The New 2+2(+2)
I've been giving it great thought lately on what a career can look like post associate PE years. On this forum, the 2+2 and the 2+2+2 have historically been viewed as the highest ROI career paths. While I still believe this is true, any PE professional on this forum knows the X years that follow the 4 or 6 is the single biggest decision you make up until that point. The opportunities following 2+2 or 2+2+2 are immeasurable with outcomes unquantifiable as it pertains to career trajectory (down river PE fund, HF, CD, FP&A, tech, ops, venture, etc.).
While most of the quality PE associates will likely seek a senior associate / VP seat, the NPV of carry street wide, I would argue, is depreciating meaningfully driven by a highly saturated asset class. While there will still be room for winners in the sector, carry recognition is starting to look much different, and my thesis is the smart money will recognize this today to reposition a career before being thrown out.
Of course being thrown out (pre ~1-3 years ago) wasn't the worst thing, but all it takes is a few clicks on linkedin and scrolling the WSJ to figure out there is an army of highly qualified finance professionals gunning for seats in volumes not seen in a decade+.
The metaphor I came up with is Everest. My god how many people must want to climb that thing a year? As technology and information has become widely accessible, the volume of climbers per annum has grown exponentially. And every climber thinks they'll see the summit. But what do they see on their way up, especially in the later stages? Bodies. Frozen to the mountain. Not just 1 or 2 mind you. A lot of them. My bearish view is that PE is slowly becoming that way whether you are at a top fund or not.
The solution? IB - PE - IB. I know it sounds crazy, and I'm sure a lot of folks on here will disagree. But if you were worth your pay in PE, and you took away strong skills from your PE gig, you can't tell me that you couldn't steamroll a VP seat in IB. Hell maybe even a D / ED seat depending on the bank. Cruise control for the most part. Clearly you would want to be selective in returning to banking (boutique I would imagine with reasonableish hours), but the effort/hr is a lot easier than PE, and a return to the right group would be an easy plug and play. You've shifted to cash comp and greater visibility, and don't try to convince me seniors wouldn't take your PE experience.
Downside is that you are no longer an investor, and you are back to being told what to do in large part. That is true. But the smart money knows that more cash in hand today is better than no or limited cash with ego and uncertainty.
Just a thought I had as, like many, I am 1 year into the job trying to figure out what to do next. Looking forward to hearing all opinions here and if anyone has made this jump.
Based on the most insightful WSO discussions, your analysis of the evolving PE landscape and the potential pivot back to IB is thought-provoking and aligns with some emerging trends. Here's a breakdown of key points and considerations:
1. The 2+2(+2) Path and Post-PE Decisions
2. The "Everest" Metaphor and PE Saturation
3. The IB > PE > IB Pivot
4. Downsides of Returning to IB
5. Alternative Paths
Final Thoughts
The IB > PE > IB pivot is a bold and unconventional move, but it could be a smart play for those who prioritize cash flow, stability, and a more predictable career trajectory. As you weigh your options, focus on aligning your next step with your long-term goals, risk tolerance, and personal priorities. The key is to stay adaptable and open to opportunities that align with your evolving career aspirations.
Sources: Why The Grass Isn't Greener: The Private Equity Associate Crisis (PEAC), What is the point of doing private equity if you will be pushed out after two years to get an MBA?, From Private Equity Associate to VP in Private Equity, The PE career path, From Private Equity Associate to VP in Private Equity
deleted
This is not uncommon at all, FYI. Most PE associates who went through this dilemma previously (pushed out) either went downstream to MM/LMM or corporate (both feel like higher ego/less "failure" moves than going back to banking), but I myself am considering (and actively exploring) a potential move back alongside more than a handful of other MM PE associates who are coming up on 2/3 years.
The work is easier, cash comp is much higher in the medium-term (5-10 years) unless you're at a MF. Typically I've noticed that PE mid-levels and seniors across all fund sizes (LMM to MF) have worse WLB than their IB counterparts.
The work in PE is definitely more interesting - is it 2x more interesting as IB? Probably not. Is it 30%? Maybe. Does that justify a 30% paycut? Not sure.
VPs and principals at my MM PE firm ($5B AUM) clear like $350-$600K cash with carry, compared to VPs and junior MDs in IB who clear $500-$1M at the same time in their careers. That plus GP commit requirements + coinvest requirements = PE mid-levels are much less cash rich than IB mid-levels. How much do you value incremental money in your late 20s and early-mid 30s vs. carry checks in your 40s?
Then you factor in the uncertainty of carry - you could slave away at an MM PE fund for 10 years and see $0 in meaningful distributions. Remember, PE carry is paid on DPI, not TVPI. Different calculus at MFs where even a very modest return (1.9x) on a $10B+ fund can make everyone quite rich. But I would also say that the earnings potential is more capped at MFs these days than MM PE where you can have truly blowout funds that creates immediate billionaires.
To put it shortly, I think about the below framework:
I'm currently recruiting for IB and either trying to maximize cash comp (EBs) or maximize WLB (MMs/niche product groups at BBs). Either seems more tolerable than MM PE, which has terrible WLB and terrible comp. My longer term goals are more entrepreneurial anyways - i.e., I don't see myself having a long-term (10+ year) career in either field. Goal is to collect as much cash as possible for 5-10 then do something cool on my own.
What entrepreneurial stuff are you looking to do?
MM PE has the most variance because there is the largest variance of funds, WLB, culture, comp, strategy, etc. There are a bunch of MM PE shops that are more chill than any decent IB group or MF PE, and conversely, there are MM firms on the opposite end. There are MM PE shops that have faltered in the past 5-10 years where being a mid-level sucks, and there are also those that have grown massively, and someone who joined 5-10 years ago is significantly wealthier than any of their MF peers by various multiples. This sounds like a risk-tolerance question.
Maybe you are very risk-averse, and in that case, MF PE makes sense. MM PE is an inherently risky proposition with inherently higher reward if you find a good seat. Also know of a few MM PE partners who are multiples of times wealthier than MF PE partners and also work significantly fewer hours. Conversely, I am sure the opposite is true. Just all going to be dependent on risk tolerance as to what you want to try out.
Also want to note that most massively growing MM firms are almost all internal promotions. Going to an MF and then moving down market to some growing UMM/MM firm isn't necessarily a thing that is very common anymore. If you want to be a long-term investor, the absolute ideal spot is a growing MM/UMM firm, with the big caveat being it's hard to determine this. However, I think there are still a decent # of MM/UMM firms that are growing, and you don't need firms that are doubling in size every time or anything to have better median outcomes than your MF PE or IB peers, just firms that provide promotion opportunities/have less bloat at levels and can grow fund size.
There are not really a ton of mid-level MM PE professionals who are worth more than their MF PE counterparts. Carry takes a really long time to pay out unless you get a right tail outcome; most MM PE professionals I know got their first meaningful carry check in their late 30s or early 40s.
My personal perspective is that I don't find either IB or PE to be terribly interesting personally, so I'd rather optimize towards the much easier, higher cash comp seat (IB) while I save up cash for something I do personally find interesting (entrepreneurship).
Also - I disagree pretty much entirely with your 3rd paragraph. First - joining a growing MM firm (i.e., growing fund size) is setting yourself up for a $0 carry check. History is littered with "growing" MM PE firms that did very well in the sub $1B fund size range (where you can - if you're a top decile investor - relatively consistently print 2.5x-3.0x returns), but decided to "grow" and raised a $2B fund that is now marked at 1.7x (i.e., no carry). By definition, most of the returns of a "growing" fund have already been achieved when it was subscale. Increased fund size -> larger checks or more investments / fund -> lower returns -> lower carry.
Second - using "median outcome" and then saying you need to find the ideal MM/UMM fund is... an interesting use of the phrase. Obviously if you join the next NMC you will be multiples richer than your generic MF PE or MM PE counterparts. I want you think about the phrase "median outcome" and see where your sentence doesn't make any sense.
Third - it's actually not true that growing MM PE funds source most of their mid-seniors through internal promotions. A truly growing MM PE fund - raising larger and larger funds - will require a ton of external hiring to generate dealflow (either more deals, or larger deals, per earlier). A first time fund that does well will almost certainly add external partners/principals when it raises Fund II, as that is the fastest way to accelerate deployment (and work towards Fund III). Obviously these places are better for internal promotion than generic PE shops, but they are very much not homegrown shops once they have reached critical growth mass (aka when the $ begins to get very meaningful for midlevels).
I will reiterate that I think my situation is perhaps a bit unique because I genuinely didn't find the work in either IB or PE to be particularly interesting or meaningful. I am much more drawn to operating/entrepreneurship and have a very high risk tolerance (much higher than average person in PE).
or go MF PC. best of both worlds
Could you expand on why this is so? Interested in learning more about the dynamics here
I actually think it would be helpful to look at a payout curve here
If you do straight IBD to MD you are going to have a nice upward arc that flatlines in your late 30s at a super beefy $MM per year
But if you spend more time in your 20s doing PE and other ventures then the curve shifts right (you are delayed). But the plateau in your late years may be higher
Personally I think the direct line is always the best . Why delay or put anything at risk
But being flat in your 20s can have a larger ROI if you’re so into it
Example Dominic Barton from McKinsey took forever to make partner but then became head of the firm
Anecdotal, but two acquaintances of mine who did the whole 2+2 of IBD+PE who then shifted to Corp Dev/FP&A at tech companies have ended up the most satisfied both from a lifestyle and comp perspective (including one who did that and ended up at NVIDIA in 2018...you do that math lol).
Anecdotally you search corp dev on this forum and ppl are pretty disappointed with the pay cut and want to get back into IB
Yeah this seems like the more realistic case. Joining the corp dev team at NVIDIA back in 2018 is like winning the lottery of corp dev opps
Well written, thank you OP.
In my view, this is a realistic path for some. Itepends on many things, but one that I've seen as very relevant throughout the years, is the need/desire to do something different. Many times it goes "been there/done this" off to something new/exciting/challenging; others seek (after a while on this path) something more meaningful (according to each ones definition of what it could be: founding, taking over a biz, jumping ship altogether, teaching, etc.).
It also boils down to what you want to optimise: money, workload, challenges, equity, heritage, own idea... So the path you described is a good trajectory, for those looking for this setup. Beware though, that life throws things at you on the way (opportunities, challenges, hardships), so keeping a flexible view helps along the way...
So I am not a banker but consultant (currently recruiting for PE, name checks out).
I never really understand the calculus you guys make that much and overindexing so extremely on compensation?
To me it all boils down to what you want to do. And being a sell-side (or in my case) commercial adviser (professional services!), is a completely different career than being an operator/investor.
I'm still not sure if I make the move to PE or to a large corporate, but ultimately I realized would never want to be in professional services for the long haul. Independent of being a McK senior partner or a top MD at a bank, you essentially have to swallow ... whatever the client wants. I was on so many processes with top tier banks (and of course with my own seniors involved), and to me it is absolutely mind-boggling how you would choose a career where you continously get treated like a dog by your clients but you just need to take it all in because you are so reliant on pleasing other people.
I grew up w around people who had careers in big corporates and that was so much different. All of those were in top mgmt positions but none of them ever worked much longer than 7.00-8.00 pm ... all of them were really n the drivers seat. Like "decision makers". Of course they had people to please (boards, other stakeholders, etc.) but it was nowhere as skewed as in banking/consulting.
If one of the senior guys of our large cap PE clients would call our partner at 2 AM on a Friday and then scream at him next morning for not pickng up, I can tell you by certainty my senior guy will go on and on and apologize and stress the team to make that up by working harder.
I never want to be a client pleaser as my fulltime occupation.
WSO wont let me post for some reason, so hijacking this thread:
Rapper Ranking Tier List
This is the only type of tier list that matters. Rankings are based on musical ability & impact with notable projects and tidbits mentioned, not moral / political considerations. Focusing on modern rappers, obviously they would not be here without the Goats before them that literally created the genre. Also including some producers because they ARE the music
S+-Tier (These People Have Woven So Much Thread Into the Cultural Fabric That is Rap Music): J. Cole, Kendrick, pre-far right Kanye, Pharrell Williams (invented music), Wolfgang Amadeus Mozart
S-Tier: Nas, Young Thug (also invented music), Andre 3000, Bryson Tiller (Trapsoul), Metro
A-Tier (Created Their Own Sound / Subgenre): Playboi Carti (Die Lit, WLR), Lil Baby, 2 Chainz (Pretty Girls Like Trap Music), Lil Uzi Vert (Eternal Atake, P&Qs), Joey Badass (All Amerikkkan Badass), Lil Keed (Rest in Peace), Mexikodro (producer)
B-Tier (Great / Strong Cultural Impact): Yeat (Up 2 Me, Alive), Drake (Views), Gunna (Drip Harder), Flo Rida, Method Man, Lupe Fiasco, Talib Kweli, Future, Roddy Ricch (old work), Little Simz
C-Tier (Good): Tyler the Creator, Meek Mill, Run The Jewels, Migos, Kid Cudi, 6lack, Swae Lee, Busta Rhymes, Sofaygo, Rod Wave, Smino, MadeinTYO, SahBabii, Schoolboy Q, Gucci Mane
D-Tier (Mid): Jack Harlow, Lil Dicky, G-Eazy, Trippie Redd, Coi Leray, Latto, Doja Cat, Macklemore, Rick Ross (she put her legs around my belly), DaBaby, Kodak Black, Night Lovell
F-Tier (Bad): MGK, Joe Budden, Charlemagne, Pitbull
UK rappers (S Tier): Skepta, Unknown T, Lancey Foux and the current UK underground (Fimiguerrero, YT, Len, etc.)
AI is going to render boutiques obsolete. Same with consulting.
Consequuntur porro cum eum qui non voluptas. Nam perferendis accusamus amet sint ut deserunt modi quos. Nihil quis assumenda qui illo molestias ipsum.
Nisi ipsam officia nostrum dolorum quibusdam quam. Quam amet eos esse excepturi. Voluptas eos doloribus ut cumque impedit. Nesciunt est quas et nihil dicta laudantium. Officia omnis temporibus et distinctio ipsum commodi hic.
Alias impedit id voluptas rerum repellat officiis ex. Dolorum natus dolores et. Quisquam et aperiam voluptatem veniam minima odio non.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...