Private Equity interview preparation

Questions

100

Traced to a firm

83

Firms

40

Updated

September 2026

Asked at

All firmsAdvent International6Apollo Global Management6Audax Group6Carlyle Group6EQT6Silver Lake6Vista Equity Partners6WPWarburg Pincus6HIH.I.G. Capital5Oaktree Capital Management5Platinum Equity5TPTPG5General Atlantic4AMAres Management3Blackstone3Clayton Dubilier and Rice3GSGuggenheim Securities3Insight Partners3Invesco3Lazard3Neuberger Berman3NUNuveen3TSTruist Securities3Bain Capital2HWHarris Williams2Kohlberg Kravis Roberts2Millennium Management2Moody's2Rothschild & Co2WBWilliam Blair2Bessemer Venture Partners1Citi1Evercore1FTFranklin Templeton1Houlihan Lokey1HPS Investment Partners1KKR1Mizuho1MSMorgan Stanley1Sycamore Partners1

Topic

All topicsLBO mechanics7Value creation5Returns2Fund economics9Investment judgement18Valuation6Firm knowledge2Credit and financing9Operations4Due diligence8Career and fit11Sector knowledge4Accounting2Deal structuring7Industry knowledge3Brainteasers3

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseFitMarket viewBrainteaser

1. 005What return does a private equity fund actually need, and why?ReturnsIntermediatetechnicalWPWarburg PincusPrivate Equity · New York · 2014

   Say this

   Roughly 20 to 25 percent gross IRR on a deal, which after fees and carry delivers something in the mid to high teens net to investors. The gross target has to clear the fee load and compensate for illiquidity.

   Then walk it

   1. The deal-level hurdle is typically a 20 to 25 percent gross IRR and a 2.5 to 3 times money multiple over roughly five years.
   2. Why that high: limited partners could buy public equities for nothing, so private equity has to beat that by enough to justify a ten-year lock-up, no liquidity and a 2 percent management fee plus 20 percent carry.
   3. The fee drag is substantial. Gross to net can lose five hundred basis points or more, so a 20 percent gross deal is a mid-teens net return.
   4. There is also a preferred return, usually 8 percent, below which the manager earns no carry at all. That sets a hard floor on what is worth doing.
   5. And not every deal works. If one in five is written off, the survivors have to carry the fund, so underwriting to a bare hurdle leaves no margin for the portfolio.
   6. The structural point worth making: as fund sizes have grown and entry multiples risen, realistic target returns have compressed, which is why operational value creation matters more now than it did when leverage and multiple expansion did the work.

   Where candidates lose it

   Quoting a number with no explanation of why it is that high. The examinable content is the fee load, the illiquidity premium and the portfolio effect where losers must be carried by winners.

   Expect next

   • What is a preferred return?
   • How does the fee structure work?
   • Why have target returns compressed?

   Reported by candidates at Warburg Pincus (Private Equity, New York, 2014). Source: Wall Street Oasis.

2. 086What is the difference between IRR and multiple on invested capital, and can they disagree?ReturnsIntermediatetechnicalWPWarburg PincusPrivate Equity · New York · 2012

   Say this

   IRR is a time-weighted annual rate; MOIC is total cash out over cash in with no time dimension. They disagree constantly, because a fast small return can beat a slow large one on IRR while returning far less money.

   Then walk it

   1. A deal returning 1.5 times in one year is a 50 percent IRR but only half your money back in profit. A deal returning 3 times over seven years is about a 17 percent IRR but three times the money.
   2. Limited partners ultimately spend cash, not rates, so MOIC and DPI matter enormously to them. But IRR is the industry's headline, which creates the incentive to shorten holds.
   3. The ways IRR gets flattered: an early dividend recap, a quick partial sale, and subscription lines that delay calling capital so the clock starts later. None of these increase the money returned.
   4. IRR also has technical problems: it assumes reinvestment at the IRR itself, which is usually unrealistic, and it can produce multiple solutions when cash flows change sign more than once.
   5. So the professional practice is to quote both, always, plus DPI to show what has actually been returned in cash.
   6. The practical rule I would give: judge a deal on MOIC for how much value was created, and on IRR for how efficiently the capital was used. Neither alone tells you whether it was a good investment.

   Where candidates lose it

   Treating IRR as the definitive measure. It is the headline but it is gameable through timing, and knowing specifically how it is gamed, recaps and subscription lines, is what distinguishes a real answer.

   Expect next

   • How would you game an IRR?
   • Which would a limited partner prefer?
   • What is DPI and why does it matter?

   Reported by candidates at Warburg Pincus (Private Equity, New York, 2012). Source: Wall Street Oasis.

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.