Why do you go into Investment Banking before going into PE?

Hey guys,

Mainly just a lurker around here but I have a question. As I've somewhat familiarized myself with IB, it seems a lot get in as an analyst and then hope for a PE opportunity (not all, I get that). My questions is: why not just try to start with a PE firm, or try to become an associate at the IB you're at?
I'm in the Dallas area and have seem some PE firms hiring for people with "0-2 years" experience, so it seem they would be open to hiring a recent grad.

Are PE firms that much more competitive to get into where you are basically forced to do IB first? Do you move to PE because pay is ultimately better as you further your career? Do you move to PE because work hours are better?

Simple question is: why do some go into IB with the intent of moving over to PE? Why not start with PE? Sorry guys.. I'm ignorant to this particular subject, which is why I figured I'd ask.

Thanks guys.


PE firms are happy to let the banks train/weed out recent grads, then cherry pick the best. Many PE funds aren't large enough to devote/risk significant dollars training individuals, only to have them flame out. Much of the low-mid level PE work is deal management, or higher level structuring/analysis, and not the grunt work done by 1-2 year IB analysts. Finally as others noted, going directly into the buy-side, PE/HF or otherwise, will pigeon hole you a bit going forward, but banking leaves you wide open (with the caveat that I don't think anything you do in your first 2-3 years out of undergrad pigeon holes you long term in a significant way).

Best Response


  1. Why not just try to start with a PE firm? There are PE firms that hire juniors out of undergrad. However, this 99.99% of the time is in a sub-associate role. In other words, you would be junior to me. I’m only pointing this out because I don’t want you to think that a person out of undergrad is getting hired to function in the same capacity that I do. There is a tremendous amount of autonomy I have as a PE associate that I didn’t have as a IB analyst. Most people (even the top performers) out of undergrad need constant guidance and instruction. Out of undergrad, no matter how genius you are, you have never done a real live transaction, negotiated an NDA, been the sole person responsible for a deal model, diligenced a management team who is much older than you, managed various third parties (lawyers, consultants, accountants, etc.) You need deal experience to have any idea on how to go about approaching these things in an intelligent manner. This is what a PE associate does all from the buyers perspective. A person being hired right from undergrad to Blackstone isn’t functioning in this capacity. They will be an analyst to the associate being groomed to function in this capacity. The reasons stated above is why most PE shops recruit to hire IB analysts after the 2-3 year IB period. When I started PE, I had 3 years of BB IB deal experience. I had a very clear understanding day 1 of my new job on how an M&A process and debt financing works. I also was well acquainted with modeling and how to be scrappy with digging up valuable information. I also had participated in diligence sessions before from the IB analyst side. With that being said, I can’t stress how different the buy-side is and how much I’ve learned so far. My skillset was very transferable, but sitting in the buyers seat is completely different.

  2. Why not try to become an associate at the IB you’re at? There are a boatload of reasons why people leave IB. It’s a tough gig as a junior. Committing to do the A to A thing is basically accepting 6.5 years of a rough lifestyle. I honestly think most people recruit for buy-side because most people recruit for buy-side. However, people do leave the IB role for other opportunities (b-school, corp dev., etc.). The biggest attraction to leveraging a junior IB role for 2-3 years is that you’re essentially placing yourself on a platform where you can exit into almost any industry. There might not be another time in your career where you can essentially exit a job and do almost anything. I spent 3 years at a top group at a BB. I honestly felt like I could have recruited for almost any role I desired (PE, HF, VC, Startup, F500, etc.). Now that I’ve decided on PE, I don’t necessarily feel that way. For example, if you move to a distressed hedge fund, you’re a distressed hedge fund guy. You might have a hard time recruiting for an equities event driven fund. As an IB analyst, you could recruit for both easily.

  3. Are PE firms that much more competitive to get into where you are basically forced to do IB first? PE recruiting is 10x more competitive than IB recruiting. There are drastically fewer spots in PE than in IB. The cycles is which firms recruit isn’t as structured. Although there is a PE wave of recruiting each year, there are tons of PE shops who don’t recruit with the initial wave. PE networking is also harder than IB networking.

  4. Do you move to PE because pay is ultimately better as you further your career? Further in your career, especially at a successful performing fund (stress on word successful), you should make more money as a Partner at a PE firm versus being an MD in banking. It’s hard to beat meaningful carry at a successful performing fund. As a junior, the biggest misconception on this forum and across the street is that pay is better at the junior level. Yes, if you attain an Associate role at Apollo you will make bank relative to staying on your IB track. However, in most cases, I would say the pay is very comparable, especially with the increase in IB pay across the street over the last year or so. The difference for most people will be nickels and dimes (I don’t mean 5 cents and 10 cents literally, talking thousands), which after tax isn’t particularly meaningful at all. I’m a first year PE associate and my best friend is a first year IB associate(A to A promote). I’m willing to bet all in the difference between our pay won’t even be worth a discussion. Again, I think this is the norm. However, yes, at a mega PE shop (e.g. Apollo, BX, etc.) I would expect the pay difference to be more meaningful at the junior level.

  5. Why do some go into IB with the intent of moving over to PE? The street and recruiting process are structured in this manner. Headhunters sift through IB analysts (primarily) and work with PE shops to hire IB analysts after their 2-3 year program. This question is almost like asking “Why do people do internships to get into IB?” It’s simply how the system works at the present moment. The primary avenue to PE is IB.

  6. Do you move to PE because work hours are better? In most cases, all my friends have better hours. The exception is my 1-2 colleagues who went to the mega shops. I would say the mega shop colleagues actually have worse hours than IB! Let me be clear by what “better” means though. This forum tends to have a misconception of the “better hours” theme. I still work hard. It’s a job in high finance. I believe the better hours really are a result of more autonomy and my work not being client driven. I have more control over the timing so I can manage life better. No more of the surprise 8pm deck that needs to get done for a client by tomorrow afternoon to discuss the mega deal that will never happen.


1) You mentioned that networking for PE is more difficult than networking for IB, could you please elaborate a bit on that?

Here are my reasons:

a) There are a lot more IB professionals than PE professionals. There are BB IB coverage groups with a larger headcount than many successful MM PE firms! Therefore, you guys have a much smaller pool of people to cold email or grab coffees with.

b) IB professionals are much more accessible. There are tons of events banks have to meet students. A bank will go to several campuses, host events for target groups (LGBT, Minorities, Veterans, etc.), give out scholarships and have bootcamps, etc. 96% of the PE universe won't do any of the aforementioned before you end up in their office for the first round interview for an associate role.

c) Headhunters are gatekeepers. I hate saying this phrase because I'm an optimist and I believe I am my own gatekeeper. Therefore, the seat is mine for the taking. Most analysts first exposure to various PE shops will be through the headhunter, which is an element not entirely present when you do IB recruitment.

d) You're no longer a student when you network for PE. When you do IB analyst networking most of the time you're doing it as a student (I'm aware people network as laterals as well). First off, students have time. Students are not on live deals. Students are not chained to blackberries. Most students don't have full-blown adult responsibilities. I understand students have class, but it's much harder to network like an animal while performing to the best of your ability as an IB analyst.

With all that being said, I can speak from experience that PE networking is very doable. During my PE recruiting process, I can recount at least 5 interviews I had as a result of my own networking, 1 was at a mega fund (e.g. KKR, BX, Apollo). While I got several headhunter interviews, these 5 interviews completely eliminated the headhunter as the middleman. PE networking will be a 2nd full-time job if you want to do it effectively. Also, like most networking efforts, your reach outs will fail more than they succeed so it takes will power.


Good post +SB. I also have noticed that some of the younger users think that the pay in PE is across the board is higher than IB but as you noted it varies and is only a guaranteed bump if you are at KKR/Carlyle/Apollo etc. level PE fund. The PE fund near me pays around BB IB pay for their analysts and associates if not slightly less. FWIW their AUM is ~2 billion USD. Can someone talk about the difference between MM and boutique PE?


Having spent some time in Dallas, I met lots of people that were hired into PE funds straight out of undergrad. However, the experience, pay, opportunities, prestige etc. of these funds do not even compare to what is available in firms like KKR etc.

Usually I saw people go PE -> Valuation! The type of work PE firms have for analysts (note: big PE firms call their entry level "associates", whereas these types of firms do call them analysts) do basic valuation work for regulatory reporting reasons and also for investors.

So in total, these firms do not provide the experience people who are going IB - PE are targeting. You pitch to private individuals rather than CEOs, your exposure to the deals themselves are basically 0, and due to the management structure of these funds there is no upward mobilityl.


As others have mentioned, if you go straight from undergrad to PE, you will likely start as an analyst. We have one analyst, and he splits his time assisting the associates with whatever menial task that has been delegated to him and the CFO/controller with different back office functions (LP reporting and tax, primarily). For the most part, it's bitch work. However, just being in our office environment and sitting in meetings/listening to the conversations is an invaluable experience in and of itself. The goal is for him to eventually transition to an associate role. So, even though it's not always the sexy deal work, it's still a pretty good position. Many PE firms don't even have an analyst role, though.

On the associate side, I didn't do IB before moving to PE. I took a very unorthodox route to PE, and I'm very fortunate to in the position that I am at today. If anyone is looking to break into PE, I would 100% advise that person to start in IB. The chances of you breaking into PE as a non-IB analyst are slim.

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