Regrets After Switching From IB to PE?

Is PE really more lucrative than banking? Comp. for PE associates is lower than that of IBD associates at EB's. I imagine most non-MF PE VPs are making less than EB VPs as well. Plus, having to get an MBA after 2 years erases a significant portion of your savings from ~4 years of work. I understand carry is when the money truly starts to hit the bank, but factoring in the insane competition for spots, and time it takes, is it really worth it? I know there are other merits to PE (slightly better lifestyle, more "interesting" work), but I suspect that they're exaggerated on WSO.

So, I'm curious if anyone has regretted making the switch from IB to PE. How did PE miss your expectations? What are your plans now (return to IB, switch to CorpDev, etc.)?

 

I know somebody who went from a top LevFin group then landed MF PE. He said he didn’t like the level of competition, and he wanted to just “enjoy his life.” He ended up getting engaged, going to b school (H/S/W) then went back to his old bank but got DCM (he said it was less stress than LevFin). He’s married with kids now.

Only weird thing is that he said he could have gone to his old bank’s DCM group without an MBA, but he just did the MBA just to go to H/S/W.

 

Why is that weird? I think it makes a lot of sense. You significantly broaden your network, appeal and hire-ability if you did banking, capital markets, and have an MBA from one of those schools. In life, your thinking can't be short term or penny wise pound foolish. At some point you can't go back to get the degree (read: network) and at some point you WILL get fired/laid off/etc from Wall Street. The sooner you feel the stinging loss of being canned, the better because it makes you more resilient and understand life is not linear and the way you envision things isn't how life works. Having something as valuable as a top MBA can enhance your pay or opportunities at many points in your life that could very well repay the cost multiples of times over.

 

Now that I have a much better understanding of Finance landscape, I’m constantly thinking about where I want to be or what I enjoy in terms of making Finance as my long-term career. So I think about going back to IB from time to time, not in the sense of money but whether I can do it for 20-30 years. IB seems like a pretty cushy role to be not worrying about taking wrong risks and staying in the loop with big companies and investors. And then I think about all the marketing pitches and realize I do not want to go back. It surely takes a certain personality to be a banker.

 

If you're approaching senior banking roles as "cushy" you're not going to make it very long. Could it be a better lifestyle or less stress than a senior PE role? Maybe, but that's totally different than saying banking is cushy.

 

I think a lot of the fixation on IB Exit Opps is a function of a Type A personality. Always striving for something bigger or better and IB to PE is just another perceived rung in climbing up the latter. Frankly, I know a lot of people who left really cush jobs because they felt at the time like it was "leveling up" and they'd probably be better off today if they recognized that they had it made where they were. Talking about people going from good IB groups to shuffling around every 2 - 3 years at different lower tier PE shops. Still crushing it in the grand scheme of things but there's something to be said for building tenure within one of the major IB machines.

Frankly, I started in IB and couldn't wait to level down. Gladly took a pay cut in favor of the work/life balance of working for a REPE fund. Still make a handsome chunk of change AND still get home in time to have sex with my wife.

 

I have a REALLY strong comp package for my level of tenure (right place right time) but if I would have stuck with IB and made it to VP level by now at my old bank or one similar to it, I would probably be making ~100K more than I am now, if I had to guess.

 

Theoretically I have time to have sex with her. Typically I just rub her feet and she falls asleep horizontally on the bed we share. This, however, comes with substantial upside as it gives me free reign of the remote control. At this point in time, with unchecked power, I am God.

 
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I am just an undergrad but this is very much my plan at the moment, a couple of years IB then switch into REPE (which looks like a really cool gig) then go home and have sex with your wife.

 

I don't make my living in banking being smarter than everyone. I make my living being a pretty good all-rounder. I understand financial concepts, can model decently, am pretty good with clients. The average PE guy is smarter than the average banker (assuming not a crap fund), so it's hard for me to foresee trying to compete more on intelligence while throwing some of my other natural skills that lend itself to banking out the window.

 

Imo I think being in rx for a career would be super fun if you can interact with governments and gain some international reputation. I think travelling to South America to work with Argentina's debt crisis would be fascinating to be involved with so many different aspects of finance and the relationships you would build.

 

I see to many kids in the industry jumping to PE but have no idea what they are getting them selves involved with. After so many years in the industry I still think there so much fat in IB and PE. I've interviewed so many kids and look they can get all offers not a big deal but only 0.1% of them will even become average/decent investors at best.

 

This is a skill that can be learned, I would say don't put them down so early in their career. Most of the greats didn't know shit. Dalio chose his first stock because it was the cheapest and thought that would mean more ROI.

path less traveled
 

I moved to a big name MM PE in Asia and I regret it.

First of all, I want to say most IBD exits are not real exits.

You are literally doing the same type of work (useless models with endless revisions, benchmarking, industry landscape, data mining) and dealing with the same type of people (ex-bankers). Be it corp dev, PE, HF, it is still the same group of people.

It is not in a sense of exit like: oh, I moved from consumer IBD to P&G brand manager and now I am managing multi-million marketing budget for SK II / operations manager at FAANG, etc. You would be very lucky even if you get to work in FP&A and deal with non-bankers (because they all prefer hiring ex-big 4 comrades instead of bankers).

If you are lucky, you get the same type of burnt out bankers in your PE/corp dev role as seniors. If not, you just get the same type of people and continue your working style. But now, you lose your BB prestige at a less well known shop.

Your senior hate IBD life himself, but that doesn't mean he hate imposing such life style on others. As long as you are working with people with lack of sense of job security, you will just continue your IB life but in another place.

 

It seems like you come from a consumer IBD background or is now doing consumer focused PE in Asia. Grateful if you don't mind me sending you a dm? Many thanks

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The comments above are so true - seems like WSO still holds the view that PE is the holy grail of finance but seeing my network of peers who have taken the PE route, it's very interesting how different reality is from the way WSO portrays things

Here's some observations I've seen (note that I'm just a small sample size at the end of the day):

  • All my peers who went to MF PE are currently miserable. I personally know and keep in touch with 6 of them and they are all either (1) applying for business school (2) looking to lateral to a MM PE funds (3) trying something more entrepreneurial. They make absolute BANK for what it's worth, but they are all soul-crushed, to the point where 2 of them actually told me they genuinely miss their times in banking (??).
  • My peers in the Lower Middle Market PE funds are more content (most of the people I know in buyside are in this segment). They all still work hard but they don't complain much about lifestyle issues (like my peers at MFs do), and some of them are on partner tracks without an MBA, so good for them. The big surprise to me here was their comp levels - they're tangibly below that in IB. Surprised me because I had initially thought that even LMM PE would pay somewhat in line with BB IBD but that's not the case - pay varies a lot more across the scale, and I would say holistically that there is a quite tangible discount to BB IBD (even more if you compare to EBs)
  • My peers who remained in banking seem relatively content. A2As particularly at BBs tend to work much less hours in general as (1) they've built up goodwill / rapport with the team at this point (2) have plenty of analysts under them to shove off grunt work (3) have become a lot more efficient at their roles, not just in terms of work product but having an internal network in the bank (i.e. if you're in M&A and you need quick debt pricing levels / high-level guidance on debt structuring, you just call your equivalent pal in LevFin to get a quick download instead of fiddling your thumbs pondering who to reach out to / your printer folks know you by name and are willing to put your print job on the top of the pile when you are time constrained etc). I personally don't think they're all IB MD material (most of them are probably self-aware of that as well) but they know they can get by with just good execution at least till Senior VP / early Director level.
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Thanks, this is really insightful. Few questions:

Are you able to provide ballpark comp. ranges for your buddies at MF PE firms? It seems like they're all pre-MBA Associates based on your comment. Also, is it the nature of the work or long hours that are crushing them?

 

Had a couple of questions - why do you think the associates at MF PE shops hate their life relative to IB associates. The way I see it, someone at a MF PE shop at an associate level will probs get into H/S/W and a post MBA pe gig which has longer term pay potential than IB? I understand MM PE is generally less in base+bonus but can be much higher when carry kicks in.

Also, is there an over-emphasis on how "interesting" the work is in PE?

 

Currently in IB so cannot share personal experience but will attempt to do as the above. Two seniors (ED/MD) in my team were on the buyside before returning to IB (some up to VP level some up to MD level), these are some of the common points that come up quite often:

-Not getting stuck on a deal, in IB you are paid to execute not to monitor, they didn't like having to deal with one investment over a 5+ year period

-Ability to work on a narrower set of sectors that they prefer and basically cover everyone or the majority of firms within that sectors rather than have a high level understanding of multiple sectors, yes in PE you may only cover Healthcare but do you understand perfectly the differences between medtech/HCIT/HC Services etc

-better cash comp/shorter vesting/less money at risk within funds

-running larger teams and path to executive roles managing PnL one day

-Not having to deal with Fundraising, as a senior you spend a lot of time on that and they seemed to hate it even with dedicated IR teams

-less travel/bullshit stuff for your PortCo, as an MD you pretty much do what you want so long you bring business

 

Interesting stuff in here, I’m on the older end but clear that the PE recruiting process forces some hard decisions for analysts.

I’ll say the risk adjusted return for comp is likely higher in banking (if you are at a good bank) given receiving carry almost anywhere is a crapshoot and takes a very long time. I disagree that banking is somehow lower stress, that may be true up to the VP level but at that point you begin to have pressure to sell and that can be very weighty too.

If you are a good performer it’s not too hard to go back to banking if you find PE is not for you. It’s worth taking the option early on and decide from there. Careers are not perfectly linear and 2-3 years is nothing in a 30+ year period.

 
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PE is not for everyone. With that said - here are some reasons why PE is the right job for the right person.

  1. Smarter people - You'll generally find smarter / sharper people in PE vs. IBD. Intelligence doesn't really matter that much in IBD. It absolutely does matter in PE (big picture thinking, detailed-oriented thinking, mathematical thinking). Note - it is not the only skill that matters - there are a lot that's needed for a successful PE professional.

  2. More valuable skill-set - I can honestly think of extremely few jobs (other than something like being a CEO) where you can build as broad and simultaneously valuable skill-set as someone can do in PE. In PE - you need to know a lot about a lot. Ability to do consultant-like industry thinking, business-specific financial and operational due-diligence, ability to analyze and think critically about QofE / financials, read / negotiate legal documents, sell portfolio companies, have high EQ and people skills, be able to manage up and down. This job - if you have the raw materials - will allow you to develop into a very strong all-around quarterback. It's Navy-Seal training for being a true investor - and it's a highly valuable and scarce skill-set. Last point on this - in banking, I think many VP/EDs realize that their skill-set isn't as valuable as the amount they are being compensated, and there is a fear of losing their jobs and not being able to find another one w/ similar compensation. If you have solid PE experience as a VP or above, there's not that same fear - people able to do everything you can do are so scarce, that you will almost certainly find a comparable job.

  3. More interesting job - Plain and simple, the job is just more interesting. You are truly putting hundreds of millions or billions of $$ to work - and generating tangible gains. There's the feeling that there's something truly on the line vs. knowing none of the work really matters anyway.

 

Isnt PE just banking 2.0? Ive read elsewhere that you dont actually do operational improvements at portfolio companies, because thats where consultants come in. As a PE guy operational improvements means looking for add-on acquisitions for the portfolio companies.

 

I am at a PE and 1/2/3 are quite BS. Not false but extremely exaggerated and overrated imo.

It is literally banking 2.0 with more menial/annoying tasks to do because everyone wants to affirm their thoughts.

Most PE guys I know have shitty personal investing performance. Despite the amount of expert calls / research resources they can use (even when they want to secretly do some personal stuff), they cannot even beat investing in SPX.

 

Okay this is going to be a 'hot-take' and I completely understand where the sentiment is coming from. The Associate job in PE is very tough because often there is a LOT to do, less resources, more responsibility, but still have no true 'voice in the room' to dictate anything. That changes at the VP+ level. Being an associate (very tough job - every VP+ in PE has been there) is just the cost of entry for the more interesting responsibilities later on...

 

Appreciate your points. Many of the pros you make can very easily be flipped into cons though right?

  1. If there’s a significant difference in intelligence level between IB and PE folks: smarter people bring more competition, which makes promotions/rising the ranks tougher. Working around the clock fighting for a promotion as a 30+ VP with a family doesn’t sound that great.

  2. This seems like a fair point.

  3. Highly debatable which industry is “more interesting”. In theory being on the buy-side is more engaging but other posts have already pointed to the abundance of btch-work required from juniors in PE. Don’t PE teams evaluate 100+ leads to only close 1 deal a year on average?

  4. Still haven’t seen any actual comp numbers on here for PE VP’s. Considering the cost of getting an MBA and the never-ending cycle of competition you commit yourself to, I feel like it’d have to be significantly higher for this to be a true “pro”. How man