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Because they can’t break into good PE shops because all of their peers that did PE before MBA fill those seats? Or if they don’t have a great investing mind, but good with people/client relations and finance/numbers, IB is the best thing
Why do you guys always assume everyone’s end goal is PE? Most of my BB class didn’t recruit PE and wouldn’t consider them failures. My comp over the last few years has been above my peers who went PE. My responsibilities are also less intense and in some cases my hours are better.
Second this. Left IB for PE and honestly enjoyed IB more. Had multiple offers at MFs and smaller shops over the period of a couple years, ended up going to a middle sized shop. It took me multiple years to even get close to what I was making at my IB job (was at a high paying EB, but still proves the point). PE is not the end all, be all. The fund has to perform well for you to get paid and that is not a given anywhere. Don’t let anyone tell you how much better PE is. The work is generally more interesting/thought provoking, but the grind is the same and the stakes / stress can be much higher.
Also just want to add that working with opco’s genuinely sucks. It’s the worst part of the job for me. You basically become the person they turn to for everything and forget about getting any clean data from them, ever. There is no glory in “jumping in operations”, it’s just a hole you never get out of.
IB is similar pay to PE with less responsibility, less accountability, less thought needed. Why kill yourself for some linkedin clout?
This is where I have shaken out (maybe just a justification for not finding a great PE shop for a VP role). Also a work environment difference between a smaller PE shop and a good investment bank -- classes of people like you vs. 2-3 other associates or VPs. Better like them a lot!
I'm about to leave PE to go back to IB. Less stress, similar hours, more CASH comp for the next few years (checks out if you don't want to stay in PE/IB forever), more structure + analysts working beneath you. PE hours are just as bad if not worse if you have a struggling portco(s). Don't underestimate the stress. PE is also garnering more competition + too many firms doing the same / similar things (see threads on JAMMBOs and prevalence of 1st time funds), so perhaps it is increasingly difficult to create outsized value. Moreover, generally unfavorable fundraising market. Higher interest rates for longer. List goes on... Agree PE is generally more interesting/thought-provoking but sometimes it can be worse than IB (esp. at the PE associate level) with the nitty gritty. You don't have an army of analysts or a presentation team working under you.
On comp, in general, I believe IB edges PE in cash comp in 10 year horizon. Key is cash comp - how many of you guys actually want to do PE for the rest of your careers? Do you have to get an MBA? Is there headcount/spots for promotion or are you going to downsize? Once you reach VP+ level and are waiting for that carry to vest, you might as well be a PE lifer!! Not saying those carry dollars aren't material and tax-advantaged but there is 1) a time-based vesting component to it akin to "golden handcuffs", especially as you stay for new funds and 2) paper $'s are not guaranteed, so be careful. I've also heard of some pretty onerous carry terms. For now, I don't see myself as a PE-lifer so would rather make more in cash and take a chiller job. To each their own.
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Many Associates will clear $300K+ during their promo year from AN to ASO, depending on the bank / group. Might actually be more now, it's been a hot minute. You'll also have a skillset honed for efficiency along with rapport you've built up with senior bankers. You can leverage your efficiency and newfound seniority to carve out some semblance of a life for yourself outside of work. You'll also start to develop meaningful relationships with clients and counterparties that can and likely do lead to unique opportunities down the road. Experienced Associates can easily lateral to a Senior Manager or PM role at high-growth companies. VPs and above lateral to Director and above roles. If the company is small enough and you play your cards right, you can land a VP Finance role at a young startup with a solid equity package.
There are lots of good reasons to stick it out as an Associate, but at the end of the day you get one career and it's up to you to decide what you want out of it.
Agreed on the above, my associates clear $350 their first year and get one month sabattical. Path for me is being an aso at a larger bank for a year or two, then move downstream, but stay in banking. I've had too many former colleagues now in PE that say the hours are just as bad, less pay, more responsibility (smaller teams inharently), and hate working on the OpCo reporting / KPIs. That's definitely suited for someone, just not for me, and I hate that so many people get MS if they want to stay in IB - no exit opps after analyst is just not true. For example, you can typically go work in corp dev or a higher role for a client after your analyst stint, maybe you have to take a year knock on your experience, but exit opps are still prevalent
There's a few new posts on WSO here regarding the grueling hours of PE. However, isn't it firm dependent on how the hours are in terms of WLB?
Genuine question - why would you stick in IB for the extra 3-5 years after analyst stint if you’re just going to switch to a CorpDev/mgmt role at another company anyways? Is the extra cash really worth the hours when you could still clear 6 figures in Corpdev and have the same career optionality?
It's because I want to work on deals in my coverage space which I am passionate about. Plain and simple.
Compared to corporate roles, the clear career progression and requirements for success are a breath of fresh air.
The money is nice but goes real quick if you have a family. No interest in "exit ops".
I stayed cause I was too stupid to get a PE offer, and that’s why everyone else stays. Same reason people go to crappy schools and not an Ivy League school. Or marry a chubster and not a hottie.
Except most people in PE don’t get promotions. Also nobody who has been promoted in the last 5 years is making anywhere near bankers at EBs.
PE was a major payday for founders 10+ years ago and now the gravy train is gone. Returns are also going to get given higher rates, lower valuations and back leverage.
Anyone at Clearlake can basically kiss their carry goodbye.
People who aren’t smart enough for HF join PE shops.
never ask an IB director+ if he ever had thoughts of going into PE 💀
Honestly PE is slightly more fun but getting to VP+ at a good firm is so hard, in all reality, I'll probably end up back as an Associate at my old IB firm and the people who stayed and never recruited for PE will be VPs at that time and I'll probably come back in below them.
IB is a value career, it has it's shitty elements, but you know what they are and there's reliable cash comp & path of promotion available. PE is a growth career. There's always that super exciting prospect down the road of making millions in promote checks, but a ton of shit all has to go totally right for that to pan out in a substantial way.
Hey - do you think you'll get 1-for-1 credit for the tenure you gained in PE when you lateral back to banking? I'd imagine that if you spent two years in PE as an associate, that you'd rejoin banking as a third-year associate, which puts you up for VP promotion in 1-3 years?
I have no idea, I just tend to plan/expect for the more conservative outcome so I won't be disappointed. For all I know I might get promoted to VP where I'm at and not go back to IB after all.
Sorry to not be helpful, don't want to spread misinfo via speculation and have a bunch of people run with it like it's fact though hahah.
This is bank dependent and what terms/standard of work you left at your old firm. I talked to my old bank about potentially going back a while ago and they wanted to set me back one year. That wasn’t really why I ultimately chose not to go back, but in my mind it probably wasn’t a bad thing. In my opinion, you have a fresh perspective on the industry and how a buyer thinks so as long as you’re working hard you’ll likely be a top performer in your class and have more time to navigate office politics for your (seemingly long term) future there.
I’m still a young boi but at most firms - banking guaranteed cash comp clears PE until the MD level. The allure to PE has also gone down in recent years for a few rzns; namely bc of comp, and second cuz some ppl are realizing that PE isn’t as sophisticated or as intellectually stimulating as once advertised. At most large cap shops, you’re just adding a few turns of leverage on decent cash flowing businesses, cutting some employees and putting in new mgmt teams. Sure, this is a bit of a generalization but you can do this and effectively generate your 2.0x MOM - which a lot of firms have done. The identities of a lot of shops are becoming more and more blurred. If you’re at a boutique M&A shop and remotely interested in the work, you might even get a better investors perspective bc ur practically diligencing the business when youre running a process. Then also, on cycle recruiting is early af, comp isn’t there, PE isn’t as stimulating. All that considered, an ASO role is quite attractive
For many MBA associates I suspect it’s something like: I don’t know exactly what I want to do for the rest of my life and either IB or MBB is a way to kick that can down the road while building some generalist skills and savings that will leave you decently positioned for whatever you want to do next, when you figure that out.
Mind you, few of them will admit that. But I suspect that’s the thought process for many.
Both are good careers tbh
A “real high finance role”? Please. Get off your high horse. I’m mid/senior level at a good PE shop and it’s funny hearing other people in my office, like you, constantly bash bankers because you think you’re better than them. IB is a good job as detailed by the many posts above. Running an elaborate LBO with a million assumptions and churning through diligence doesn’t make you smarter and arguably qualify as “menial tasks”. This is classic douchey PE think.
High finance is a dumb term lmao
PE is completely commoditized
I would argue that MDs at banks require more skill than partners
Lol
This guy tryna convince himself he’s a genius and made the right decision going into PE. Go be some stupid shitcos excel monkey, man.
This entire conversation is trying to understand the reasons / merits as to why folks might stay in banking - not why one career is better than the other. You must be an insecure fk so I do hope you get to see some carry $$ in the next decade - sounds like you need it
Some of us actually like banking and the work. I really enjoy interacting with clients, ideation / pitching, managing internal politics and the like.
If you're smart, end up in a firm / group where you're a good fit, and have semi decent people skills, life is infinitely better at VP2 and up. Ain't nobody working 90 hour weeks beyond that unless you suck and/or your juniors suck.
I assume this question is really geared towards post-MBA associates, in which case, I think the vast majority of people (at my MBA program at least) fell into these three buckets:
1. Non-traditional pre-MBA background, such as military, non-profit work, former professional athletes, etc. There is a lot of overlap between these types of candidates with consulting recruiting as well, and when push comes to shove, it really just depends on how much you value money/working on transactions vs a more diverse set of exit opportunities/slightly better WLB.
2. People who came from a finance or finance-adjacent background who want to do a 2-year stint and exit to a smaller PE fund or Corp Dev.
3. People who really have no idea what they want to do long term, but IB is one of the few career paths that offer immediate ROI on an MBA. Some of my closest friends fell into this bucket, and they're 2-3 years into their post-MBA IB stint right now. One friend is doing great, is well-liked within his group, and has a path to VP (and maybe even Director), if they want to stick it out another ~4-5 years. That being said, I can already see the golden handcuffs starting to wrap themselves around another friend that comes to mind. Comments like "I don't know what I want to do after this, but I know that it probably won't pay as well as my bank does now" are really sobering.
The decision to work in banking as an associate can be influenced by a combination of factors, and it varies from person to person. Here are some common reasons why individuals choose banking:
Financial Incentives: Banking associates often receive competitive compensation, including bonuses, which can be a significant motivator. The potential for substantial earnings in a relatively short time can make the long hours seem more bearable.
Career Opportunities: A stint in banking can open doors to a wide range of career opportunities, both within finance and in other industries. The skills and experience gained are highly transferable and can lead to future roles in areas like private equity, venture capital, corporate finance, or entrepreneurship.
Networking and Prestige: Banking offers a chance to work with influential clients and build a strong professional network. The prestige associated with working at a reputable investment bank can enhance one's career prospects.
Learning and Skill Development: Banking provides a steep learning curve, offering exposure to complex financial transactions, valuation techniques, and strategic thinking. This experience can be invaluable for future career growth.
Short-Term Commitment: Many individuals enter banking with the intention of working for a few years to accumulate savings and valuable experience before transitioning to another career that may offer a better work-life balance.
It's important to note that the decision to work in banking is a personal one, and individuals have varying motivations and career goals. While long hours are a part of the banking culture, some see it as a short-term sacrifice for long-term career benefits, while others thrive in the fast-paced, high-pressure environment. Ultimately, the choice depends on an individual's priorities and aspirations.
Thanks, Chat GPT.
Good thread, thanks all
Lots of good answers here. One nuance I’ll add:
Do you want to be an investor or a salesman? To me, that is the biggest difference between PE and IB. One is not necessarily better than the other, and your preference likely depends on your natural skills.
Personally, I’m a naturally born salesman. I actually like presenting - to boards, investors, whomever. That’s why I may end up as a career banker.
If you don’t like sales, then banking probably isn’t for you.
Most people on this site are very junior investment banking analysts, if they. They have no idea wtf they’re talking about.
At a senior level it’s simple, I like working on 10 deals at once vs my friends in PE who work on two (admittedly to far greater depth)z
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