I've done research and spoke to a lot of people in the industry and it seems like the hours aren't that better at all from IB and the all in comp is roughly the same as in IB. So why does every second person in IB want to make the transition one day? The only thing I conclusion I could come up to is that maybe the work in itself is intellectually stimulating. Or am I wrong?
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I thought hedge fund was for ER/AM types, not IBankers since the skills aren't transferable at all.
I thought hedge funds take the CFA types. HF needs a lot more skills then just being an excel jockey
What is a "CFA type" to you? Because in my experience, CFA types are generally people who can't access the primary roads to PE/HF, or for that matter even IB. I.e. they didn't go to top schools, didn't get wall street jobs right out of college, can't or won't go to a top MBA program, and are thus relying on the CFA as the one thing they can do to add credibility to their resume. Then once they get the CFA, they of course must preach to anyone who will listen that the CFA is the ultimate buy side credential. Meanwhile 99% of PE folks and 80% of hedge funders somehow didn't find the CFA worth their time.
Your guess is pretty much correct - comp & hours don't vary materially these days between IB/PE (exceptions exist of course), but the work is definitely a lot better, dare I say fun
Two points I think I should make here. One, your life becomes invariably more predictable due to obvious factors, most stemming from the fact that you are no longer a servicer to a client: you are the client. This washes away the last minute, out-of-the-blue client requests on a Friday afternoon. Second, there is less volume of work due to the fact that you are doing only what is required to get a deal over the line, while using investment banks for the ancillary tasks that may otherwise keep you up late at night. Management presentation needs to be prepped? There's a banker for that. CIM needs to be prepared for a portfolio company? There's a bank for that. Hell, I have even heard of people sending their comps to banks to be updated, completely unrelated to a deal they have been retained to advise one.
These factors GENERALLY make PE a better lifestyle, but there are many exceptions. I think the rule of thumb is as follows: larger firms tend to become more and more bureaucratic, which results in a higher frequency of work being pushed down and mid-level people going the extra mile (often for little value add) to impress those above them by creating more work. I think this is a common reason for why you see hours similar to banking at mf's, if I understand correctly. However, it is the exception in MM PE that the hours are equal to banking, and these exceptions seem to be far and few between (but I see you Mariner).
Haha so true, in one of my recent deals, our M&A team was their buyside advisor and the PE guys made them essentially write up their entire 80+ page investment committee memo. As in like from all the IRR sensitivity charts to all comps, sponsor investment thesis, even directly edited the sponsor model etc.
The best part was that PE associate wanted to make it look like as if he was directly doing all the work. So for example the PE associate would give instructions to our M&A guys that evening then go home at like 8pm, then our M&A guys would churn all night send him a draft at like 4am. PE guy comes in next morning at 9:30am then sends it straight to his Principal without CCing the bankers to make it seem like he did all the work. Absolutely hilarious
The actual reason is that PE is sustainable. IB eventually becomes sales.
Everything eventually becomes sales.
Oh God no, not sales! clutches pearls
Having worked both sides of the tables, I don't believe one is better than others. I have seen many people moved back to IBD from PE side. PE is great if you really want to be involved with actually investing, fixing companies and exiting. A lot of people say that they enjoy operational aspects of PE, but that can also start becoming a pain in the ass. On the better side of IBD, once a deal is closed, it is done for good and you get paid by then. PE people often complained that the real deal starts when you invested in a company; from now till exiting an investment it takes at least 2-3 years - that is a lot of sleepless nights ahead of you. The only upside with PE is when you actually invest your own money (GP capital), and you can significantly claim the larger portion of carry - which doesn't happen that much at the junior level. Was in IBD > then PE > IBD > now thinking about PE for the right fund environment.
I cover a very niche area so the only reason I would move to PE would to be:
My niche is 1) being able to fund raise myself, 2) do my own deal sourcing, and 3) do my own process improvements on the invested companies. I won't be going back to B-school for that.
Good question - I wrote a piece on this topic a couple months ago you may find helpful. I went from IB to PE and back. The link below outlines my reasons and rationale of what I was looking for. To no surprise, the grass isn't always greener.
https://www.wallstreetoasis.com/forums/there-and-back-again-a-bankers-t…
If you compare PE vs other exits opps out of banking such as HF or VC, PE is the one with the least prerequisites. For example, HF and VC both require a strong pre-disposition towards the craft -- whether it's a passion for stock picking or keen interest in the tech industry or entrepreneurialism. The reality is that most analysts have never picked a stock in their lives / follow the stock market, and outside of using Instagram and Snapchat with their friends, don't have enough of a passion for tech to make a career out of it. So that leaves PE. You then couple that with all of the great things you hear about PE, does it really come as a surprise that most analysts go into PE?