For seniors who have spent your career in private equity, do you regret it?
For industry veterans who have spent your career in private equity, do you regret it?
For context, I worked at a top bank, am currently a first year PE associate (ignore the title), and am making +/- $400k a year.
The big caveat for me is that I’m older than most first year associates (30 y/o) as I went to college later than most.
I initially went down this career path to “make up for lost time” and save at a higher rate.
On that note, things have worked out (+$250k net worth after just 2 years in banking), but I find myself wondering if this is the path for me.
I’m 30, still working 80-100 hour weeks, don’t have a girlfriend or significant other, and other areas of my life are lacking too. On top of that, it doesn’t really seem like the hours get much better as a VP. Realistically, if I spend 3-4 years as an associate and then perhaps another 4-5 years as a VP, I’m looking at 7-9 more years of comparable hours. At which point I’d be 37-39 with other avenues of my life likely materially underdeveloped…
Not expecting to necessarily hear from others that started private equity late as I know I’m on the road less traveled there, but am curious to hear from those that have made sacrifices in other parts of their life to pursue this for the long run. Do you have any regrets or advice?
personal relationships....memorable experiences....there's more to life than your net worth
Not senior by any means, but thinking in the same pathways as you are. Been months since I experienced a week of less than 80 hours. I am trapped in the idea that with the comp / prestige I have in my current role, doing anything else would be "throwing it away". I have worked so hard to get where I am and very few people get an opportunity like this. I am scared to throw it away.
On the other hand, I try to be rational and think about what is truly important to me in life. I want to be able to exercise, take care of my body, pursue my hobbies, develop myself, have a meaningful relationship with someone etc. That will never be possible when working 80-100 hours a week. The questions I ask myself are:
- "What can I do with $300k a year that I would not be able to do with $150k a year?
- "Is it really worth sacrificing everything else that is important to me in order to buy those things / save that money?"
Sure, I can save a lot more. But then the next question is what am I gonna do with those savings that is so important to me? Will buying a really nice house and a supercar when I'm 40 make up for the fact that I am alone and have had no life for the past 20 years? Most likely not.
I could also consume a lot more for $300k than I can for $150k. I can go to nicer restaurants, I can buy more expensive clothes, live in a nicer place, go on more expensive vacations etc. However, I feel that $150k is more than enough to buy everything I want. Of course, I could spend more on the same stuff to get a better quality, but I feel that the difference is quite marginal at this point and it's not worth that much to me.
In summary, I believe that if you are going to sacrifice so much of your life for money, you need to have a very clear vision of exactly how that money will make it worth your sacrifices. Personally, I have come to the conclusion that $150k is more than enough for me to buy everything I want and have a good life while also allowing me to pursue other things that are important to me. Have spent a lot of time thinking about this and will make the move to switch industry soon.
Can chime in on this:
The PE industry breaks down in a few areas:
My general view is a majority of private equity professionals either regret 1) the hours they devoted 2) not working at a hedge fund 3) not starting their own venture
Now before everyone piles on top of me. I’m not saying it isn’t worth working in the field. You learn a ton and can earn a great deal rather early in your career. However, I question the long term outlook at many funds. To another responses point, not all funds are the same and there are situations you can find where you work less or like the people or have some unique comp, but by and large, I find PE professionals get unhappy and the ones I know that ended up happy split to hedge funds, unique shops, or decided to grow their own individual business.
In other words... PE is paradise
Risk adjusted you might be right…but my comment “comparison is the thief of joy” is why I disagree.
PE professionals I know don’t count their blessings and think “geez im glad im not like my hedge fund friend who flamed out” rather it’s more “I was smarter/harder working than that guy that cleared $1m last year”
It sounds reductive, but I view PE as just a hyper demanding corporate job. It’s like working for a big fortune 100 company on steroids. Not a ton of risk in the role and political. Unless you are self aware and risk averse, you are going to compare yourself to others that took riskier paths and achieved outlier outcomes while ignoring those who got unlucky taking risk.
I am helping several VP/principal level IPs leave their firms for opportunities that allow them to either work on themselves (alcoholism/drug problems, major mental health challenges) or live a more fulfilled life (find a partner, family time, rediscover hobbies, travel). Not a single one has regretted leaving behind the money.
The entire industry is having a moment of clarity that carry checks are only going to be 20-50% of what they'd projected for themselves from the last few vintages (if they even hurdle at all). Very hard for mid-levels to swallow that the carry was never real at the calcs their partners pitched them on. In combination with the need to work on themselves, there's sufficient push and pull factors to get out. And there's immense demand for sharp people to jump into stressed (not distressed) portfolio companies and figure out a path to the gross 3x, so there are plenty $250-400K cash + $500K - $1.5M DAW opportunities to exit to in ops, finance and corp dev.
I think about it as a flow back and forth between the benefits of being an IP vs. operator. From 2011 - 2021, being an IP was great. Low interest rates, high leverage, lots of hot potato of assets between firms, and big exits/carry checks. That's an environment that may be worth giving up your personal life for when there's generational money on the line. Not the case anymore.
And the operator world is definitely not perfect. With the single asset concentration vs. diversified PE model, you really have to do your diligence. Higher risk profile, lower quality people, nebulous exit timeline, unsexy work. It may not be for you at all. But I've gotten general consensus that being an operator > IP in this moment.
Someday there will be a flip back to IPs > operators. For now, the world's better on the operator side.
Spent more than 15 years in PE, had good carry allocations across three vintages, coasted for the last 2-3 years, never need to work again at 42 and have a happy family life. It’s great, would recommend.
Also keep in mind that given the way the hurdle return works - once IRR is over 8%, the GP gets 20% of everything (not just what's above the hurdle), which can still be a significant amount of money.
Take for example, a $5bn fund that generates a 1.5x/8% gross return (over 5 years). That's a $2.5bn gross profit for the fund, which is $500m of carry for the GP (as they were above 8%). If as a VP, you get a 2% share of the carry, that's $10m for a fund which has only returned 8%. It's might not be MF founder level wealth, but put a couple of those together over a career and you're still worth tens of millions of dollars.
Just to clarify the calculations, an 8% gross return won’t pay any carry. Usually the waterfall works so the first 8% goes to the LPs, the next 2% to the GP, and then 80/20 thereafter. So essentially the fund would need to return 10% gross for the GP to get the full 20% carry allocation. It’s basically a “catch up” mechanism once the hurdle is met.