IB VP or Associate to PE -- is this a thing?

I keep reading about the "normal" path to PE, which seems to be 2 years as an IB analyst (with super early PE recruiting), and then PE. But what about for those who want to give IB a fair shot, as in doing it for multiple years? Is this doable? To make the move from IB to PE as either an IB associate or VP? Or are PE shops only interested in IB analysts and MBAs?

Thanks for input.

Comments (23)

  • Prospect in IB - Gen
Jul 14, 2020 - 6:14pm

75% of analysts lateral to PE? Do we live in the same world?

  • Prospect in IB-M&A
Jul 14, 2020 - 5:50pm

Do you think this is because of choice by IB associates or VPs -- that they don't want to leave? Or because it's very difficult for them to transition to PE at that point, even if they want to do so?

Jul 14, 2020 - 6:09pm
phillyboy, what's your opinion? Comment below:
Prospect in IB-M&A:
Do you think this is because of choice by IB associates or VPs -- that they don't want to leave? Or because it's very difficult for them to transition to PE at that point, even if they want to do so?

difficult to. its not path and analysts with 2 years experience are the perfect monkeys to do grunt work for PE.

While most associates and VPs wont be able to make it even if they want to another thing is that quite a lot dont want to even go. They are making solid money and their hours aint bad compared t o the analysts. So for them PE isnt the green grass on the other side

im not saying they (esp post MBA associates) wont take it if they have the choice but they arent as despreate to get out

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Most Helpful
Jul 14, 2020 - 9:09pm
Khayembii, what's your opinion? Comment below:

IB Associates wouldn't end up at a mega fund, so a lateral to a PE Associate role would be a significant drop in pay. On top of that, you're starting over as the low man on the totem pole as an Associate, in most cases with a two year clock ticking over your head before you're likely kicked out. The best you could hope for is to make a Senior Associate role which isn't as lucrative at the vast majority of shops as IB Associate, so you'd be grinding as an effective Analyst at an IB Analyst salary for two years just to hope to get the Senior Associate role to basically be back at the same level (probably less) than what you were making as an IB Associate.

Assuming you're an IB Associate 1, in that time you could've went to IB Associate 3 with a path to getting promoted to IB VP. Every year you would've gotten a pretty big bonus (this year excluded), gained responsibility and increasingly gained the ability to push work down to Analysts, further improving your work life balance.

So from a pay and position perspective there is very little incentive to go from IB Associate to PE Associate. It's just not nearly as lucrative as for Analysts, and is in fact a significant step back with high risk to even claw your way back to where you were before.

Everyone in the industry can also see where returns are trending. IB Associates won't go to mega funds, so you're going to be most likely to go to some mid market fund or smaller, and competition in that space for deals is insane. The upside in the mid market has been coming down meaningfully and is arguably a secular decline in returns and comp. In comparison to that, investment bankers are always going to be around, deals are always going to get done and fees aren't going to move meaningfully on a TEV % basis from where they're already at.

Pair that with the fact that the interest in people going into banking has significantly declined over the past decade, and with improvements to "culture" and "work/life balance" (though much of it is bs, there have been meaningful improvements on this front since 2007), and you have your answer. Even if an Associate were qualified to go to PE (which in itself is uncommon), why would they?

  • Prospect in IB-M&A
Jul 14, 2020 - 9:30pm

Wow, awesome stuff, really insightful. Great to hear the practical pros and cons on such a granular level. Have not anyone break it down this way, thanks!

  • Intern in IB - Gen
Jul 14, 2020 - 9:50pm

So do you believe going the IB -> PE path is only worth it if you join a MF right after your IB analyst years? Or do you think staying in IB long-term is better (from a compensation, lifestyle, responsibility perspective)?

Jul 14, 2020 - 9:57pm
Khayembii, what's your opinion? Comment below:

I'm not making a generalization about IB vs. PE, I'm just saying how a typical IB Associate would view lateraling to a PE Associate role. It's almost like going from a bulge bracket / elite boutique IB Associate to a first year analyst at a mid market bank. From a comp, lifestyle and career outlook perspective, it doesn't really make any sense.

The only reason you'd really do that is if you have an intense burning passion for PE - so much so that you're willing to suffer through everything I've mentioned - or you've got a unique opportunity, such as getting in on a firm that just raised their first fund where the partners are rock stars in their field or something. Otherwise, generally speaking, it doesn't make a ton of sense. And I don't buy that PE has better lifestyle either; I'm sure there are some funds that are like that but when you're in a deal you're still beholden to your deal deadlines and the work that just needs to get done.

Nov 24, 2022 - 8:35pm
Doug_Funny, what's your opinion? Comment below:

Perhaps another scenario that would make sense - IB associate leaving NYC banking for a LMM/MM PE gig in a lower cost of living / tier 2 city like Philly/Atlanta/Denver etc. Def a pay cut but wouldn't feel it as much..

  • Associate 2 in IB-M&A
Jul 11, 2021 - 11:12pm

A2A is meaningfully different for MF PE. As mentioned above, MM/LMM PE funds don't attract IB associates because pay is a meaningful step down and it's a lot riskier for an IB associate to make that move. 

On the other hand, MF PE basically has their pick of who they'd want to hire (and MBA IB associates will likely jump at the chance to join MF PE) but they don't hire IB associates due to 2 things:

1. There's a lot of risk an MBA associate not having the requisite modeling skills, regardless of whether they're new or an As3.

2. Funds that require MBAs lose the optionality of having an associate go for an MBA before deciding to bring them back as a VP

When you're an A2A, neither of those concerns apply to you so you're basically on an almost level playing field as anyone else doing off-cycle recruiting, with just a couple of questions to be asked about why you stayed on in IB. As you mentioned, A2A to MF PE isn't common but high quality MM/UMM exits are pretty common for A2As

Jul 11, 2021 - 1:21pm
NewIndustryHorizon, what's your opinion? Comment below:

Aware of one healthcare PE shop that hired a post MBA associate/VP at the VP level I believe (may have been a senior associate hire and promoted soon after). Subpar performing firm in a Tier 3 city though.

Honestly the PE VP was probably making more at their IB gig (a top paying firm) but technically has more upside (heard their current fund is doing poorly, overvalued some acquisitions).

Edit: Above PE VP is now a Partner at same firm they joined.

Personally would stay in IB over PE if you're entering at the Associate/VP level. Occasionally, IB MDs who have strong financial sponsor relationships may jump into an upstart MM PE firm or in some cases start their own LMM PE fund with a first fund of $100-500 million. But the ones I'm aware who pulled this off were either rainmaker at top groups or viewed as very strong at their particular niche (aware of a MM IB MD in healthcare who had some innovative sell-side/buy sell-side deals that garned very strong returns for UMM/MF funds. Ended up leaving banking to be a MD/Partner at a $2-5 bil AUM firm).

Jul 11, 2021 - 1:37pm
Anonymous244729, what's your opinion? Comment below:

To add a bit, I am aware of a VP in IB who moved over to PE. It's possible, maybe is a thing but not too common. I would think someone who has a IB VP job, moving to PE may not be that attractive given how good IB VP may be. If I'm not mistaken at many of the top banks that VP job may be making like 500k a year all in (rough numbers and I may be off as most of my experience is with EB's) and a fair bit of that is prob cash. Plus by then at that level their WLB is prob pretty good maybe only needing to put in 60 hrs a week on average or so with plenty of junior support to avoid the worst parts of the job in general. Plus if someone is on path to making MD with a few million a year maybe in comp, able to support nice life with wife, kids, house, vacation etc, PE may not be that attractive of a relative opportunity. But just a thought 

if an IB VP really wants to be an investor they can prov do it on their own by now. I think I know a few VPs who invest in private companies and basically are already like a partner of their own personal PE shop effectively. So they get the fun of investing and do it for themselves while still being a banker. Again just some thoughts. Hopefully it's helpful 

  • VP in IB - Gen
Jul 11, 2021 - 3:05pm

500k total is more like BB vp1. you can easily add 200k to that for EB if not even more.  if you're an EB vp, zero reason to switch into PE considering you'll be looped into profit sharing.  Yes, after carry the VP in PE might earn more but you get the benefit of having mostly cash up front at an EB, which you can invest and compound on your own.

  • Intern in IB - Cov
Nov 7, 2022 - 6:28pm

Um or you're bored out of your mind in IB... not that PE is always a massive step up but I would think IB at that point would be excruciatingly boring to someone doing it for that long, even if you're doing slightly more cerebral things as a VP

  • VP in IB - Gen
Nov 7, 2022 - 6:33pm

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