Private equity vs. Hedge funds -- Lifestyle comparison
(Senior Chimp, 25
Points)
on 9/30/11 at 8:25am
Hey guys,
After going through the forums several times, I have yet to see one good discussion on the tradeoffs between working in PE and HF (especially for pre-MBA, post-IB analyst positions).
Given the popularity of both career paths amongst IB analysts, I (and many others) would love to hear from the older monkeys regarding the pros and cons of each. Why did you pick one over the other? How is your lifestyle compared to your analyst stint in terms of culture, hours, responsibilities, etc. (if applicable)?
Also, has anyone moved from PE to HF or vice versa? If so, what factors motivated your decision and how have your experiences in each field compared?
Any insight would be greatly appreciated. Thanks in advance.
also interested
also interested
I didn't say it was your fault, I said I was blaming you.
As good as it gets for
As good as it gets for equities/value shop lifestyle: http://www.amazon.com/Money-Mavericks-Confessions-...
Maybe a 2-4h read.
Both career paths require very different personalities. PE will allow you to bloom much later (20 years down the line at partner level) but is arguably less risky. I would say ask yourself what kind of personality you truly have, what you are like, and then choose based on this rather than first order factors (hours, office location, analyst pay, etc.).
Recent history has seen the
Recent history has seen the top private equity firms (Bain being the worst offender) jump the gun and begin interviewing at a ridiculous early date, which of course causes all the other PE firms to begin interviewing. In a week or two (or even one day, really) the big funds will have offered the majority of their associate classes and there is significant pressure on them to all accept quickly.
This means that unless you are very, very sure you want to do a hedge fund, momentum will be pushing you to do PE with all the other analysts at your bank. Hedge funds are (usually) much smaller and thus much more selective about who they hire. They start interviewing later and you'll likely have many rounds to go through with no guarantee that you come out the end with a job offer. Thus a lot of monkeys seem to shoot for the surer thing with PE, or at least go through the interview process. This brings another set of issues as you risk pissing off the headhunters who usually specialize between PE and HF - (i.e. you tell one HH you're 100% PE while you tell another you're 100% HF, etc)
So I'd say a lot more monkeys are being pushed the PE track than the HF track for that reason alone.
I went the PE route at one of the larger, well known funds, and have found the lifestyle to be somewhat better, with the caveat that if you are in the hunt and cranking on a deal, you'll be there in the office as late as in banking. On the off time, you're left with more independence to accomplish an overarching goal (e.g. read over this CIM or look at this company, tell me what you think) and generally you are required to think critically much more than in banking. It's refreshing to dig in and really learn about a company, the main drivers behind it, the space/geography it operates in, etc. rather than simply process like you would in banking. Also, it's definitely much more professional, no shooting the shit and throwing footballs around with other analysts in the bullpen. You get in, get your shit done, and get out.
Also, you quickly realize that this shit matters - you fuck up a number in a model and you can really torpedo shit quickly, including your reputation. For that reason it's definitely much more stressful. You can't just shove your work to your Associate and hope he catches all your errors - that shit's all on you.
As for motivation for one vs. the other, I really felt that I needed time to really learn how to become a thoughtful investor, which I just felt that PE would give me. I really wanted more experience in a structured environment before going to a hedge fund to start swimming with the sharks. Some people might consider themselves to be (and some definitely are) much more savvy investors, and for them going to a HF makes perfect sense, I'm sure. It really depends on you and your personality and circumstances.
Hope that helps. And yes, I am up at 2:30am waiting on comments
I went mega HF --> VC, a bit
I went mega HF --> VC, a bit off your question but it was the best move of my life. The HF I worked at was as miserable as banking (regarding lifestyle). The pay was unreal, but didn't really matter given the hours I was working.
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"There are two types of people in this world: People who say they pee in the shower, and dirty fucking liars."-Louis C.K.
I think this all depends on
I think this all depends on the size of the PE group. I'm in a small shop and the hours are pretty brutal all the way up to VP level. As you rise up the hours convert more towards traveling to meetings/conferences and doing things that are a lot more interesting (as compared to an Analyst's work).
From talking with friends in the industry, it's pretty clear its a corporate culture issue. Some are a little more laid back while others are machines.
SpacemanSpiff wrote: Also,
Also, you quickly realize that this shit matters - you fuck up a number in a model and you can really torpedo shit quickly, including your reputation. For that reason it's definitely much more stressful. You can't just shove your work to your Associate and hope he catches all your errors - that shit's all on you.
That also applies to hedge funds (perhaps even more). I've seen people fired on the spot or demoted to accounting/back office for quoting the wrong number ("you're such an idiot for stating that XXX country rates are YY").
HealthcareAnalyst wrote: I
I think this all depends on the size of the PE group. I'm in a small shop and the hours are pretty brutal all the way up to VP level. As you rise up the hours convert more towards traveling to meetings/conferences and doing things that are a lot more interesting (as compared to an Analyst's work).
From talking with friends in the industry, it's pretty clear its a corporate culture issue. Some are a little more laid back while others are machines.
Most people usually say that hours at mid-market (ie, smaller) PE shops are better than at the megafunds, especially at the associate level.
I'm at a large fund, and the hours are great whenever we're not active/cranking on a deal. I leave between 7-8pm most days during this "off time". When we are cranking on a deal, all bets are off and we'll typically be here until midnight or later, with guaranteed weekend work. Will definitely be some 2-3am nights, etc.
Anyway, I think it all depends on firm culture. There are only 8-10 major i-banks, and they all have pretty similar hours (granted it varies by group, etc.). Whereas with PE, there are literally dozens of "good" firms, with significantly more variability in culture, lifestyle, etc.
I would stick with my first comment (in general, associates at megafunds work longer hours than those at MM firms), but there is significantly more variability than i-banking.
EURCHF parity
Also, you quickly realize that this shit matters - you fuck up a number in a model and you can really torpedo shit quickly, including your reputation. For that reason it's definitely much more stressful. You can't just shove your work to your Associate and hope he catches all your errors - that shit's all on you.
That also applies to hedge funds (perhaps even more). I've seen people fired on the spot or demoted to accounting/back office for quoting the wrong number ("you're such an idiot for stating that XXX country rates are YY").
Brutal. They don't like accidental liars.
Would the low level roles in PE/HF be somewhat analogous to those in IB or AM (i.e. gather research, set up pitch books, set up Excel valuation models, etc.)?
What are some of the best PE
What are some of the best PE firms that have great culture/work life balance?
MM PE hours are not too bad.
MM PE hours are not too bad. I think generally, associates at my firm leave around 7 or 8 when they're not busy. When they're on a live deal, there can be late nights, but it's not like banking where there's always a pitch or a live deal to keep you in the office late. To put it in perspective, as an associate in PE, I remember doing an all nighter maybe 3x a year. In banking, it wasn't uncommon to do a couple all nighters in a week.
Generally, based on my experience, mega PE funds work much more than MM PE. I remember partnering with a mega fund on a deal several years back and feeling like I was in banking again... Lots of "busy" work like pointless daily deal update presentations and doing "SWOT" charts for deals going nowhere.. a lot of "just in case the 0.1% chance deal actually happens" work.. Also, i remember being in the megafund's office with the team at 3AM working on a deal and the entire place being packed with associates and analysts who were still working.
Re: Hedge funds, one of my old roommates used to work for a large, well known HF and I remember his hours being much better than banking hours. Based on what i've read in this thread, it seems HF hours can get pretty bad, but my impression of HF has always been that the hours are much better, just because my roommate came home everyday before 8PM. That said, he was usually at the office by 7AM.
i can talk about the hf
i can talk about the hf lifestyle more than pe
basically you get in really early around 5 or 6 and goes home ~ 7 if it's a hardworking fund. If it's a normal relaxed hf, you can sometimes get home around 5:30.
echoing what other said, a lot shit is on you and you better not mess up the numbers in the model. You will think a lot from the other side (for instance, what happens if greece goes out badly, and what will that situation affect the company/global economy as a while) and the first thing your vp/associate will always ask is "what do you think about the company" instead of "can you put in the numbers for me in excel".
Personally, i actually find hf to be a lot more stressful than banking. In banking you have a lot down times where you are waiting for comments but in a hf you are basically working non-stop and most of the time i get to the office before the sunrise and goes home after the sun goes down without stepping outside of the office.
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bump
bump
I think it will be more
I think it will be more accurate to say lifestyle wise, it is probably commensurate with the hours clocked and stress faced in terms of PE vs HF. Not talking about within each sub groups (ex within PE, theres mm or megas etc)
PE vs. HF is akin to a building contractors vs. freelance photographers.
The former is locked into each business contracts, has slack time while waiting for some parts of the deal to be done. (for ex. procurement of supplies such as wires and cables, feasibility studies, ensuring sufficient manpower and for the right role - project manager, worker, transportation etc). The contractor often has to obtain high qualifications to maintain their quality of the people and feels more like a factory unless your the top guy.
So it is more regular and foreseeable and the contractor most likely uses some leverage due to its certainty. While some days there may be mistakes and overruns, there will be mostly regular timings based on project difficulties and time lines. However, because of leverage and project expectations as well as tight budgeting to ensure margins, each mistake, no matter how small or mundane will impact margins greatly. Hence people in this field measure each factor closely, focusing on minute details even down to coloring, style and formatting of the building. Having said that, the workers relish the fact that they are part of a good team, doing long term work and creating value in a way with their job not much threatened by the state of the economy with bonuses that are tied to how well the manager can control the margins and allocate the excesses.
The latter is more like a opportunistic worker, no contracts but get what you snap. More often than not, the requirements for the role is not fixed and purely based on the ability of the photographer. Based on a certain set of fundamental rules of photography, the photographer tries to take something that can be appreciated. There is no fixed demand or supply. So he/she works hard everyday, trying to find ideas worthwhile to take action. The work is often non stop, even on holidays, when markets are good, people are more willing to buy and when markets are lean, vice versa. However, working hard is on all days. Due to the nature of smaller teams and individualized work, people factor and fit is very important. The place although works beyond factory hours, is driven by the direct impact of costs as well as potential for returns and the passion for the job. There is no shifting of responsibilities and individual performance is obvious to everyone.
This field although lucrative is highly unstable. There is also less of a "proven" ability in the individuals as compared to a successful building contractor since building contractor's strategy can more or less be replicated. Furthermore, the workload varies between photographers as some like to explore various locations to get inspirations and others like to sit quietly in the office to wait for fixed assignments. But of cos, only those exploratory and much acclaimed photography pieces will fetch a higher price.
yea.... about that....any
yea.... about that....any
Some generalizations from my
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bump
For HF --> you have a much
I'm recently in PE back
Very helpful thread guys,
At my firm, nearly 100% of
DagwoodDeluxe wrote: At my