Does really buy-side make more than sell-side

Based on the most helpful WSO content, the comparison between buy-side (e.g., private credit) and sell-side (e.g., investment banking) compensation is nuanced and depends on several factors, including the firm, role, and individual performance.

1. Compensation Comparison:

   • At the associate level, private equity (and by extension, private credit) often offers higher bonuses compared to investment banking. For example, bonuses in private equity can reach 150%+ of the base salary, whereas in investment banking, bonuses are typically lower, with 100%+ being rare at the associate level in most banks.
   • However, base salaries in private credit or private equity may sometimes be slightly lower than in investment banking, especially when transitioning directly from an associate role in banking to a similar role in private credit.

2. Long-Term Upside:

   • A significant appeal of the buy-side is the potential upside from investments in the fund and carry agreements. However, this comes with risks, as the investments might underperform, and your economics are tied up for the duration of the investment.
   • On the sell-side, compensation tends to be more cash-oriented and predictable year-to-year, with banks increasingly tying compensation to longer-term equity incentives.

3. Real Case Examples:

   • In some cases, associates in private credit or private equity may earn less than their counterparts in investment banking, especially when considering base salary alone. For instance, a mid-senior associate in investment banking might earn a higher base salary than a newly transitioned associate in private credit.
   • Conversely, the total compensation (base + bonus) in private credit can surpass that of investment banking, particularly for high-performing associates or those at top-tier funds.

4. Key Considerations:

   • The decision to switch from banking to private credit should not solely hinge on compensation. Factors like work-life balance, career trajectory, and personal interest in the investor-side role should also weigh heavily in the decision.
   • It's also worth noting that private credit roles may not always offer the same camaraderie or structured career progression as investment banking.

In summary, while private credit associates can potentially make more than their banking counterparts, it is not a guaranteed outcome and depends on the specific circumstances of the role and firm.

Sources: From Private Equity Associate to VP in Private Equity, Banking vs. The Buy-side: 10.5 considerations, Private Equity Pay vs. Investment Banking Salary, Private Equity vs. Private Credit, Private Wealth Management/Private Banking Guide for Associates