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.
I don't understand why you can't just say what bank he went to?
He's telling a story about an acquaintance. I'm sure his acquaintance would like some level of anonymity.
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.
huge variance in terms of comp in REPE. Some pay well, others pay more along the lines of real estate developers. Here's some figures I pulled together. This was to compare US vs. Hong Kong real estate comp, but the US figures are likely still relevant for you.
Wait you guys are still having sex after marriage??
The man is a God ... it is literally in his name.
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.
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.
One of the funniest comments from an undergrad I've seen on the forum. Incoming Analysts coming in hot this year!
I don't think my wife's boyfriend will be too happy about that
Congrats on the sex
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.
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.
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):
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
PE is not for everyone. With that said - here are some reasons why PE is the right job for the right person.
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.
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.
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.
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.
PE is gonna go they way of fundamental L/S Equity HFs... surprised more people don't see the writing on the wall.
"We ... emphasize that if private equity managers have skill in choosing good investment projects and bringing them to fruition, the result is a return due to the human capital of the private equity managers. Labor economists would argue that this return goes to the human capital, that is, the managers. Talented private equity managers are the scarce resource here, not investors' capital. As a result, the fees of managers should be set so that private equity investors just get expected returns that compensate them for the high risks of the investments."
"Finally, because the returns to private equity investments have large idiosyncratic random components (in addition to high market sensitivity), a wide range of outcomes is likely purely by chance. It is then predictable that the lucky managers are anointed by investors and the media, and they are flooded with new money from investors, even when past performance is due to luck."
Source: https://famafrench.dimensional.com/questions-answers/qa-public-vs-priva…
Sources: https://www.aqr.com/Insights/Research/White-Papers/Demystifying-Illiqui…, https://www.aqr.com/Insights/Perspectives/The-Illiquidity-Discount
Sources: https://www.calpers.ca.gov/docs/board-agendas/201511/invest/Workshop02-…, https://pdfs.semanticscholar.org/3c31/135608cf8cbcfbad3c236073729b61827…
Yale Returns: https://static1.squarespace.com/static/55db7b87e4b0dca22fba2438/t/5c8b0…
"What do we notice and how does this affect what we learn and come to believe? I present a model of an agent who learns to make forecasts on the basis of readily available information, but is selective as to which information he attends: he chooses whether to attend as a function of current beliefs about whether such information is predictive. If the agent does not attend to some piece of information, it cannot be recalled at a later date. He uses Bayes' rule to update his beliefs given attended-to information, but does not attempt to fill in missing information. The model demonstrates how selective attention may lead the agent to persistently fail to recognize important empirical regularities, make biased forecasts, and hold incorrect beliefs about the statistical relationship between variables. In addition, it identifies factors that make such errors more likely or persistent. "
Source: http://www.dartmouth.edu/~jschwartzstein/papers/SelectiveAttentionMain…
Source: https://verdadcap.com/archive/do-mbas-make-better-ceos , https://verdadcap.com/archive/is-ceo-performance-persistent
He just keeps posting the same 10 every now and then on WSO to tell people that "PE MAKES NO SENSE"
TLDR :
This website is clearly an echo chamber. PE is not the be-all and end-all unlike every other thread on this topic.
As with anything, form your own conclusions based on primary research, not secondary research.
All jobs suck. Choose the one that sucks least based on your own motivations.
RBC might be better than whatever MM PE firm you're thinking of joining.
I went from BB industry group to MM PE Fund. Pay is definitely lower than if you continued in BB, but it is a bump from the first few years of being an analyst. I'd say a MM PE fund will pay an associate similar to a BB 3rd year analyst / stub year associate, and a senior associate gets paid like a 1st year BB associate, and a VP is paid like a 2nd year BB associate.
MM PE Cash Comp Associate: $200-275k Senior Associate: $275-350k VP $350-450k
While you give up comp, the quality of life is usually much better. There are less firedrills, you are in control of what you do with the deal, less things "pop up" and blow up your weekend last minute, and you get to develop investment thesis' and execute on them rather than working for other people. Plus, there's the potential for carry, which can we worth a few hundred grand to a few million, so if you had those things into comp it can be hire than banking, but of course there's no guarantee and you wont see carry for a few years.