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Wondering about this. Is it just the prestige/pay? Seems like your experience would be quite limited at megafunds (type of work similar to banking, just modelling focused). Why don't more people pursue MM -- especially if it is less competitive?

Moderator note: This has turned into one of the most candid conversations about what working in PE is actually like that we've had on the site in a long time.

2

Comments (169)

  • In reply to alexpasch
    TheKing's picture

    alexpasch:
    I left my job at a MM PE fund to start my own small HF. My reasons were manifold but it basically resulted from realizing a few key things:

    1. I don't care what PE fund you work at, unless you are a Partner (which takes about 20 years, btw), you are not calling the shots at all, your superiors are. Your value add and compensation will always be limited by the level of control you have as far guiding the business forward. Everyone below this level just follows through on getting deals done. If you spend your entire day building an excel model, just how much value did you REALLY contribute? That's why the entrepreneurs of companies make so much more, they build companies, not excel models. One is worth more than the other...

    2. The hours are slightly better than banking, but the work is just as boring. Also, the work is often harder. Try doing a waterfall on a company that is on its Series F round and each round has different terms, liquidation preferences, dilution adjustments, etc. And it has to be perfect, btw. I worked tons of hours on stuff like that, but it's not really value add, at the end of the day it won't affect your IRR. Writing memos and portfolio company performance write-ups, same thing; worthless in the big scheme of things.

    3. If you own your own business, there is no cap to your compensation. If you are in PE, there is a cap to how much you can make, even if it's a very good living, there is a cap (huge turnoff for me). I'm not afraid of risk and most of you shouldn't be either; if you think you really are top notch, you shouldn't be killing yourself to go work in PE, you should be taking advantage of the fact that you're young and have virtually zero opportunity cost to breaking out on your own and doing something that could potentially be much more valuable. Worst case scenario, it doesn't work out and at least you have something unique on your resume that makes you an attractive candidate to prospective employers.

    SB. Your second point adds a little more info on the really gritty crap.

  • rebelcross's picture

    There is a large amount of pessimism towards PE here, and it's very understandable as all have made great points. However, I would like to suggest that perhaps the feelings being expressed towards PE by those in the industry are not a reflection on the PE industry, itself, but, instead, a reflection of the fact that....work sucks.

    Let's face it, work absolutely sucks. I don't care what job you have, sitting at a desk and doing the same thing everyday in somebody else's company is boring. Excel is boring. Powerpoint is boring. Paperwork is boring. And the things you do at every other job in the world are boring as well (save for some extreme cases such as what a basketball player does.) So to all of you who suggest that PE is mundane (which it is as is banking), I ask, what is the alternative?

    Sure there are exciting careers in the CIA perhaps or something of that nature, but, realistically, what is an alternative that can provide PE's pay / lifestyle ratio? If one were willing to sacrifice some of that pay, what is the alternative for an exciting career that still pays well and provides a better quality of life? It doesn't exist. There's entrepreneurship, of course, but not everybody can be an entrepreneur (be it due to capital constraints, relationships, ability to sell a product or general lack of good ideas.) So, in the absence of entrepreneurship, what is the alternative to PE? There is none.

    That's why you see what you see from people trying to get into the industry. It's not about having the most exciting life. I think people expect to be bored, expect to dread going into work. That's the sacrifice you make for any job, and PE just happens to be among the better paying of those jobs (for the most part.) Yeah, I see what people are saying here, it doesn't always pay the best, but, in working for somebody else, there's not much else out there that pays better.

  • In reply to rebelcross
    alexpasch's picture

    rebelcross:
    There is a large amount of pessimism towards PE here, and it's very understandable as all have made great points. However, I would like to suggest that perhaps the feelings being expressed towards PE by those in the industry are not a reflection on the PE industry, itself, but, instead, a reflection of the fact that....work sucks.

    Let's face it, work absolutely sucks. I don't care what job you have, sitting at a desk and doing the same thing everyday in somebody else's company is boring. Excel is boring. Powerpoint is boring. Paperwork is boring. And the things you do at every other job in the world are boring as well (save for some extreme cases such as what a basketball player does.) So to all of you who suggest that PE is mundane (which it is as is banking), I ask, what is the alternative?

    Sure there are exciting careers in the CIA perhaps or something of that nature, but, realistically, what is an alternative that can provide PE's pay / lifestyle ratio? If one were willing to sacrifice some of that pay, what is the alternative for an exciting career that still pays well and provides a better quality of life? It doesn't exist. There's entrepreneurship, of course, but not everybody can be an entrepreneur (be it due to capital constraints, relationships, ability to sell a product or general lack of good ideas.) So, in the absence of entrepreneurship, what is the alternative to PE? There is none. That's why you see what you see from people trying to get into the industry. It's not about having the most exciting life. I think people expect to be bored, expect to dread going into work. That's the sacrifice you make for any job, and PE just happens to be among the better paying of those jobs (for the most part.) Yeah, I see what people are saying here, it doesn't always pay the best, but, in working for somebody else, there's not much else out there that pays better.

    Yes, this is true. I mean all of us work(ed) in PE for a reason. Still, doesn't mean you can't set your sights higher.

    Personally, it was a hard lesson for me to learn, but I don't think money buys happiness at all. I didn't start my own fund for the money. If I make $100K a year for the rest of my life (in real terms) while managing my own fund, I'll die a much happier man than if I make millions a year slaving my way up through PE. I actually really enjoy waking up everyday and working in Excel and following the market and choosing how to allocate capital. And to be honest, I think that because I love what I'm doing I think I will actually (hopefully) end up being much more successful than if I had stayed in PE. It's really funny, because the work I'm doing isn't very dissimilar from PE, but being able to work your own hours and knowing that what you're working on is for your sweat equity and not someone else's, makes a world of difference. I guess the key words in your post was "somebody else's company". Even then, there are jobs that provide you a lot of independence/empowerment and are fun that still pay well; sales comes to mind. I know this chick who does medical supplies sales and she makes like 200K a year (and she's no genius). Sure, she travels a lot, but all she does is talk to clients, pitch the products, and book sales. She's not slaving away at an office and the work is not hard. Same thing with being a realtor (another sales job). You can go out and be a realtor and just drive people around town showing them houses. That's fun as hell and while it doesn't pay PE level salary, some realtors make a lot of money, like mid six figures (or even more - I knew a realtor in Nashville who was making about a mil a year). While I know that there are some people who genuinely love PE, I think most are in it for the money.

    I just think you need to get off the mindset that work has to suck. Most of us went to some of the best universities in the world and have some of the brightest minds and possess a career/work skillset most people can only dream of. If there's one group of people for which work should suck the least, it's us. Think about it...

    Consultant to a Fortune 50 Company

  • illiniPride's picture

    This whole thread has been a great read. I wish I had more SBs to throw around.

    Quick question, do any of you personally known someone who has left banking / PE to start their own business?

    Leadership can be defined in two words: "Follow Me"

  • Saccard's picture

    Sales is the lowest of the low. Take it back, I know you didn't mean it pasch.

  • TheKing's picture

    re: Rebelcross

    That's basically what I'm getting at. PE isn't some golden ticket to fun times, it's a lot like banking and if you don't enjoy doing deals, you won't necessarily find what you are looking for in PE. I have found this out the hard way myself. My point wasn't to sound overly pessimistic, but to bring things into reality for prospective PE monkeys. I don't want to see others go into it expecting it to be something lofty when it simply isn't.

    Also, what alexpasch said.

  • In reply to alexpasch
    rebelcross's picture

    Alex, I dig what you're trying to say here, but a few points just to help elaborate on the discussion a bit (I'll take it piece by piece because these posts are getting long):

    alexpasch:
    Yes, this is true. I mean all of us work(ed) in PE for a reason. Still, doesn't mean you can't set your sights higher.

    First of all, I think we can all agree on this without issue. I mean, sure, I'd like to set my sights higher than anybody. I'd like to achieve unbelievable things that would make you gasp in awe, but, like 99.999% of people who have ever lived, I have yet to figure it out yet. Do you know how many times I've wanted to start my own fund or start my own this or start my own that? I'm just not at a point where I can seem to make it work. So, this kind of path is really the best I can do for myself in the meantime.

    alexpasch:

    Personally, it was a hard lesson for me to learn, but I don't think money buys happiness at all. I didn't start my own fund for the money. If I make $100K a year for the rest of my life (in real terms) while managing my own fund, I'll die a much happier man than if I make millions a year slaving my way up through PE. I actually really enjoy waking up everyday and working in Excel and following the market and choosing how to allocate capital. And to be honest, I think that because I love what I'm doing I think I will actually (hopefully) end up being much more successful than if I had stayed in PE. It's really funny, because the work I'm doing isn't very dissimilar from PE, but being able to work your own hours and knowing that what you're working on is for your sweat equity and not someone else's, makes a world of difference. I guess the key words in your post was "somebody else's company". Even then, there are jobs that provide you a lot of independence/empowerment and are fun that still pay well; sales comes to mind. I know this chick who does medical supplies sales and she makes like 200K a year (and she's no genius). Sure, she travels a lot, but all she does is talk to clients, pitch the products, and book sales. She's not slaving away at an office and the work is not hard. Same thing with being a realtor (another sales job). You can go out and be a realtor and just drive people around town showing them houses. That's fun as hell and while it doesn't pay PE level salary, some realtors make a lot of money, like mid six figures (or even more - I knew a realtor in Nashville who was making about a mil a year). While I know that there are some people who genuinely love PE, I think most are in it for the money.

    I have to, unfortunately, disagree a bit on this one. I mean, now we've reached a point where the conversation changes to what really matters in life. Honestly, I can't comment on the idea that money doesn't buy happiness, so I'll take your word for it. However, what I will say is this, I don't know where you are in life, but I would assume you've made enough money to be able to make this kind of a judgement, and it was after making that money that brought you to such a conclusion. While money has not brought you the kind of happiness once dreamed of, you are forgetting that before you reached a point where you had money, you had a burning desire to get that money. If by today, you had still not reached that point, you would still be striving for that money everyday, and it would pain you that you didn't have it. What I'm trying to say is, that the money did serve a purpose. While it did not buy happiness, it ended the burn that came with not having it. It filled that void, if you will. It's like a hot girl you want (we've all been there). Once you get it, it's not that great, it's like anything else, but before you get it, it sucks not to have it. Sure this may seem like a vicious cycle, but I'm not here to dabble in the existential, that's far beyond me. I just know that reaching that point of economic success certainly does have it's value, and it's much less painful to be in a position in life where you can say "money isn't all it's cracked up to be" than to not know what it's like at all.

    So, yeah maybe that sales job you mentioned is great, and it pays alright (200k is nothing to scoff at, especially for somebody born in Appalachia like myself), but it's still not big time money. And we really wouldn't be on this website if that was good enough, we would have pursued very different careers, many of which can get us to that number. Among the bigger money careers, there still is no real alternative to PE. I don't think any of the other paths seem to be that great. Since you suggested sales perhaps institutional sales offers something near what you would consider to be ideal for that higher level of income? I wouldn't know. I just know that until one has reached that upper level, they really can't say that big money isn't enough for happiness, because the psychological problem is dealing with the absence of the money (in the company of so many that have achieved it and have access to better things.)

    I mean if money were really that small of a consideration, then why settle for 100k doing what you do now? I'd rather be unemployed, collect welfare and simply pursue my own hobbies all day long (which are far from work related, and far from revenue generating.) Believe me, I'd be happy as a lark if money did not have any bearing on happiness. I get it, you're striving for that happy medium of some financial comfort and some freedom, but you really can't desire that until you've really fulfilled the big money desire.

    alexpasch:
    I just think you need to get off the mindset that work has to suck. Most of us went to some of the best universities in the world and have some of the brightest minds and possess a career/work skillset most people can only dream of. If there's one group of people for which work should suck the least, it's us. Think about it...

    I don't know Alex, this question is bigger than me. Maybe the opposite is true, maybe society is below us? Maybe the so-called careers of average people just aren't enough for our over active minds, and, hence, we're not suited to enjoy work? Or maybe society is above us, maybe we think too highly of ourselves? Maybe we deserve nothing more than mundane tasks all day...I don't know. I don't think I buy the argument that because we've achieved decent things compared to most others our age that we should somehow have a greater appreciation for work. Sure, it "should" suck the least for us, I wish that it would, but, I don't think that the system was designed by the smartest among us. Believe me, I'd love to find a job that pays very well and doesn't just plain suck. You think I want it to suck? I have tried so hard to enjoy everything that I do, but for some reason, any job seems to suck when you look outside on an icy day and wish you were on the beach in Hawaii. I think you get what I'm trying to say, that no "job" can compare to what is actually enjoyable in real life, unless you were willing to sacrifice money in a big way and passionately chase some ideal (spend your life as a lifeguard in Waikiki.)

  • TheBenevolent's picture

    for all the associates at MM PE firms, approximately what percent of your day do you spend creating or updating models? do you consider this the worst part of the job or something else?

  • In reply to TheBenevolent
    alexpasch's picture

    TheBenevolent:
    for all the associates at MM PE firms, approximately what percent of your day do you spend creating or updating models? do you consider this the worst part of the job or something else?

    The worst part of the job is the LP Questionnaire. May they burn in hell along with their useless questions ;)

    Consultant to a Fortune 50 Company

  • In reply to rebelcross
    alexpasch's picture

    rebelcross:
    Replying to rebelcross's long post

    I still have a burning desire to get money, but not how you would think. My only desire to get money comes from the fact that I love finance and your IRR (i.e. money) is the only thing by which you can judge performance. Think of it like Peyton Manning. Do you think he would play for $1M instead of $20M? I think he would, because he loves the game. I used to dream about Ferraris, models and bottles, etc. but that type of shit doesn't really get me going anymore. I currently don't have the money to buy any of those things; I worked in PE for a couple years and that was it, so it's not like I was in a cushy position; what I did was risky in that sense. I took my savings and opened the fund with family money. It was the type of thing where I saw some mispricings so great that I knew if I didn't try I would regret it for the rest of my life. My parents believe in my idea and have given me a substantial portion of their retirement assets to manage. I don't like to talk about returns, but let's just say that at the current pace the capital gains are outpacing what I'd be earning in PE right now (and I'm working fewer hours). I'm hoping the returns will speak for themselves and money comes pouring into the fund, only time will tell. It was a measured career risk; I don't have kids, I'm not married, etc. I always thought, worst case scenario, I go back to work for someone else. You don't have to be swimming in money to get a sense that money isn't that important. Do you think Bill Gates lives in a perpetual state of bliss? I mean, c'mon.

    I don't mean to denigrate PE or Banking whatsoever. They can be lucrative, fulfilling career paths for many people. I know there are people that genuinely love these jobs. I just would caution that you have to know what you're getting into and not be blinded by the money. This goes for any field. I've met lawyers, doctors, financiers, you name it, who seem so miserable at their jobs. I've also met people in all these fields who seem to love their jobs. I have met people in PE who genuinely love it, and people who don't. Guess which ones do better at it (and stay in it)?

    All I was trying to say is that there are happy mediums to everything, and if you do what you truly love, you will be successful, if not monetarily at least fulfilled/loving your work. I think this concept is underappreciated. My mom would tell me when I was little, I don't care if you want to be a garbageman, just make sure you love it and the money will come. For example, per your lifeguard example; I saw this guy on tv that started his own surfing school in Florida, which he sold, and now he just lives off the capital gains. That guy did surfing for a living (and he was good, but it's not like he was a professional in competitions or shit like that). Do you think he woke up one day in his 20s and said "oh I want to retire at 40 with a couple mil?". Obviously not, he just did what he liked. Don't assume that there is a preset path to "wealth". There isn't. I bet there's quite a few guys who own plumbing companies or restaurant franchisees pulling in sums MDs can only dream of...

    Consultant to a Fortune 50 Company

  • alexpasch's picture

    ^^^One really small lower middle market deal I looked at once (not with the PE firm I worked for but for some wealthy guys) was this printing company that was started by this lawyer. He told me that he woke up one day and just thought to himself "law isn't that fun anymore, I want to do something else; I like printing companies so let me start one of those" (I don't know why someone would love the printing industry but more power to him). Anyway, he built this company, ran it for like 20 years, would earn about a mil a year from it as far as net income and salary (that's when he sold it, I'm assuming it ramped up over time), and ended up selling it for something like 10 or 15M. He started it with some savings and some loans for buying the big printing equipment.

    Consultant to a Fortune 50 Company

  • In reply to alexpasch
    bfin's picture

    alexpasch:
    ^^^One really small lower middle market deal I looked at once (not with the PE firm I worked for but for some wealthy guys) was this printing company that was started by this lawyer. He told me that he woke up one day and just thought to himself "law isn't that fun anymore, I want to do something else; I like printing companies so let me start one of those" (I don't know why someone would love the printing industry but more power to him). Anyway, he built this company, ran it for like 20 years, would earn about a mil a year from it as far as net income and salary (that's when he sold it, I'm assuming it ramped up over time), and ended up selling it for something like 10 or 15M. He started it with some savings and some loans for buying the big printing equipment.

    I know someone who did the exact same thing although he was never a lawyer but he loved the printing industry

    The answer to your question is 1) network 2) get involved 3) beef up your resume 4) repeat -happypantsmcgee

    WSO is not your personal search function.

  • rebelcross's picture

    Alex, I think we're in agreement here. I like your idealism, and I hope you make it big and you remember this conversation and I hope I make it big, etc...I have always believed one has the best chance of really making it work if you have a passion for what you do, that's just common sense. I would just caution you a bit. The cliche' does hold true, for every one example of somebody chasing their dreams and making it big, there are so many examples of...well you know... As per your Peyton Manning example, sure he'd play for a cool million a year, but a mil is pretty damn good, if the choice was more along the lines of play for $50k per year or make $150k as an engineer somewhere, the question becomes much trickier, and I think that's the way you have to look at this industry.

    However, I'm certainly not as risk averse as you may think, in fact I'm quite the opposite. From my limited knowledge of your situation, if I were in your shoes I would have done the same as you. Especially at our age, I am big proponent of trying to do something on your own while you still have the chance. However, for those that don't have the chance or for those with passions that are a pretty long shot to make a lot of money (which is most people), you pretty much have to work for somebody else if you want to make money, and money tends to win the battle of priorities because it makes obtaining those other passions so much easier. Everybody in this industry has the same idea, get a big time day job down the road and make enough to get chase one's own passions. And that's just what the finance industry is...a day job. It feels like work and it's tedious just like most other people's day jobs. It just happens to be among the most well paying of those industries, and among the most exhausting. Within finance, PE is at or near the top, I don't think there's much of a question about that. It is what it is - a means to make money, let's not make it anything bigger than that. I know a lot of people wish their lives were more flexible, but in the absence of such things, I would just caution that there aren't many alternatives to PE for what it can provide in terms of compensation / hours. Sure there are better things to do in life, and some people have made it work doing awesome things, but there aren't many better "day jobs" - if you will.

  • Walkerr's picture

    Talking about pay /lifestyle ratio, would the ratio be worse or better being in a Hedge fund? Just curious.

    I agree with the statement that once you've reached your goal it doesn't satisfy anymore. What if you would change your mindset and goals. Most goals are in the form of "I want to work in PE", once you get there, it's boring. What if you would make the goal more concrete "I want to work in PE, make X amount of money, and do this and that". I think this would change your mindset quite a bit.

  • In reply to Walkerr
    alexpasch's picture

    Walkerr:
    Talking about pay /lifestyle ratio, would the ratio be worse or better being in a Hedge fund? Just curious.

    I agree with the statement that once you've reached your goal it doesn't satisfy anymore. What if you would change your mindset and goals. Most goals are in the form of "I want to work in PE", once you get there, it's boring. What if you would make the goal more concrete "I want to work in PE, make X amount of money, and do this and that". I think this would change your mindset quite a bit.

    Depends on the HF and what you're doing for it. The other thing you said is important; your outcomes will match your goals more often than not. It's not enough to say I want to work in PE. It should be more like I want to work in PE and be Partner one day. When I was in college, my goal was just to go work on the buyside. Once I got there, I realized that a key part of that goal was being my own boss and being free to invest how I saw fit.

    Consultant to a Fortune 50 Company

  • In reply to alexpasch
    samoanboy's picture

    alexpasch:
    TheBenevolent:
    for all the associates at MM PE firms, approximately what percent of your day do you spend creating or updating models? do you consider this the worst part of the job or something else?

    The worst part of the job is the LP Questionnaire. May they burn in hell along with their useless questions ;)


    No - the worst part is being an LP and having to wait 8 months for a fucking quarterly report, which then arrives has two lines on each portfolio company, no info on pipeline and some bullshit two page article from the MD on his ponderings on the global economy....

    I also enjoy reading that a portfolio company is 'experiencing some operational slowdowns, however long term prospects remain excellent.' Next quarter - 'written-off'.

  • In reply to alexpasch
    bankbank's picture

    alexpasch:
    rebelcross:
    There is a large amount of pessimism towards PE here, and it's very understandable as all have made great points. However, I would like to suggest that perhaps the feelings being expressed towards PE by those in the industry are not a reflection on the PE industry, itself, but, instead, a reflection of the fact that....work sucks.

    Let's face it, work absolutely sucks. I don't care what job you have, sitting at a desk and doing the same thing everyday in somebody else's company is boring. Excel is boring. Powerpoint is boring. Paperwork is boring. And the things you do at every other job in the world are boring as well (save for some extreme cases such as what a basketball player does.) So to all of you who suggest that PE is mundane (which it is as is banking), I ask, what is the alternative?

    Sure there are exciting careers in the CIA perhaps or something of that nature, but, realistically, what is an alternative that can provide PE's pay / lifestyle ratio? If one were willing to sacrifice some of that pay, what is the alternative for an exciting career that still pays well and provides a better quality of life? It doesn't exist. There's entrepreneurship, of course, but not everybody can be an entrepreneur (be it due to capital constraints, relationships, ability to sell a product or general lack of good ideas.) So, in the absence of entrepreneurship, what is the alternative to PE? There is none. That's why you see what you see from people trying to get into the industry. It's not about having the most exciting life. I think people expect to be bored, expect to dread going into work. That's the sacrifice you make for any job, and PE just happens to be among the better paying of those jobs (for the most part.) Yeah, I see what people are saying here, it doesn't always pay the best, but, in working for somebody else, there's not much else out there that pays better.

    Yes, this is true. I mean all of us work(ed) in PE for a reason. Still, doesn't mean you can't set your sights higher.

    Personally, it was a hard lesson for me to learn, but I don't think money buys happiness at all. I didn't start my own fund for the money. If I make $100K a year for the rest of my life (in real terms) while managing my own fund, I'll die a much happier man than if I make millions a year slaving my way up through PE. I actually really enjoy waking up everyday and working in Excel and following the market and choosing how to allocate capital. And to be honest, I think that because I love what I'm doing I think I will actually (hopefully) end up being much more successful than if I had stayed in PE. It's really funny, because the work I'm doing isn't very dissimilar from PE, but being able to work your own hours and knowing that what you're working on is for your sweat equity and not someone else's, makes a world of difference. I guess the key words in your post was "somebody else's company". Even then, there are jobs that provide you a lot of independence/empowerment and are fun that still pay well; sales comes to mind. I know this chick who does medical supplies sales and she makes like 200K a year (and she's no genius). Sure, she travels a lot, but all she does is talk to clients, pitch the products, and book sales. She's not slaving away at an office and the work is not hard. Same thing with being a realtor (another sales job). You can go out and be a realtor and just drive people around town showing them houses. That's fun as hell and while it doesn't pay PE level salary, some realtors make a lot of money, like mid six figures (or even more - I knew a realtor in Nashville who was making about a mil a year). While I know that there are some people who genuinely love PE, I think most are in it for the money.

    I just think you need to get off the mindset that work has to suck. Most of us went to some of the best universities in the world and have some of the brightest minds and possess a career/work skillset most people can only dream of. If there's one group of people for which work should suck the least, it's us. Think about it...

    both examples of other job possibilities that you gave (medical supply sales, realty) are sales jobs. sure lots of money can be made in sales, but you have to be able to sell. this is a skill that a lot of people don't have (myself included) and it's something that isn't easy to develop/learn for a lot of people.

    A junior role at a PE firm doesn't require much. Just a reasonable amount of intelligence and the ability/willingness to crank for hours on end when the job requires.

  • In reply to samoanboy
    bankbank's picture

    samoanboy:
    alexpasch:
    TheBenevolent:
    for all the associates at MM PE firms, approximately what percent of your day do you spend creating or updating models? do you consider this the worst part of the job or something else?

    The worst part of the job is the LP Questionnaire. May they burn in hell along with their useless questions ;)


    No - the worst part is being an LP and having to wait 8 months for a fucking quarterly report, which then arrives has two lines on each portfolio company, no info on pipeline and some bullshit two page article from the MD on his ponderings on the global economy....

    I also enjoy reading that a portfolio company is 'experiencing some operational slowdowns, however long term prospects remain excellent.' Next quarter - 'written-off'.

    put your money in a different fund?

  • In reply to alexpasch
    bankbank's picture

    alexpasch:
    I left my job at a MM PE fund to start my own small HF. My reasons were manifold but it basically resulted from realizing a few key things:

    1. I don't care what PE fund you work at, unless you are a Partner (which takes about 20 years, btw), you are not calling the shots at all, your superiors are. Your value add and compensation will always be limited by the level of control you have as far guiding the business forward. Everyone below this level just follows through on getting deals done. If you spend your entire day building an excel model, just how much value did you REALLY contribute? That's why the entrepreneurs of companies make so much more, they build companies, not excel models. One is worth more than the other...

    2. The hours are slightly better than banking, but the work is just as boring. Also, the work is often harder. Try doing a waterfall on a company that is on its Series F round and each round has different terms, liquidation preferences, dilution adjustments, etc. And it has to be perfect, btw. I worked tons of hours on stuff like that, but it's not really value add, at the end of the day it won't affect your IRR. Writing memos and portfolio company performance write-ups, same thing; worthless in the big scheme of things.

    3. If you own your own business, there is no cap to your compensation. If you are in PE, there is a cap to how much you can make, even if it's a very good living, there is a cap (huge turnoff for me). I'm not afraid of risk and most of you shouldn't be either; if you think you really are top notch, you shouldn't be killing yourself to go work in PE, you should be taking advantage of the fact that you're young and have virtually zero opportunity cost to breaking out on your own and doing something that could potentially be much more valuable. Worst case scenario, it doesn't work out and at least you have something unique on your resume that makes you an attractive candidate to prospective employers.

    lol @ number 2. equity cap tables are a pain in my ass. first time since college that i've actually needed to break out a paper and pencil and do algebra (and then i have to graph the f*cking thing and put on nice labels and put it in powerpoint).

  • dayaaam's picture

    Great post and thanks from the WSO community for this. I have been really struggling with the thought of doing PE recently and have even considered leaving finance. This post even adds more fuel to the fire. I am currently in final talks with a MM P/E firm and I am just losing a lot of interest in pursuing PE. I hate banking, I hate long hours, I hate sifting through data rooms, formatting, researching impossible to find stats, modeling is going to suck when you do it 24/7. To an earlier point, maybe I just hate work haha. Anyway, I know the pay in PE is is pretty nice, but I I'd be ok making 70K - 100K and loving what I do. On the other side of the spectrum, when I have a family in the future, I do want to be able to provide a comfortable life and not have to worry about money.

    And lets talk about hours. I mean I've now realized how much hours matter for me. I have been working my ass off in banking, like worked to the core. A lot of you went through the same shit I'm going through but damnit it sucks and I don't want any part of it. Maybe I'm burnt from the countless all nighters and 4AMs for 8AM meetings. I just can't picture myself sitting in a desk for the next two-three years, working like a dog doing the same things I did in banking. Especially now that I'm near the end of my analyst career and the hours have improved somewhat, I don't want to back to that dark, dark place...

    For the rest of us monkeys at a crossroads, It'd be great if some of you in post-banking jobs could:

    1. List your typical weekly hours
    2. What kind of firm you are at, MM PE, MF, HF, Bus. Dev., Surfer?
    3. Are you happy in your role and do you consider your career or life more important?
    4. Do you plan on going to B School (let's face it, its a huge freaking investment)
    5. Are you going B School because a) you don't know what else to do and its whatever everyone else is doing, b) you are tired and you want a break, c) you hate your current track and want a career reset, 4) you are interesting in making connections and learning more - be honest as I've heard all of these before.

    Thanks for all the discussion thus far.

  • LBO2's picture

    1. Typically 8:30 - 7:00pm (varies, obviously), very few weekends
    2. Lower MM PE ( MBA is a whole discussion in itself. I have been thinking very seriously about why/if I want to do b-school, particularly with the recent backlash against 2+2 candidates. I have a lot of highly qualified friends who did not get interviews at H/S/W and others who will not be applying to business school at all (don't see the value, don't want to deal with the rat race, don't want to re-learn what a balance sheet is with a bunch of kids who did TFA etc.)

  • In reply to bankbank
    samoanboy's picture

    bankbank:
    samoanboy:
    alexpasch:
    TheBenevolent:
    for all the associates at MM PE firms, approximately what percent of your day do you spend creating or updating models? do you consider this the worst part of the job or something else?

    The worst part of the job is the LP Questionnaire. May they burn in hell along with their useless questions ;)


    No - the worst part is being an LP and having to wait 8 months for a fucking quarterly report, which then arrives has two lines on each portfolio company, no info on pipeline and some bullshit two page article from the MD on his ponderings on the global economy....

    I also enjoy reading that a portfolio company is 'experiencing some operational slowdowns, however long term prospects remain excellent.' Next quarter - 'written-off'.

    put your money in a different fund?


    Private Equity is illiquid, once your money is in, you dont get it back for 10 years (unless its listed when it'll have a 50% discount and only trade twice a year!!)

  • In reply to rebelcross
    JimmyDormandy's picture

    rebelcross:
    LBO2:
    don't want to re-learn what a balance sheet is with a bunch of kids who did TFA

    I actually have nightmares about this very scenario.

    ^ This

    "Jesus, he's like a gremlin; comes with instructions and shit"

  • In reply to samoanboy
    bankbank's picture

    samoanboy:
    bankbank:
    samoanboy:
    alexpasch:
    TheBenevolent:
    for all the associates at MM PE firms, approximately what percent of your day do you spend creating or updating models? do you consider this the worst part of the job or something else?

    The worst part of the job is the LP Questionnaire. May they burn in hell along with their useless questions ;)


    No - the worst part is being an LP and having to wait 8 months for a fucking quarterly report, which then arrives has two lines on each portfolio company, no info on pipeline and some bullshit two page article from the MD on his ponderings on the global economy....

    I also enjoy reading that a portfolio company is 'experiencing some operational slowdowns, however long term prospects remain excellent.' Next quarter - 'written-off'.

    put your money in a different fund?


    Private Equity is illiquid, once your money is in, you dont get it back for 10 years (unless its listed when it'll have a 50% discount and only trade twice a year!!)

    yeah, of course, i was implying that you should work with funds that are more investor friendly in the first place.

  • HFFBALLfan123's picture

    1.) 8:30-7ish, sometimes later if need be
    2.) Around 1 AUM at my firm but work on a smaller

  • barkatthemoon's picture

    Great thread, guys!

    It's good to see hours at MM funds aren't that bad at all. My friends at megafunds are working insane hours.

    I also agree that all work at junior level SUCKS, whether it's PE, banking, consulting, equity research, whatever. But I still think that finance/investing gives you the best options, if you're willing to put up with the junior roles for a couple of years. I still think a senior role at a PE fund, or especially at a hedge fund is an unbelievable gig, when you consider the risk/reward. Also it takes you years to rise up in general management, but you can get a solid senior level gig in PE/HF in 5-6 years.

    Keep in mind, I'm excluding entrepreneurship option from this. That's a completely different animal.

  • In reply to barkatthemoon
    bfin's picture

    barkatthemoon:
    Great thread, guys!

    It's good to see hours at MM funds aren't that bad at all. My friends at megafunds are working insane hours.

    I also agree that all work at junior level SUCKS, whether it's PE, banking, consulting, equity research, whatever. But I still think that finance/investing gives you the best options, if you're willing to put up with the junior roles for a couple of years. I still think a senior role at a PE fund, or especially at a hedge fund is an unbelievable gig, when you consider the risk/reward. Also it takes you years to rise up in general management, but you can get a solid senior level gig in PE/HF in 5-6 years.

    Keep in mind, I'm excluding entrepreneurship option from this. That's a completely different animal.

    5-6 years... if 1. you LOVE the job. 2. Don't burn out 3. Suck an insane amount of D 4. a little bit of luck

    The answer to your question is 1) network 2) get involved 3) beef up your resume 4) repeat -happypantsmcgee

    WSO is not your personal search function.

  • Kenny_Powers_CFA's picture

    Has anyone here ever transitioned over to a portfolio company, either temporarily or permanently?

    There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.

  • HFFBALLfan123's picture

    Although, at PEI training (awesome 3 day course but expensive as fuck), the ex partner of a MF said he viewed this as a big no no. Every organization will have their own perspective on this.

  • Kenny_Powers_CFA's picture

    I'm sure it depends on the context. For example, I know people who have been asked to step over to portfolio companies while they're owned by the sponsor but not someone who's left to a former portfolio company after exiting the investment.

    There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.

  • In reply to TheKing
    labanker's picture

    TheKing:
    Otter.:
    This discussion is really great guys - thanks to everyone sharing their perspective. Definitely interested in hearing more about peoples' perspectives on MM vs. MF etc. I had a specific question, for anyone really to answer, but it was brought up by Kenny Powers:

    Kenny_Powers_CFA:

    2) Firms that want to make operational changes but don't do it themselves. These sponsors tend to hire management/operational consultants to work on the changes they want made.

    What's the work of these consultants like from a PE perspective? I hear consultants gripe a lot that they have to analyze very mundane operational problems for clients that don't want to hear that they're doing things wrong, and then the clients don't actually implement any of the consultant's suggestions. Is this very different if you're working with a sponsor's portfolio company?

    I guess what I'm asking is - would working on a portfolio company for a sponsor that sees value in operational changes in a company be a lot more interesting and meaningful work experience because the company actually needs to change, rather than just doing an internal study for a F500 company when that company doesn't really care what the consultant has to say? Also, do the consultants work closely with the PE guys, or is it more like - here's the problem, come back to us when you've fixed it?

    In my experience, the consultants work more directly with the portfolio companies and produce reports that are then reviewed with the company and the PE firm. I'm not really sure what you are looking for here, to be honest. It isn't like that's some awesome and exciting work.

    Again, people need to put this "operational improvements" shit to bed - it isn't some super exciting shit, it's a consultant's report that says "you need X salespeople with a focus on Y to attack market Z because of such and such reasons." Not gonna get your dick hard (no homo.) Let me be clear. If you want experience running a business, then join a business, not a financial services / consulting company. Or start a business. Obviously, the latter is tough, but people need to understand that there isn't some glamorous shit going on when you work in PE. It doesn't matter if it's MM or Mega Fund, you're going to be doing relatively the same shit just on different scales and the due diligence reports you get from consultants and shit will just be done by different firms that specialize in different deal sizes. And maybe your hours would be better at one place vs. another. As in, KKR will work you to death whereas some no-name MM fund will likely be a shit-ton better (though you can still expect to work a lot and stress about it.)

    This.

    I envisioned grand turnarounds predicated on operational improvements when I first started PE as well. What you learn is that most of the managers / owners have been in their given business most / all of their lives, their parents were in the business, and maybe their grandparents were in it as well. They live and breathe the business everyday and they also usually have some technical background or specific expertise that you will not be able to replicate or enhance (yes you may be able to help them get their DSO down but I'm referring to more core operational improvements).

    Your value add to the situation is structuring transactions to (i) extract the most value out of the company, (ii) minimize tax consequences, and (iii) minimize legal exposure to your firm. Guys that know how to do these things inside and out are the most impressive in my opinion, as they can generate millions of dollars in additional shareholder value or bridge seemingly impossible valuation gaps to get deals done. I'm less and less impressed with "operational partners" or parters who claim to be "industry experts" (there are some good ones of course but I'm speaking generally) as their "skills" pale in comparison to guys that have been in the industry since day one.

  • jimbrowngoU's picture

    Guys, when running through your typical hours, size of fund, etc., would you mind including location? HFF and LBO2, could you toss in your location?

  • ibintx's picture

    Good stuff guys. Interesting how the beginning of the thread makes the hours seems worse than people think, but then the 2 people to post specific numbers are right in the 50-60 range that everyone dreams of after banking.

    Also, a new question: How does PE compare to VC?
    (in terms of lifestyle/hours, the work itself, general satisfaction etc. oh and pay too) They seem somewhat similar, but I've heard VC is a little better lifestyle. I know VC is a loose term these days but I'm interested in both growth equity and principal/traditional VC.

  • jimbrowngoU's picture

    LBO2 — do you know many other PE associates in the Boston area? What are their hours/experiences like, and what size funds do they work at?

  • junkbondswap's picture

    As a disclaimer, I haven't read the second page of this thread (but will later) but Alex mentioned that PE professionals (anything below the partner level) are essentially capped, which hasn't been my experience and is completely false. What happens when a strategic or financial sponsor swoops in and pays an exorbitant amount for one of your portcos making your carried interest (which was worth zero the day before because you were probably over-levered and under-performing during the recession) worth a ridiculous amount of money. PE is exciting because you are comped well and always playing for the ups, which are basically unlimited.

  • LBO2's picture

    Boston is no different than other cities in that hours vary greatly by fund. In general, most associates I know that work at $1B+ funds do put in more hours. Some work 60-70 per week on average, others work banking hours or worse. In my experience, hours are correlated more with bureaucracy and hierarchical structure of a firm than fund size alone (though the two often go hand-in-hand). For Boston specifically, CompBanker is another good data point - he has discussed his experience a number of times in the past.

    I will say, for the hours they put in, my friends at MFs get absurdly high comp; however, I wouldn't trade with them for a day to go back to that schedule.

  • jimbrowngoU's picture

    I was more curious as to smaller sized funds... I have spoken with CB about his experience before, and it seems pretty much in line with yours. I'm guessing 50-60 is pretty standard for lower MM firms investing out of

  • ametista's picture

    Note to Patrick:
    Can we make this thread into a sticky?

  • In reply to TheBenevolent
    labanker's picture

    TheBenevolent:
    for all the associates at MM PE firms, approximately what percent of your day do you spend creating or updating models? do you consider this the worst part of the job or something else?

    I actually think modeling is one of the more enjoyable aspects of the job. I like sitting down and working through a complex transaction structure, waterfall, or just putting together a basic model and trying to make it more efficient / clean.

    Least favorite activity is probably industry research or listening to people talk about "where x industry is going." The former does not interest me as I do not care what industry a company is in and the latter is a waste of time given the staggeringly low success rate of these predictions.

  • junkbondswap's picture

    1) NYC,
    2) MM PE focused on $1B-$3B EV size companies
    3) 50-60 hours per week in the office (rarely in the office on a weekend, maybe once every 3 months depending on where we are in a deal cycle) but always on call to answer emails and calls
    4) Love my job and enjoy going to work everyday. Good group of intelligent, entrepreneurial type competitive individuals who want to make as much money as possible but value things like work/life balance, family/friends, etc.
    5) Undecided on b-school, I think its overrated given my existing network, skill set, deal experience. would love a 2 year vacation but would probably go PT if at all.

    Alex, I would think that managing money on your own would eventually get to be boring. Dont you miss the camaraderie of the office, working towards a common goal with your peers. I think PE is getting a bad rap on this thread. The deal cycle can be incredibly exciting. Sure parts of the cycle are mundane but the excitement of submitting bids, closing dinners, trips and learning granular details about companies make it worth it to me.

    There is no job in the world that would have provided me with the same level of access to these types of business leaders and these types of experiences at such a young age.

    Also, Alex, have you ever bought a house, co-op, condo, etc.? Being a real estate agent is a "fun" job? Really? I would hate to be in a sales position kissing clients asses all day.

    One last point regarding the important of industry experts and operational improvement guys...these are the guys who create real value for private equity firms. You are significantly underestimating the value of a guy who can come into a company and institute best practices by reducing headcount, combining roles, renegotiating contracts, changing procedures, etc. The only reason that many companies survived the recession is because people were willing to cut costs to protect earnings.

  • In reply to junkbondswap
    bfin's picture

    junkbondswap:
    1) NYC,
    2) MM PE focused on $1B-$3B EV size companies
    3) 50-60 hours per week in the office (rarely in the office on a weekend, maybe once every 3 months depending on where we are in a deal cycle) but always on call to answer emails and calls
    4) Love my job and enjoy going to work everyday. Good group of intelligent, entrepreneurial type competitive individuals who want to make as much money as possible but value things like work/life balance, family/friends, etc.
    5) Undecided on b-school, I think its overrated given my existing network, skill set, deal experience. would love a 2 year vacation but would probably go PT if at all.

    Alex, I would think that managing money on your own would eventually get to be boring. Dont you miss the camaraderie of the office, working towards a common goal with your peers. I think PE is getting a bad rap on this thread. The deal cycle can be incredibly exciting. Sure parts of the cycle are mundane but the excitement of submitting bids, closing dinners, trips and learning granular details about companies make it worth it to me.

    There is no job in the world that would have provided me with the same level of access to these types of business leaders and these types of experiences at such a young age.

    Also, Alex, have you ever bought a house, co-op, condo, etc.? Being a real estate agent is a "fun" job? Really? I would hate to be in a sales position kissing clients asses all day.

    One last point regarding the important of industry experts and operational improvement guys...these are the guys who create real value for private equity firms. You are significantly underestimating the value of a guy who can come into a company and institute best practices by reducing headcount, combining roles, renegotiating contracts, changing procedures, etc. The only reason that many companies survived the recession is because people were willing to cut costs to protect earnings.

    You sir will be an MD or Partner one day. Good luck to you.

    The answer to your question is 1) network 2) get involved 3) beef up your resume 4) repeat -happypantsmcgee

    WSO is not your personal search function.

  • jimbrowngoU's picture

    Appreciate the insight, jbs. Totally agree on the operational improvement side of things. While I don't believe every firm does it (nor does every firm have the ability to do so properly), the firms that I do work with that stay within their "comfort zones" and focus on operational improvements (primarily implementing best practices, which include headcount reductions, focusing operating cost structure, etc.) are the firms that have the most success.

  • In reply to junkbondswap
    CompBanker's picture

    junkbondswap:
    Alex, I would think that managing money on your own would eventually get to be boring. Dont you miss the camaraderie of the office, working towards a common goal with your peers. I think PE is getting a bad rap on this thread. The deal cycle can be incredibly exciting. Sure parts of the cycle are mundane but the excitement of submitting bids, closing dinners, trips and learning granular details about companies make it worth it to me.

    There is no job in the world that would have provided me with the same level of access to these types of business leaders and these types of experiences at such a young age.

    Also, Alex, have you ever bought a house, co-op, condo, etc.? Being a real estate agent is a "fun" job? Really? I would hate to be in a sales position kissing clients asses all day.

    One last point regarding the important of industry experts and operational improvement guys...these are the guys who create real value for private equity firms. You are significantly underestimating the value of a guy who can come into a company and institute best practices by reducing headcount, combining roles, renegotiating contracts, changing procedures, etc. The only reason that many companies survived the recession is because people were willing to cut costs to protect earnings.


    Didn't put in the time to read every post, but I think Junkbondswap's comments pretty closely align with my own feelings. There are a million different careers out in the world and PE ranks pretty darn high on that list. The difference between PE and IB is that the PE experience varies dramatically between shops. In banking, the analyst's responsibilities are primarily modeling, ppt, writing CIMs, or doing research. In PE, there are some shops where you'll be sourcing investments all day long (cold calling). Others have their associates continue to crank out models til they are blue in the face. Others have associates do due diligence all day. Hours can range from 50 hrs a week to 100 hrs a week. Pay can also vary from low $100k's to $350k+. As a result, everyone is going to have a different impression as to what a job in PE truly entails, and there really is no good answer.

    It sounds like some posters in this thread have found PE shops that are a good fit for them, while others may be doing a less exciting role. Personally, I work at a shop where associates do diligence, work ~50 hours a week, but don't get paid nearly what the megafund guys do. For many on this board, that sounds like a nightmare -- its megafund or bust for them. So, in conclusion, it is really hard for someone to make the statement: "PE isn't all it is cracked up to be." Like anything else in life, for some people it is, for others it isn't.

    CompBanker

  • TheKing's picture

    re: Junkbondswap and CompBanker

    I think you both have the right ideas here. My main point in my posts within this thread (and others) is that PE needs to be demystified and people need to realize that it is a deal business. If you don't get excited by working on deals and doing due diligence, than it isn't a job for you. The idea of "operational improvements" and other such junk from the perspective of being an Associate is a bunch of junk and should really not weigh on one's decision to do PE or not. Again, to summarize, if you enjoy working on deals, enjoy due diligence, and truly do not like the marketing aspect of banking (which has it's high points, believe it or not), then PE could be for you. It's just important that everyone has a realistic view of what they will be doing in PE and not go in with lofty dreams of being some sort of uber-decision making PE God.

  • In reply to alexpasch
    APAE's picture

    alexpasch:
    I left my job at a MM PE fund to start my own small HF. My reasons were manifold but it basically resulted from realizing a few key things:

    1. I don't care what PE fund you work at, unless you are a Partner (which takes about 20 years, btw), you are not calling the shots at all, your superiors are. Your value add and compensation will always be limited by the level of control you have as far guiding the business forward. Everyone below this level just follows through on getting deals done. If you spend your entire day building an excel model, just how much value did you REALLY contribute? That's why the entrepreneurs of companies make so much more, they build companies, not excel models. One is worth more than the other...

    2. The hours are slightly better than banking, but the work is just as boring. Also, the work is often harder. Try doing a waterfall on a company that is on its Series F round and each round has different terms, liquidation preferences, dilution adjustments, etc. And it has to be perfect, btw. I worked tons of hours on stuff like that, but it's not really value add, at the end of the day it won't affect your IRR. Writing memos and portfolio company performance write-ups, same thing; worthless in the big scheme of things.

    3. If you own your own business, there is no cap to your compensation. If you are in PE, there is a cap to how much you can make, even if it's a very good living, there is a cap (huge turnoff for me). I'm not afraid of risk and most of you shouldn't be either; if you think you really are top notch, you shouldn't be killing yourself to go work in PE, you should be taking advantage of the fact that you're young and have virtually zero opportunity cost to breaking out on your own and doing something that could potentially be much more valuable. Worst case scenario, it doesn't work out and at least you have something unique on your resume that makes you an attractive candidate to prospective employers.

    As a kid looking in, this mirrors almost exactly what I feel (albeit with no experience of my own). I look at banking as a stepping-stone to buy-side or an entrepreneurial endeavor of my own, and simply from the amount of information I've been forced/able to absorb over the recruiting process, PE appeals to me less than HF for these reasons he listed. Granted, I haven't even started my SA gig, but this is how I feel now.

    Most people do things to add days to their life. I do things to add life to my days.

    Browse my blog as a WSO contributing author

  • In reply to junkbondswap
    alexpasch's picture

    junkbondswap:
    As a disclaimer, I haven't read the second page of this thread (but will later) but Alex mentioned that PE professionals (anything below the partner level) are essentially capped, which hasn't been my experience and is completely false. What happens when a strategic or financial sponsor swoops in and pays an exorbitant amount for one of your portcos making your carried interest (which was worth zero the day before because you were probably over-levered and under-performing during the recession) worth a ridiculous amount of money. PE is exciting because you are comped well and always playing for the ups, which are basically unlimited.

    You usually don't get carry at the junior levels, and when you start getting carry it's often a very small percentage...

    Consultant to a Fortune 50 Company

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