What is there outside of IB?
Finished up SA @ a BB/EB bank this summer, and of course, consider myself very fortunate. Had a great summer - liked my team and expected the IB hours coming in - and ended up getting the return offer.
As I think about whether to accept it or not, I've had a major back and forth with myself that I really don't have an answer to. I would ask mentors who've been FT in IB/PE for a few years already, but don't feel comfortable doing so. I've talked with incoming FT and SA friends, but there's not much to gain there; they've all accepted this as their fate (not saying they're right or wrong).
But what I came to realize this summer is that the role of an IB analyst is lacking the analytical component I had anticipated (maybe naively anticipated). Granted, I did not get staffed on any deal where we had to build a model so maybe my thoughts would have been different here. Still, I feel like an IB analyst can get away with not knowing a thing about the company or deal they're working on, so long as they perform the tasks assigned and turn comments accordingly. People said in IB "you learn a lot," but I came away from the internship feeling a little underwhelmed by this.
I may be entirely wrong, after all just an intern here. But if there is some truth to this, is there any other finance role out there (be it ER, PE, HF, or otherwise) where a college grad is challenged to take on a more analytical, thoughtful role? Or is IB as good as it gets, and any fresh grad role is going to entail "shoveling shit" until you get good at "shoveling shit"? And is there something to be said about all you learn from "shoveling shit" (Mr. Miyagi type of training)?
credit research at junior levels is more intellectually satisfying than IB. Any other role where you do analysis + analytical writing could also be considered (ER or macro teams).
IB is low IQ work and sales-focused, it's consensus, so you're not wrong
Would you take credit research at a top LO AM over mid-high BB?
optimizing for junior pay or for being intellectual satisfying ?
If I were to start all over I wouldn't want to spend my time doing CIMs and marketing materials. I would want to spend my time doing as much technical work as possible and developing a more investment-focused outlook on companies than acting as simple advisor who follows MD instructions.
I might do credit research, preferably non-investment grade/HY at an AM/credit rating. Would be working less, so my WLB might be better to enjoy my 20s and also still remain a desirable candidate for buy-side roles (e.g., in LDN for example it's not unheard to have guys from credit ratings get into credit roles). Public markets is more interesting imo as well and wouldn't want to do public equities because for that might as well want to sit in a quant role considering on how fundamental pods fall behind quant pods...
End goal would be some large investment manager (blackrock/pimco/etc.)/HF in credit/distress/special sits roles. PE is overrated and ppl stick around for the carry. So need to find a balance between intellectual stimulation and comp.
Besides, I personally always viewed fixed income/credit as a more authentic finance field than IB/PE which are more business inclined. When you think about the 80s: junk bonds = credit , about the 2008 crisis: MBS/CDS = credit. The economy, interest rates, central banks, etc. everything is about credit (which also puts you sometimes to think like a macro economist adding to some character versatility in the role...). JPMorgan/Rothschild rose through lending to States and big corporations. Goldman Sachs was also the leading commercial paper business until the 60/70s when it moved into trading blocks and then fixed income under Gus Levyy, which then Salomon Brothers came and overtook them effectively dominating the bond markets. Apollo's PE different investment playbook as well is also deeply rooted in the credit/capital structure approach developed in Drexel under Michael Milken/s HY bonds, making them look at businesses from a BS perspective/positioning instead of the usual I/S approach of many other PE firms (hence why they also leaders in distress PE). Now you're back to private credit/direct lending, proving how credit/debt always has been there and will always stay and will constantly evolve. Also, you have the Argentina/Greece default, which are also credit events. So if you do really enjoy finance, doing credit, albeit many complain that can get pretty boring, can be more interesting when you think about things that are above your job responsibilities because credit/debt moves economies + the entire financial industry, historically, is all about credit. Besides, from a legal/history standpoint, debt/credit was also used as a strategic means to "capture" someone whom you know couldn't repay you, so again, can get very interesting to see indentures/agreements and try to find such asymmetric control clauses (which are very easily exposed when the company breaches covenants/gets in distress).
Helping you out with a few old comments I have. First, recognize no job is final and a career winds and twists in ways that aren’t obvious when you are younger. Only after the fact can you connect the dots of understanding how your past experience got you to the present. My advice for younger people navigating a career is the following:
One day you will interview for your dream job and need to convince the person across the table you are qualified for that job. Make sure each job you take is a stepping stone to that job or a tool in your toolkit for that job one day. However, note with this that career charting isn’t exact because you have imperfect information. You need to develop a thesis and as you gain more information and course correct. You won’t be perfect, you will miss, but realize sometimes missing is equally as valuable as being on target. If you work in a role that just isn’t for you, that can be helpful because it allows you to pursue other roles with more confidence and a reference point. Something I will also note is this is also why I encourage some job switching early in your career—you can gain a lot by working at different places and peicing together what sort of office/type of person you are more like or which environment/work you dislike more.
For someone who is a “business person” I kinda view the paths as follows:
-consulting/operations of companies
-entrepreneurship
-private investing
-public investing
There are obviously subsectors that vary massively, but these buckets to me are pretty different and have less overlap than interbucket roles. Note also that you can move between these buckets, people tend to do it less though since it usually involves some pay cut or risky decision making. Honestly, my guess is my career will end up touching all of the above in a way that makes a lot of sense now, but wouldn’t if I had explained it to college me. IB to PE to HF to entrepreneurship to hopefully mature company operations when my startup grows up. More in the next comment.
An old comment on the difference between IB and PE:
The PE versus IB debate is an interesting one. The truth is college kids don’t know what they want to do and it’s really hard to say what is actually better for your future. I think the actual answer is it doesn’t really matter contrary to what prospects and others will say, with both having pretty solid pros and cons. Also, both likely can lead to the same path down the line. Most the Megafund PE analysts seem to jump to another Megafund PE firm for associate anyway, or go to a HF. WSO will take this as a prestige debate, but I’m going to tell you some differences in what I learned in IB and PE (although growth) and why despite hating IB I’m actually very glad I did it. My personal take really is it’s actually less meaningful than people think, with potentially IB teaching you a skill set that is beneficial the rest of your life and undergrad megafund PE potentially being a quite impressive position that gets you to where you want to be sooner. I don’t know if there’s an obvious choice and both are great places to be. I think it’s more a coin flip than people would think based on the benefits of the skill set you get in IB and the ability of both to get to the same end destination.
Background on me, I did IB at a MM and thought when I recruited I was pretty certain I would do PE or broader investing long term. Some of the advice I received from mentors was IB and PE can often times be similar, but there are subtle differences that can teach different skill sets. I also was told to do mm IBspecifically (again really contrary to this website, so hang on!). Doing IB for a little bit could potentially be helpful for making you a better investor in the long run or just an overall more knowledgeable business professional. I sorta knew I would leave IB when I did it, but I was surprised by how much I hated my time in IB. There was less critical thinking, more abuse, less interesting work, worse people, and tons of people who just completely lost sight of the bigger picture. That said, There are a few things I learned that were really important:
Now at a megafund pe job, you likely would learn most these. However, a huge part of investing is the 80/20 rule and further most the time in investing your role is looking at potential investments and saying, “yeah, this one isn’t for us”. So it’s very possible to go to a private equity firm and spend a great deal of time not seeing the process of a company getting bought or sold. People refer to this as deal execution. IByour job is literally deal execution, so you will get more reps seeing processes than you would at a private equity firm, the con is you don’t evaluate opportunities in IB and are always trying to frame a company as great when many aren’t. Further, the reason I say I am glad I did IB is I know how to raise capital and market a business—you wouldn’t learn this at a private equity firm outside of hearing from an investment bank that is helping you sell a portfolio company or participating in a process, which isn’t the same thing. I have assisted numerous early stage and growth companies in creating materials and preparing them for series A, B, and C raises and it’s a skillset that I learned from banking. Had I done PE, I wouldn’t have this skill set and really wouldn’t know how to prep materials or provide advice on a process like an ex-banker would. Ultimately understanding how to fundraise and market a company as well as deception used by banks to make companies look better than they are is a skill set that is invaluable for 1) running/working for a growing company (entrepreneurship, startup work etc.) 2) assisting growing companies (VC, growth equity) 3) to some degree understanding the deception used can be helpful for evaluating opportunities (large-cap PE, other types of private investing).
Now PE will help you be a better critical thinker when IB actively discourages critical thinking. That said, in IB you can look at each deal you are on and think critically about whether you think a company is worth what a buyer is paying for it and what you would pay.
Finally, something that also is very relevant: your first year on the job, you are very useless anywhere and likely won’t really learn about an industry. Notice how some of the biggest skills I listed were outlook/ excel/ ppt proficiency? The truth is no matter how smart a person is, out of undergrad they just need reps writing emails and doing tasks to become effective in a working environment. This takes time, and really makes the first 6 months of a job in any IB firm or PE firm virtually the same.
You know Megafund PE is arguably the most prestigious position an undergrad can get, which provides superb optionality. There’s some pros to IB and switching as I listed. IB really does suck though and I think would be a more miserable experience than a megafund PE role. Ultimately both are great options and you can’t choose wrong. I think that’s the weirdest part about being an adult—for the first time in your life you need to make a decision that will close doors. Up until the end of college, most your decisions just open doors, but post, you start needing to make choices that will close opportunities. My advice, pro con the paths of each, call people who have had to make that decision before and ask them how they handled it, and trust your gut. The one thing I would caution you on—getting advice from people who are ignorant. This thread will likely have 10+ college undergrads saying “megafund PE for sure” without any idea of the pros and cons. Weight knowledgeable peoples opinions heavier than random ignorant peoples views. Good luck!
Edit: the one other thing I would say is to be careful about maximizing optionality above all else. My favorite type of person is the IB—> buyout PE —> HBS person who has no idea what they want to do with their life despite being almost 30 because they have never listened to their heart and pursued “optionality” above all else. Have a spine and take a chance at some point otherwise you will just be a wondering corporate shell continuously using other peoples definition of success to define your own, which from what I see is the best way to be unhappy and unfulfilled.
I really really appreciate my time in IB years later. I think it was fantastic for entrepreneurship and private investing.
Public markets investing and hedge fund investing is a difference beast entirely. To really be in the hedge fund world you need to obsess about markets and deal with extreme stress and risk taking which some people are not set up to do. Likewise, they need to operate at a high intelligence and intensity level and always be on in a way that just isn’t true for other fields in business. Due to public markets having very clear returns, there are less politics. This is great, but it means people can be very odd or aggressive and unfriendly personalities and as long as they make money they thrive. The reverse is also true, no matter how good your personality is the only thing that counts is making money. Thats less true for basically all other jobs.
FWIW, if you aren’t 100% on HF, I think you are better off finding something else. If you have a crap personality you also will need to do some introspection on which path would work best.
Either way, it will all workout.
Nah you’re def right, bankers are glorified marketers and the analytical aspect depends on your bank. Congrats on your return tho.
Just started my analyst stint and I remember having similar thoughts last summer. If you’re in an M&A product group, I could see where it’s easy to get caught up in the process and never feel like you’re getting the intellectual piece in as you may never get a full grasp on the business especially if you keep hopping from sector to sector on your staffings.
I do believe that coverage banking is somewhat slept on here especially at the junior level. I was generalist as a SA and now full-time in a coverage group that models and I think it’s the best of both worlds (understand a lot of coverage groups do not model and you miss out on a key part of the job if you hope to make it to the buyside). If you really dig the industry you’re covering, it’s easy to make it intellectual. You can learn a ton about the drivers of a business, what differentiates key players, and the strategic moves each player wants to make. It’s cool to see how the VP/MD duos analyze the landscape of sponsors and strategics and try to get ahead of the competition is mapping out the landscape. Buyside mandates are pretty neat in this regard as you get to see what a company does, what their future growth story looks like, and what emerging companies their corp dev/management are keeping tabs on. This is also immensely helpful for understanding what type of investing you want to do and what sector/subverticals interest you. It also helps inform where you think the money will be made in the future, which makes recruiting for corp dev teams or buyside funds a bit more strategic rather than just a shot in the dark.
There’s definitely a large delta in excitement in this job with who you talk to because of the variance in hours worked, culture, and the type of work you do. One of the things you can solve for is coverage group, and I do think it makes the job more enjoyable when you’re grinding late but doing work that you find a bit interesting and know you can build on to become smarter as a future banker or investor if that’s your end goal.
My main strategy for each staffing is going to be thinking through:
do I like this vertical?
what can I apply to my career from this? (interests identified or skills gained)
what drives these businesses from a P&L standpoint and what are the themes that management teams/sponsors are pursuing currently in the market?
This makes the experience more intellectual and allows you to come across smarter within the organization as well as just general acumen for when you talk to buyside during recruiting. It’s easy to grovel and complain about the nature of this job but I do think there are serious skills to be gained just out of college from this especially if you can take a higher level view.
To be a real rainmaker in this job on either the sellside, buyside, or as an operator/corporate executive, it’s clear to me you not only have to be sharp but also seriously interested in the sectors you cover because so much of the job is like chess where you have to constantly be one step ahead of the competition and that comes through countless interactions and meetings with stakeholders that help build a thesis on where deals will be and who will be coming to market (bankers/corp dev) and what will drive the highest returns (buyside/corp dev).
I think you do still learn a lot being an analyst for 2 years in IB. Considering you were an intern you didn’t have the same exposure full-time analysts will have to working with your senior bankers & actually needing to think for yourself while modeling, etc.
If you don’t know exactly what you want to do in the future, I don’t think it hurts at all to start in IB and figure out what you want to do from there. It’ll only open more doors for you.
You should accept the offer if you have not already and figure it out from there. Job market is absolutely brutal right now and you need that safety net.
Depends on what you like.
In terms of investment management, you have a good number of roles. IR(relations) is client facing, S&T is managing trades with other firms, endowments & family offices all have their own investment people who do analysis & allocation.
On the public equities side, you have Equity Research, Hedge Fund or AM Analysts, and similar roles (not necessarily any easier than IB, but generally a bit healthier hours + doing DCFs and similar)
On the M&A Side, you have internal M&A Roles (i.e. CorpDev) that pay a bit less but are also much more of a traditional corp role, as well as financial consulting somewhere like FTI or accounting consulting (if your background matches) at a Big 4 or other big firm.
You, of course, have all the credit stuff - credit research, consulting, etc.
You also have private markets (PE, VC, etc.) - guessing you already know about them since PE is the famous IB exit, but always an option to at least try the market.
Given you have IB experience, you're already in a pretty good spot. I've known people who have leveraged SA roles to land AM full-time or otherwise leveraged it to skip out on the few years of FT IB, so you're definitely in a good spot to make a mover once you decide where (if anywhere) you want to go.
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