At what tier does PE in EU/London cease to be worth the IB pportunity cost?

Is the 1% or 10% chance of distant future carry wealth from a career in LMM PE, & tiers of PE lower than that, ever substantial enough to ever stand a chance of having a comparable 30-year comp NPV to being a career banker?

4 Comments
 

Based on the most helpful WSO content, here's what you need to know:

  • PE vs. IB Opportunity Cost in EU/London: The opportunity cost of leaving IB for PE in Europe/London becomes significant when considering the long-term compensation and career stability. In Europe, PE recruiting is less structured compared to the US, and funds generally hire people with 1-5 years of experience. However, it becomes harder to move after 3 years in banking as you become perceived as a "banker."

  • Long-term Compensation Comparison: For those aiming to make a career out of finance, PE offers more stimulating work and the potential to be part of building a business. However, much of the compensation in PE is tied up for a long time, and the first 10-year compensation between a good PE firm and a good bank often favors banking by a wide margin.

  • Lower Middle Market (LMM) PE: The chances of achieving substantial carry wealth in LMM PE or lower tiers are relatively slim. The 1% or 10% chance of distant future carry wealth in these tiers is generally not substantial enough to compare favorably with the 30-year net present value (NPV) of a career in banking. Banking offers more immediate and predictable compensation, with less competition and a more structured career path.

In summary, while PE can be more rewarding in terms of job satisfaction and long-term potential, the financial opportunity cost of leaving IB for lower-tier PE in Europe/London is significant, and the chances of achieving comparable long-term wealth are relatively low.

Sources: Q&A: London BB IBD to top 3 PE, Is the IB vs. PE Debate Shifting Back Towards IB?, https://www.wallstreetoasis.com/forum/private-equity/internationals-in-ibpe-where-are-you-now?customgpt=1, The Allure of Investment Banking, PE vs HF in London, pros & cons

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