I have a strange question about investment banking
So... I believe it is common knowledge that most investment bankers exit the industry to enter the buy-side (hedge funds, private equity, venture capital) after a few years. And I thought that you needed some sort of serious qualifications or experience before you enter the buy-side. However, I've seen that it is relatively easy to secure an internship in buy-side firms as an undergraduate, and also have peers starting their careers in venture capital/private equity immediately upon graduation.
What's actually going on here? If one can start directly on the buy-side (where the big $ is, apparently), why bother going through the convoluted path of having to pass through the sell-side (investment banking, asset management) before exiting to the buy-side? Why not just start from VCs/PEs directly? I don't get it at all.
Buyside internships don't convert into full-time offers
There you have it! Seems like we’ve been missing it all along. Should have looked into PE directly. Like an idiot plowing through IB hours when I could have been a venture capitalist out of undergrad…fml
I've seen more people starting off in buyside analyst programs over the years. If you're fortunate enough to land one a coveted role at a good group, try to stay on and get promoted to associate.
It’s hard as hell to land a buy side internship and then hard to convert it to a full time position. Unless you’re at a very top school (HYP and W), it’s not happening. There might be some sketchy startup funds that will offer internships or jobs but you’re better off starting off at a reputable sell side firm.
Also FYI asset management is technically buy side.
Lmao. You’re very deluded on this. We’d need to have a phone call.
Go apply to be a blackstone analyst and let me know if you get in
I'd also add (and I'd agree with the general comments above) that at least in my experience the larger blue chip funds are notorious for rolling over internships into a continuous loop, and then not converting an offer. So individuals end up with having, say, 1.5 year "internships" and then no job. That said, 1.5 years working at a Blackstone or Ardian or Cinven (etc.) is still great and relevant experience, but isn't a full-time role.
Do buy-side internships like blackstone or ardian help with buyside recruiting in any way? Would headhunters or interviews look at it more favorabaly in giving you a first round
To be fair, they do help, including, say, offering strong references (although of course it depends on the firm, culture, people, as with everything). I'd say that for sure having an internship at a top tier buyside fund is helpful in recruitment, but by that stage, the question becomes why not just go into Private Equity via the "traditional route". I'd add (and my background is a VP in IBD), if I can recruit a junior into my team with 12 months at a top tier bank or 12 months at a top tier fund, I'd choose the former, just as the experience will be more directly relevant to what the individual will be doing in my team.
At top schools you most definitely can go straight to the buyside and many do. However, there are less spots in top investing roles for recent grads than there are in advisory roles. This is because most buyside firms want you to have two years of IB because of the learning you do, then they don't need to train you as much as you are already up to speed. Have spoken with some buyside associates+ who have remarked they dislike working with analysts straight from undergrad as their technical skills are below par compared to those who did two years of IB.
I think you commit a fallacy when you say it is "relatively easy to secure an internship in buy-side firms as an undergraduate." Maybe this is true for lesser-known firms, but the top exits for IB analysts (KKR, BX, etc) are not hiring that many undergraduates as interns.
Other people are explaining it well, much much harder than it looks to land a top PE or VC position and they recruit 90-100% of their class from banking pools instead of undergrad. Most PE/VC analyst programs are at tiny firms. MF PEs are just starting to have analyst classes but they are small, elite classes, not really accessible to the thousands of kids applying to IB every year.
The other point here is branding. If you spend 2 years at a big-name bank doing IB, people will know you are legit, even if you're 15 years down the line. Starting at a small PE firm doesn't have the same cache, unlikely people outside of the industry would know it. If you ever want to start a business or do something outside of finance, it helps to have a massive, well-known brand on your resume.
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1. Giving PE offers directly to undergrads is something new in the industry. Before that, the majority needed to pass through IB and then get into PE. Can't comment on HF or VC.
2. If you don't make it into PE straight from your undergrad, then you can try it again after 2 years in IB. Thus, discussions about jumping from IB to the buy-side have the same value as discussions about how to make it in IB (albeit with more intelligence), but that doesn't mean that it's the mandatory path anymore.
Banking Analyst is better experience than PE Analyst. Banking Analysts run the model and all of the relevant analysis for the deal. At a reputable PE, the major analysis will all be done by the PE Associate, virtually all of whom were IBD Analysts before (some ex-consultants). What's left over for the PE Analysts to do is very limited as compared to in IBD. Is the lifestyle better in PE for an Analyst? Yes. Is that what will really benefit you over the long run? Not necessarily.
Also, doing an IBD Analyst stint first provides you the opportunity to recruit with a much wider net of PE firms than during undergrad, since most PE firms don't even have analyst programs.
IBD Analysts will also develop a much wider network naturally because their Banking Analyst class and friend group will go all over the place over time, whereas a PE firm will be more tight-knit and most people will try to stay at the firm.
Finally, you also can learn a lot and make mistakes as an IBD Analyst for a couple of years before going to PE and getting a fresh start. Especially if you plan on continuing on at that PE to make VP/Principal/etc., it can be useful to just get all the learning out of the way in IBD and treat that like basic training.
Reposting from another thread where I laid out the PE/ IB debate. It should answer your questions although it was more targeted to what they were asking. I’m short, there are very few PE roles where you gain execution experience and IB is pure execution. IB analyst roles often lead to you being a better investor in the long run. I’ve done both and knowing what I know now, I am incredibly glad I did IB. I think starting in PE is a mistake actually anywhere you go if you have a long term view of your career.
The PE versus IB debate is an interesting one. The truth is college kids don't know what they want to do and it's really hard to say what is actually better for your future. I think the actual answer is it doesn't really matter contrary to what prospects and others will say, with both having pretty solid pros and cons. Also, both likely can lead to the same path down the line. Most the Megafund PE analysts seem to jump to another Megafund PE firm for associate anyway, or go to a HF. WSO will take this as a prestige debate, but I'm going to tell you some differences in what I learned in IB and PE (although growth) and why despite hating IB I'm actually very glad I did it. My personal take really is it's actually less meaningful than people think, with potentially IB teaching you a skill set that is beneficial the rest of your life and undergrad megafund PE potentially being a quite impressive position that gets you to where you want to be sooner. I don't know if there's an obvious choice and both are great places to be. I think it's more a coin flip than people would think based on the benefits of the skill set you get in IBand the ability of both to get to the same end destination.
Background on me, I did IB at a MM and thought when I recruited I was pretty certain I would do PE or broader investing long term. Some of the advice I received from mentors was IB and PE can often times be similar, but there are subtle differences that can teach different skill sets. I also was told to do mm IBspecifically (again really contrary to this website, so hang on!). Doing IB for a little bit could potentially be helpful for making you a better investor in the long run or just an overall more knowledgeable business professional. I sorta knew I would leave IBwhen I did it, but I was surprised by how much I hated my time in IB. There was less critical thinking, more abuse, less interesting work, worse people, and tons of people who just completely lost sight of the bigger picture. That said, There are a few things I learned that were really important:
Now at a megafund pe job, you likely would learn most these. However, a huge part of investing is the 80/20 rule and further most the time in investing your role is looking at potential investments and saying, "yeah, this one isn't for us". So it's very possible to go to a private equity firm and spend a great deal of time not seeing the process of a company getting bought or sold. People refer to this as deal execution. IB your job is literally deal execution, so you will get more reps seeing processes than you would at a private equity firm, the con is you don't evaluate opportunities in IB and are always trying to frame a company as great when many aren't. Further, the reason I say I am glad I did IB is I know how to raise capital and market a business-you wouldn't learn this at a private equity firm outside of hearing from an investment bank that is helping you sell a portfolio company or participating in a process, which isn't the same thing. I have assisted numerous early stage and growth companies in creating materials and preparing them for series A, B, and C raises and it's a skillset that I learned from banking. Had I done PE, I wouldn't have this skill set and really wouldn't know how to prep materials or provide advice on a process like an ex-banker would. Ultimately understanding how to fundraise and market a company as well as deception used by banks to make companies look better than they are is a skill set that is invaluable for 1) running/working for a growing company (entrepreneurship, startup work etc.) 2) assisting growing companies (VC, growth equity) 3) to some degree understanding the deception used can be helpful for evaluating opportunities (large-cap PE, other types of private investing).
Now PE will help you be a better critical thinker when IB actively discourages critical thinking. That said, in IB you can look at each deal you are on and think critically about whether you think a company is worth what a buyer is paying for it and what you would pay.
Finally, something that also is very relevant: your first year on the job, you are very useless anywhere and likely won't really learn about an industry. Notice how some of the biggest skills I listed were outlook/ excel/ ppt proficiency? The truth is no matter how smart a person is, out of undergrad they just need reps writing emails and doing tasks to become effective in a working environment. This takes time, and really makes the first 6 months of a job in any IB firm or PE firm virtually the same.
You know Megafund PE is arguably the most prestigious position an undergrad can get, which provides superb optionality. There's some pros to IB and switching as I listed. IB really does suck though and I think would be a more miserable experience than a megafund PE role. Ultimately both are great options and you can't choose wrong. I think that's the weirdest part about being an adult-for the first time in your life you need to make a decision that will close doors. Up until the end of college, most your decisions just open doors, but post, you start needing to make choices that will close opportunities. My advice, pro con the paths of each, call people who have had to make that decision before and ask them how they handled it, and trust your gut. The one thing I would caution you on-getting advice from people who are ignorant. This thread will likely have 10+ college undergrads saying "megafund PE for sure" without any idea of the pros and cons. Weight knowledgeable peoples opinions heavier than random ignorant peoples views. Good luck!
Edit: the one other thing I would say is to be careful about maximizing optionality above all else. My favorite type of person is the IB-> buyout PE -> HBS person who has no idea what they want to do with their life despite being almost 30 because they have never listened to their heart and pursued "optionality" above all else. Have a spine and take a chance at some point otherwise you will just be a wondering corporate shell continuously using other peoples definition of success to define your own, which from what I see is the best way to be unhappy and unfulfilled.
As someone who went directly to a hedge fund and has friends that went to PE shops out of undergrad, I have a slightly differing point of view. On average, most people would probably be more successful if they started in a banking program because you have more room to make mistakes and develop while there is a certain level of competency expected on the buyside. This is why you see some hedge funds not recruiting of undegrad each year. You also have to learn a lot more on your own in the buy-side, you will not always have someone available to teach you which is why you have to be a self-learner. This requires a certain level of discipline, aptitude, and interest that a majority of prospects just do not have. If you are able to succeed in a buy-side analyst role, it goes a long way and puts you on a much better track for promotion.
I would say for those that are really interested in investing and have done internships throughout the school year in those fields (I interned at 3 different places during my last 2.5 years of college), it does not make as much sense to go into banking. Regardless, You cannot go wrong with either decision.
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