Canada.

Here’s what you’ll get from the story he’s about to share:

  • How to move from an accounting role at a Big 4 firm to a financial advisory role, and then finally into private equity – and skip banking altogether.
  • What to expect in the recruiting process at a Canadian pension fund, and how it compares to traditional private equity recruiting.
  • What the pension fund industry in Canada is like, and why you’ll almost certainly have to work at one if you’re interested in PE there.
  • What it’s like on the job at a pension fund, from hours to culture, work, pay, and more.

From Financial Advisory to Private Equity

Q: You’ve been reading this site for a long time. You know the drill – give us the high-level overview of where you came from and what you did.

A: Sure. I did my undergrad at a well-known school in Canada, majored in accounting, and completed 3 internships at one of the Big 4 firms in Toronto.

I received a full-time offer from the same firm 2 years ago, but by that point I had already realized that I wanted to do something other than accounting. A lot of my friends were in investment banking, so that seemed like a logical choice.

But the economy wasn’t exactly doing well (and still isn’t), and as previous readers have pointed out, it’s extremely competitive to get interviews at banks in Canada, let alone win offers.

At the same time, though, I knew I had to start networking to have any chance of moving elsewhere – so I started reaching out through the usual channels (alumni network, LinkedIn, etc.) to everyone I could contact on the sell-side and the buy-side.

I had started off in more of a pure accounting role, and I knew that I would need more relevant experience to move into finance, so I transferred into the financial advisory group about a year after I started.

That gave me experience that was a whole lot more relevant, because most of the job consisted of valuing companies, conducting due diligence, and assisting with purchase price allocation.

To see an example of this kind of work – the basics, at least – see our tutorial on the Goodwill calculation.

I kept networking, and then I taught myself more about financial modeling and leveraged buyouts from your online modeling courses.

Private equity firms want to know whether you can build an LBO and support it with logical thinking, which are skills you don’t necessarily learn at a Big 4 valuation shop.

The market was still not great, so I wasn’t having much luck – but about 6 months ago, I heard about an opportunity from one of my contacts in the PE group of a pension fund.

They were looking to expand their team, so unlike most other finance firms they were ramping up their hiring.

I got introduced and went through the interview process with them, which took about 3 weeks from start to finish, and I won the offer at the end.

I’d say the 3 main factors in my success were:

  1. Networking – Even when the market was bad and no one was hiring, I kept at it.
  2. Experience & self-studyMoving into a more relevant role and filling in the gaps in my knowledge from your courses was essential for PE.
  3. (Some) luck – Being in the right place at the right time and knowing someone at a firm that was expanding also made a big difference.

Q: Great, thanks for that overview. So let’s take a closer look at some of what you did here – how exactly did you go about networking, and who did you focus on?

A: Sure… I actually managed to line up a few investment banking interviews over 2 years ago, but I was not prepared at all and did very poorly. The Vault guide just isn’t enough for the types of questions they ask you now.

But one of the Associates I met with liked me and thought I had potential, so we stayed in touch and he became my “mentor,” also taking the time to explain what I should be doing.

I got some introductions from him and also went through my alumni database and started contacting everyone I could find, from MBAs to undergrads. Out of every 10 people I would contact, maybe 2-3 would respond, and 1 of those might actually be helpful in terms of winning interviews.

Once I exhausted that list, I went on LinkedIn to search for VPs and Managing Directors at all the banks and began contacting them. The “hit rate” there was much lower, but I met at least 4-5 people who were willing to help.

I noticed you’ve gotten some questions before on which level of banker is best to target for networking purposes – my experience was that VPs and MDs (senior bankers) were more helpful because they are more in touch with the group’s hiring needs.

Ironically, this meant that I focused more on some of my “cold contacts” as opposed to friends-of-friends and alumni, since most of them were more junior.

Q: Interesting to hear that, though I think it depends on the region and what your alumni base looks like as well.

Any other networking tips?

A: One of the reasons people liked me and supported me is that they liked my story.

You’ve written about how important your response to the “Walk me through your resume” question is, but your “mini-story” is equally important when you’re networking.

Mine went something like: “I wanted to do accounting because it’s a great platform for learning the fundamentals, but after a few internships realized I didn’t want to do auditing – so I started talking to friends in banking, learning more about deals and modeling on my own, and moved into the financial advisory group to get closer to it. In the future, I want to [Advise] / [Invest in] companies using my industry knowledge, and I see [Banking / PE] as the best way to get there.”

For buy-side networking, I talked more about my own personal portfolio and some of the investments I had made.

That story may seem a little “generic,” but I demonstrated 2 important points with it that a lot of people forget about when networking:

  1. I had already taken specific actions to move closer to the finance industry – I wasn’t just reading about it.
  2. I stated my future goals and explained how joining their firm would get me there.

Pension Fund PE Recruiting

Q: Yeah, those are great points. Sometimes when you’re going through a hardcore networking effort, it’s easy to forget that you still need to pitch yourself effectively – it’s not just about contacting people and setting up meetings.

So what was the recruiting process at this pension fund like?

A: There were 2 rounds of interviews. In the 1st round, I met with people at the fund across all levels and it was mostly “fit” questions, with a few questions on my experience and skills as well.

The 2nd round was more technical, and I had to complete the infamous LBO model case study that you’ll get in pretty much any PE interview.

I was given a scenario which included the company’s financial statements and a few of the key assumptions, and was asked to build the model, justify any new assumptions I made, and then make an investment / no investment recommendation at the end in a 15-minute presentation.

In addition to the case study presentation, I interviewed with several other members of the team in this 2nd round.

Q: Great, so any tips on this type of in-person case study?

A: For case studies with limited time, I recommend focusing on the numbers first and the qualitative/market criteria second.

You just don’t have enough time to do in-depth market research in an hour or two – but you can build a simple LBO model and at least get a rough idea of whether or not the deal is feasible.

I spent most of my time on the model and coming up with assumptions, and a bit less time on the presentation itself and doing some market research based on the materials they gave me.

So your argument should generally be something like: “Yes, I recommend investing because you can realize a [20%?] 5-year IRR with a purchase price in the range of [A] to [B], exit multiple in the range of [W] to [X], and leverage of between [Y%] and [Z%]. Plus, it’s a solid, growing market, and the company is well-positioned against competitors.”

Or on the flip-side, if you’re recommending against investing, you still base it mostly on the numbers and then use the more negative market factors to back up why the deal is not great, both qualitatively and quantitatively.

Pension Funds: The Landscape

Q: Thanks for sharing those tips. I definitely agree that the numbers are more important if you’re under extreme time pressure like this and have limited information.

Can you tell us what the pension fund industry in Canada is like, and why there are fewer traditional private equity firms there?

A: Sure. The main difference is that the PE mega-funds have less of a presence; the likes of KKR and Blackstone may occasionally invest in companies here, but neither one has an official office in Canada.

The biggest local Canadian PE firm is Onex, which might be considered middle-market in the US.

So you have fewer options in traditional private equity here – most investment activity actually takes place at pension funds, the biggest of which are the Caisse in Quebec, the CPP Investment Board (CPPIB), the Ontario Teachers’ Pension Plan (OTPP), the Public Sector Pension Investment Board (PSP Investments), and OMERS.

Then there are a few others, such as Alberta Investment Management, the Healthcare of Ontario Pension Plan (HOOPP), the Ontario Pension Board (OPB), and the OPSEU Pension Trust (OPTrust).

The traditional private equity funds that do exist here tend to be quite small – the entire team might be 10 people, with 1-2 analysts, a few associates, and a few Principals / Directors / Partners.

The pension funds, by contrast, tend to have larger teams and Analysts and Associates (juniors) represent approximately 2/3 of the group.

Some of the larger pension funds also have offices in locations like Hong Kong and London, so those might add a few dozen professionals to the total group size.

Q: Great, so as with PE even in markets like the US, teams tend to be quite small – at least compared to the headcount at “normal companies.”

We all know natural resources are huge in Canada, but do you focus on oil & gas and mining deals?

A: I personally do not focus on oil & gas and mining deals; our group is more diversified and we’re pretty much sector-agnostic.

You might see stats that say that the majority of buyouts or buyout funds in Canada go into natural resource deals, and that might be true simply because they tend to be bigger deals in the first place.

But from what I’ve seen, relatively few PE firms and pension funds here like to “focus on” the sector because of the risk created by fluctuating commodity prices – your article on metals & mining and some of the comments there describe why it’s so risky.

Culture, Compensation, and… Government Regulation of Bonuses?

Q: So it sounds like the work itself isn’t too much different, though the types of investments you make may be. What about the culture at your firm? Is it better than what we saw at Peak Partners?

A: Yeah, definitely. It’s not really an “eat what you kill” culture, so people are pretty supportive and it’s not a shark tank where everyone is out to one-up you and get ahead.

The other difference is that the public investment side and private investment side are more integrated here.

Your opinion is valued from day one, which already makes it quite a bit different from banks or traditional PE firms – but they also expect you to speak up and voice your opinion, and then to back it up with numbers and data.

Q: And an average day in your life…

A: It differs greatly depending on whether or not I’m on a live deal.

On a “deal day,” my day might start at 7-8 AM and it might end anywhere from 7 PM to 12 – 1 AM. So it’s not much different from banking hours, except for possibly the earlier start time, but that’s true whenever you get busy with a deal in PE.

The work itself is everything you’d expect: calls with everyone involved on the deal, modeling, writing investment memos, meetings throughout the day, and doing research and due diligence on companies.

When I’m not working on a deal, work might be in the 50-60 hours per week range, and I might get in at around 8:30 or 9 AM and leave around 7 – 8 PM.

The work also changes, and I spend more time screening potential deals, looking at our existing portfolio, and doing market research.

Q: And now we arrive at the ever-popular question about compensation. How does it compare to traditional PE and IB?

A: It’s definitely less than what you would earn at a traditional private equity firm.

I don’t have exact figures for you, but a 1st year analyst here might earn 20-25% less than a 1st year analyst at a bank.

As you move up the ladder, you would continue to see a substantial discount at all levels – a 2nd or 3rd year associate here might earn what a 1st year associate at a bank would make.

Managing Director / Partner-level people can still earn a lot, but again, it would be a sizable discount to pay at a traditional PE firm.

There are a few reasons for this:

  1. Pension funds have to be more conservative because it’s all “public money” – it wouldn’t sit too well with employees’ unions to know that a private equity group within their pension fund is awarding millions of dollars to certain employees.
  2. There’s no carry – there is an incentive plan, but bonuses are all “discretionary,” so it’s not as if you’ll earn a massive amount more if you source a great investment that yields a 50% IRR over a few years.

So, like previous interviewees have suggested, in Canada the buy-side isn’t necessarily the path to earning more – but it can offer better work-life balance than banking.

Nonetheless, many people actually stay in banking and move up the ladder there.

Q: Thanks for adding that. Speaking of exit opportunities, what do you see in both banking and PE if people tend to stick around longer?

A: Business school is probably the most common “exit opportunity,” aside from the private equity and/or joining another investment group at a pension fund.

Lots of people do banking for 2-3 years and then go to business school; most of our recruits also come from banking, but again, there aren’t that many spots so exiting to a pension fund is less common than moving from IB to PE in the US.

I am contemplating whether I would like to go that route; if I did, I would most likely pick a top US program since they’re better-known than the ones in Canada.

Q: Way to respect your own country…

A: Hey, I’m just speaking the truth – there are some great schools here, but nothing with the recognition of HBS, Stanford, or Wharton.

Q: OK, fair enough. So based on everything we’ve discussed, who do you think would do well in a PE role at a pension fund (in Canada)?

A: You have to be more than a number cruncher here. Yes, they’ll test you on that in case studies during the recruiting process – but on the job, voicing your own opinion is extremely important, as is your ability to work in a team and not attempt to out-shine everyone else.

You also have to be willing to learn and ask the right questions, because the last thing they want is someone who comes in and can only do the specific work that’s assigned to him/her without going beyond that.

New hires can sometimes struggle on the buy-side if they can’t express their own opinions of deals and investment decisions – and that’s exactly what you need to succeed here.

Q: Awesome. Thanks for your time!

A: My pleasure.

Want to read more?

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About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

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Read below or Add a comment

  1. Hi Brian,

    I am debating between a FT in S&T and a FT in AM. Ultimately I would like to work in AM down the road but the pay is quite alluring in s&t. would it be hard to make that change from s&t to AM down the road in a couple years?

    1. Depends on what you want to do at the AM firm… if it’s execution trading, sure, it shouldn’t be that hard to move from S&T to AM because it’s a similar skill set. You might need some pretty good P&L results from your own book to do it, though (see:

      If you want more of an investment analyst role, that will be tougher because the skill sets don’t much up unless you’re using some type of global macro or rates strategy in AM and your desk in S&T matches up closely.

  2. I’m in my 3rd year of university and am debating between internship offers between a Canadian pension fund (private equity) vs. a Canadian bank for investment banking

    Most internships have the promise of return offers for full time, but I think the return offer prospects for the pension fund is lower…I was wondering which one would be a better resume add for me? I always intended PE to be my end goal and was aiming to get into it right out of school, but now seeing this article about the steep discount in salary, I’m thinking about going into IB then PE to raise my salary range a bit first

    1. If you want to keep your options open, the Canadian bank is better because you’ll have broader exit opportunities. There aren’t that many pure, non-pension PE roles in Canada, so if you want to go that route, you may have to move to another region. For more recent information, please see:

  3. finance123

    I am speaking in the case if someone move from an independent PE fund to a pension fund. There seems to be more downside than upside.

    what’s the exit opportunity for someone having worked in a pension fund in direct PE group? I imagine it’s harder to move to an independent PE fund. I feel like all you are at pension funds are number crunching monkeys, lacking skills like structuring, negotiating etc. Deals that you do at pension funds are based on flow instead of being originated by senior guys.

    In addition, there is no carry but just bonus. So I guess your bonus is tied to deals you brought in in some way but capped since it’s a public fund. So on what are basis does anyone promote a junior in there? Also are you lacking any skillsets that juniors in independent PE funds are able to develop? Seems to me, exit opportunities and comps are a lot worse than in an independent fund and seem to be a big downer on your career prospect.

    1. We’ve addressed many of these questions in a follow-up article:

  4. Brian and team,
    Would you be able to confirm as to how long (hours/day) was the case study test was for at this Canadian pension fund?
    Also do they provide you an excel template (just as in BIWS courses/case studies) at test center and then you have to fill in, or is it just a word document or something and then you create model from scratch (offcourse, as Brian recommends in these case, one ignores the formating and skip some of the steps, if one only has a couple of hours).

  5. I have an upcoming interview for a large buyside/pension fund in Canada as a financial services analyst (summer internship) – I’m still in undergrad. I had a previous summer internship in Big 4 in transaction advisory though. I may have to take an “analyst” test but not quite sure what that is. Any thoughts or ideas and where I should direct my focus towards? Could it be a modeling test, case study? Thanks

    1. M&I - Nicole

      It could be a combination of both, as well as test on your qualitative skills. It varies according to the firm so I can’t say for sure. However, I wouldn’t worry too much about it.

  6. How do placement agents work? In particular the research roles. What kind of research do they undertake?

    1. M&I - Nicole

      You’re talking about private placement agents? I am not 100% sure, but in terms of research I believe they’ll be doing research on funds (i.e track record etc) and entrepreneurs/private companies so they can bridge the two.

      1. Thank you. Yeah sorry that is what I was getting at. Is it similar to the due diligence process at the big four? or more or less technical? It seems to be an area where not a lot of information is available on the web and loads of them seem to be hiring these days

  7. Ex Banker

    How common do you think significant weekend work would be at these private equity pension funds? Quite significant when on a deal and none when not?

    1. M&I - Nicole


  8. How well do the pension funds usually place for the top US business schools?

    1. Probably not quite as well as a top bank or PE mega-fund, but on par with most other firms in finance.

  9. Awesome post. Though I’m from Continental Europe, Canadian pension funds have interested me for quite some time due to their heavy exposure on infrastructure:

    1. What is the size of the London teams (since Canada is most likely not an option as interviews would be difficult)? I guess it differs, based on the size of the fund, but are they complete teams or are there cases in which there is only a small, complimentary team?
    2. What do you say when cold messaging peoples on LinkedIn when you are already employed? “How to position myself for a possible opportunity with your firm?” or anything elese?
    3. Another question, is workload/pay the same in the London offices as it is at HQ (adjusted for regional differences of course)?

    Thank you very much!

    1. Thanks!

      I’ll try to answer your questions, but I’m not an expert on pension funds elsewhere:

      1. I would guess that the teams, overall, are smaller than those in Canada simply because Canada has some of the largest pension funds in the world. There are some big ones elsewhere in Europe, but not so much in the UK.

      2. Just be direct and give a quick sentence stating your background (“I’m currently in [Role X] at [Firm Y]”) and what you want to do in the future and ask about hiring opportunities and/or general advice.

      3. Not sure on this one, but London is probably about the same… maybe a modest discount, but certainly not anything close to “normal” hours, at least on the PE side.

      Anyone with more knowledge, feel free to correct any of this.

      1. Hi Brian, thanks for the quick response.

        To clarify my first question, I was referring to the London offices of Canadian pension funds rather than to European pension funds.

        As for the European pension funds, I might add that some European funds have become more active as direct investors in infrastructure debt, but I am not aware that they have been active as direct investors (infrastructure equity) on large scale. Maybe as co-investors alongside a fund in which they are LP, but not with the notoriety of the Canadian and some Australian funds.

        1. I imagine team sizes are still somewhat smaller because London offices may be considered “regional.”

          And agreed that fewer pension funds in Europe do direct investing.

        2. And there I have to correct myself. Dutch pension fund PGGM founded in 2011 a 50/50 JV with BAM PPP with BAM PP transferring its PPP assets into the JV. It will also invest in new projects.
          What makes it even more interesting is the fact, that PGGM will take on significant construction risk as new projects will be mostly greenfield.

  10. So this is direct investing by the pension fund? If so, do they also invest as LPs?

    1. I believe they do both, but his group focuses on direct investing. He didn’t want to give too many details on investing strategies because it might be too easy to identify him.

      1. What is LP if you don’t mind me asking?

    2. I work for a placement agent, and the answer is yes – Canadian pension funds are huge LP investors (as well as direct).

      1. LTCM – which placement agent do you work for if you don’t mind me asking?

  11. calgary advisory

    How do private equity in pesion funds view designations? Coming from a Big 4 background, I assume you would have your CA. How does this weight into their decision? How do CFA/CBV compare?

    As well, being from Calgary msyelf, there are a few private equity shops but no pension plans. How do pension plans view individuals coming in from places like Vancouver/Calgary?

    1. From what I’ve heard from readers, certifications such as the CA are more useful in Canada. They’re still not the best use of time vs. networking, but they can be more of an added bonus than in other regions. Not sure about the CBV, but the CFA, similarly, may also be more helpful.

      Pension funds, from what the interviewee told me, really want people with solid transaction experience, modeling skills, and critical thinking abilities… so if you have those, you’re in good shape. The main disadvantage to the other places you mentioned is that deal flow may not be as strong, but I don’t even think that’s necessarily true in Calgary (just more of a focus on natural resources).

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