Do MBA IB associates jump to PE after 2 years?
Haven't seen anything recent on this but had wondered how common this is?
For people who probably weren't in IB pre-MBA, it seems they can have a convincing story of "why PE?", even though they would be ~ 30-32 at the time of going to PE.
Interested as well. From my understanding, it would be difficult - especially to move into the larger, more established funds
It doesn't happen very often at all, it's quite uncommon.
When hiring for Associate roles, PE firms primarily screen for candidates with top-notch technical chops. Junior roles in PE are all about the financial modeling and analysis that allow the firm to evaluate potential investment opportunities. (Side note: that's not enough if you want to progress up the slippery slope on the partner track. Soft skills prove to be the difference maker when firms choose who to offer post-MBA Associate roles [which typically correspond with a path to the partnership]; see the two great threads on this in the PE forum titled something like "Why I didn't make VP in PE" or such.)
As a banking analyst, you get thrown immediately into the deep end. You become an Excel and PowerPoint jockey; within six months the best analysts have climbed completely up the learning curve and can execute complex valuation and financing analyses quickly and thoroughly. You aren't client-facing; you are the splintering wood at the very bottom of the totem pole whose only shining light is the allure of the vaunted buy-side role you're forced to recruit for only seven months into your analyst stint.
As a banking associate, you're in the lowest-level managerial role. You oversee the work of the analysts on your projects while managing the process (deadlines, deliverables, and egos) of each staffing. The irony of this is that the majority of the associate class is hired out of business school (and are almost invariably career switchers), meaning that someone who was working in marketing, nonprofits, or some corporate role only 20 months ago is somehow in charge of analysts who know way more about the job, have closed more deals, and are faster and more efficient than the Associate will be for at least a year.
Whether it's fair or not, this leads to the stigma that banking associates are the ones who were either not smart enough to crack into banking out of undergrad or were uninterested enough in finance to pursue another field before choosing to spend $120k on a degree that acts as a filtering mechanism for the Street.
Couple that with the fact that the type of work you do as an associate (managerial) doesn't give you the same skill-set as an analyst (technical) and it becomes really clear why PE firms take the easy (and smart) route of recruiting only from the analyst pool.
Although some banking associates have made the transition, it's remarkably rare and I have never seen it happen with a classic buyout megafund. I can think of two that I know personally. One went from a coverage group at GS to a non-core strategy at a megafund (think TPG special situations or BX Tac Opps) and the other was a class of 2007 analyst who got shut out of recruiting (like everybody else then) when absolutely nobody hired. He was at Lehman, moved over to Barclays, ended up doing 4.5 years in banking total before getting over to an upper-MM PE firm.
HAHAHAHHAHAHAHAHAHHAHA
Hey don't MS the guy. He's a 3rd year analyst. Probably hasn't seen the sun or had a day of in over 1,000 days. Bound to have some screws loose after that. Give him some slack.
Many MBA Associates also self select themselves out of the PE recruiting process. Moving up in PE is incredibly difficult, far more difficult than making VP in banking, and pay is frankly not that different until you get to very senior levels. After two years of being an IB Associate, where if you've fortunately been intimately involved in actual modeling to get the basic requirements of going into PE, VP is only a year a way where life and comp for the most part gets notably better. I'm willing to bet on a risk adjusted basis, someone deciding to stay in banking vs. going to PE and hoping to make to partner one day ends up being slightly better off in banking financially. The reality is most people don't make it to the MD/Partner track. You're just able to delay getting off the track in banking a little longer.
Pay is not that different until you get to "very senior levels"?? Are you serious? Do you know how much 23 yr old associates make at megafunds and large mm funds? Also do you know how much impact carry has for senior associates and vice presidents, even at smaller mm funds?
Perhaps "very senior levels" is an exaggeration, but certainly not until you're close to partner.
Not everyone is getting into MFs or top upper MM funds. Most PE firms pay somewhere between $180 - $250k for Associates coming out of analyst programs. If you're A1 at a bank and middle bucket or higher (and many banks are starting to do A2A after 2 years), you're pretty much getting paid $220k - $250k, and getting a bumped every year, without having to get your MBA and far easier to move up past VP than in PE.
Regarding senior associates or VPs in PE (whatever the titles may be depending on shop), let's just take TheBigBambino's example here (http://www.wallstreetoasis.com/forums/vice-president-fund-carryequity) and say average compensation is $975k ($375k base/bonus + $600k annualized carry), VPs in banking are making $400 - $600k (depending on seniority, bucket, the bank, blah blah). But the VP in PE is getting a payout at the end of a ~7ish holding period, where as the VP in banking is getting a good portion of that upfront (because some is in the form of deferred comp) and could theoretically put some $ in an index fund getting 5-7% annually to close the gap a little. Is PE better? Sure, I never disputed that. But frankly a couple hundred thousand dollars after taxes is hardly changing people's lifestyles. It's not like we're talking about some entrepreneur that got a big windfall after selling a company for >$20mm.
And now when you take into the fact we're talking about a post-MBA IB Associate (that didn't do IB before), the likelihood of him/her getting into a top paying PE fund is not very likely. He/she is much more likely to go into a sub-$1bn fund (or whatever that number is) where the annualized pay is probably not $975k.
Edit: According to Preqin, the average fund size raised in 2015 was $573mm, which let's just say is probably pretty close to the average fund size across PE in the U.S. today. I get there were a couple of vintage years where the top firms raised record fund sizes, but those are not typical and probably not the norm for the next couple of years. That's a pretty big difference than the $1bn in TheBigBambino's case.
Megafund PE is pretty rare, but MM and lower-MM are definitely possible, it's just that most people don't gun for it. You won't have headhunters blowing you up for the spots but you can absolutely network into roles if you put in the effort.
It does happen in Europe, although it's generally from A2A promotes and IMHO, it doesn't make any sense. why work 3 years as an IBD analyst, then a year or two as an associate to start again as a first year associate in a PE fund where you will be at the bottom of the food chain for another 3 years (assuming no MBA) before having a 50%+ chance of being kicked out.
The scenario I put was when people go to IB after B-school (more than likely career-switch), do they try to jump to to the buy-side after 2 years?
I understand, but under that scenario, you'd still start as a first year associate with no guarantee of making the transition to a partner-track role 2-3 years down the line vs. being a year away from a VP promotion at a bank, it doesn't make any more sense with regards to career progression. I think making the transition from an IBD associate with no pre-MBA buy-side or finance experience to a post-MBA role at a PE firm is outside of the realm of possibility.
I think it is very tough but not impossible. but you need the connections, the school brand and the technical skills. A friend of mine without IB background went 1 year after MBA in PE. But he was also doing crazy modeling. he said the recruiter told him that they will test his modeling skills and it is very unlikely he gets hired but still a good opportunity to get in touch with them, maybe something later on could come up. When he aced the model, they were so impressed that he got an offer. (of course he did also really well on other things)
Similar question: what about going from a top Rx shop (PJT/LAZ/HL) to HF as post-MBA associate?
Side question: what about IB analysts who land PE jobs, but have no intention of going to business school? Under what circumstances would a PE shop be willing to promote to senior associate in lieu of getting an MBA
I actually asked the PE fund I got an offer with this question. While they said they have direct promoted associates to senior associates before, those individuals were rock stars and the vast majority of individuals have to go back to b school. I'm confident in my abilities, but I wasn't about to risk my current position to possibly have to pay up for b school and recruit again after
To answer OP's question, not standard but definitely possible. It doesn't always fit well with the way many PE firms run their junior programs (i.e. 2 and out) but there are certainly reputable firms that will consider you.
If Post-MBA Associates are not going to PE, where do they go if they leave banking?
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