Why move to PE/HF at all?
Looking at these forums here, it seems like between banking, PE and HF the former is by far the best risk adjusted career. IB is paying high 6 to low 7 figures to mid level (VP/Director now) and hours are bad but get better as you become more senior.
PE sounds like IB but with less pay and worse hours (ironically the opposite of why everyone used to think PE was the best thing ever) and low likelihood of moving to partner level (versus in banking where the chances of making MD are not terrible as long as you grind it out). Then after 2 years you get kicked out (with low chances of HBS/GSB unless you work at a mega fund).
HF sounds like the world is moving to MM HFs where you have to balance 50 factors while trading 50 stocks and prodding CFOs and IR teams for quasi MNPI (“so - how have things trended last 2 weeks?”), or single managers where PMs find ways to not pay you at the end of the year and there is business risk. Yes the top places like Viking/Tiger are great but there are like 20 of those roles (if that) open per year so it’s not really a realistic option for the 1000+ IBD analysts out there.
Why would anyone move? Because the grass is greener?
A lot of people are type A here and want the potential for the greatest expansion in income in the future. You can make a lot of money as an MD in banking, but you're not going to make the same as a partner at a PE firm or a PM at a hedge fund (assuming they perform). You also don't get the tax advantages associated with carry. The probability of getting Partner / PM is obviously much lower, but I think a lot of people think they'll figure it out along the way, and if they don't they'll have a good buy side career. It's harder to make the jump to buy side past normal recruitment channels so you also retain optionality. Additionally a lot of people hate banking, which is client and sales centered, vs. PE and HF which are investment roles.
Agreed, and I'd also add that people generally overestimate their capabilities (eg a survey was done where 65% of Americans considered themselves above average at Maths or something, which is a mathematical impossibility). Hence the thinking by a lot of people that they'll make partner at a PE firm/PM at a HF
Median would be a mathematical impossibility, average is technically possible if like the bottom decile of Americans were as dumb as literal rocks.
Median is an average lol, those aren’t mutually exclusive.
Lol yeah, they can be the same value, but they are not at all the same thing.
average = mean; median isn't "an average"
Found someone in the bottom decile.
Because IB is at its heart a client-service job and working with unorganized clients who don't give af about you sucks. On the buy-side, when you're the one with the check-book, you don't have to deal with all of the admin shit you just get to execute and analyze deals you actually favor once the bankers do months of bitch work to create a CIM and financial model out of the shit ass, unformatted, PDF files the client sends them.
lmfao +1 this is too accurate my fuck life i hate making cims
Kind of amusing seeing everyone complain about the work life balance in banking and treat PE as their salvation - only to then go to the PE forum and see the same complaints
Firms, on average, are not paying this kind of compensation without asking for their pound of flesh.
While they have crossover skills, they are three different jobs. All of which are lucrative. So you should choose the one that best suits your personal interests and talents. I think a lot of people develop this mindset of raw optimization (be it for prestige, comp, or both) which is a somewhat defensible view for college and early career, but mid-career and onward you really have to think about what actually suits you best (even outside of these three choices btw!).
So with that point made, I’ll defend doing at least a tour in PE. Once you’re there at a good fund, you have some good exit ops and you’ll get some broad exposure to make an informed choice. If you like investing but don’t like people/process stuff, go to HF. If you don’t care for the investing piece and just found IB better, go back to IB. They would love a former PE guy. If you love PE, stay in PE. And BTW, the “2 and out” isn’t the issue it used to be, many places have moved to a direct promote model and even if not you can lateral relatively easily without an MBA. If you find you love working with the portfolio most, can exit to a great role in a portco (either yours or someone else’s).
All that said, yes I do think associate/vp in pe can be pretty rough at lot of places.
lastly since you seem focused on comp, I would say PE can still be more lucrative than IB, it’s just that it usually takes at least 10 years to hit that breakpoint and then it crosses over back to PE once the carry rolls in.
And don’t lose sight that what you’re seeing in IB comp isn’t necessarily the new normal. Bonuses are up because of supply/demand, but that ebbs and flows with the market…it can easily come back down. That’s what has happened every single recession, we just forget that as most on this website entered the workforce post GFC…
Since starting in banking, I have come to learn that PE is actually really unattractive because of how up in the air it is in the long term. What originally got me into finance was investing and my dream was to work at a hedge fund and eventually open my own, but practice has proven that working at a hedge fund sounds like a horrible job from a risk perspective, I really couldn't stomach it as well as I could stomach investing in a personal account, for example. I agree that long term, IB is the best risk-adjusted career because you can really find your niche and even breaking out and doing your thing is possible, if you really specialize in your sector.
The whole PE is the alpha giga Chad end all be all seems deteriorating and exhausting because it's literally just banking 2.0 with extra privileges that, not gonna lie, seem cool like getting a board seat and having some more authority on a higher level. That being said, I really like advisory and I'm not a fan of direct intervention, but that's just my two cents.
Can't speak for HF, but PE comp even at the mid level absolutely blows IBD out of the water. I was making 13-14MM/annum incl carry at APO as a VP and that was post-GFC.
Is that still true? At my MF, even post-MBA VPs are still slightly underpaid vs Banking (EB). My impression is that comp structure has changed materially as the number of non-partners have increased materially vs partners, and salaries have gone up at the very junior level. This trend has been galvanized further as proportionally more and more associates are promoted to VP without the MBA requirement, which has historically served as an excuse to kick junior ppl out and ensure that whoever was hired from HSW had a partner track. If Apollo is paying that much more to VPs (and we are talking here 10x to 20× more), sign me up to switch MFs immediately.
You’re responding to a troll account btw
Aren’t you a prospect?
Tell me you're a virgin without telling me you're a virgin.
This is obviously wrong. Allow me to clarify:
For starters, Apollo doesn’t even have a VP title. They only have Partner, Principal, and Associate. And $13-14mm annualized comp is blatantly wrong. Newly promoted Principals receive 2 points (out of 2000 total points), with each point worth roughly $2.5mm. That’s $5mm of carry that will vest over 5 years, equaling $1mm of annualized carry. Then base comp is around $1.2mm on avg during one’s Principal tenure.
Some people like investing; I don't, but some people do.
Important point to grasp about "Investing" - most private equity guys are not "Investors" at all but process managers. Sure maybe at the senior level you might get the chance to do some actual critical thinking about your fund's portfolio and capital allocations, but juniors are mostly still excel/PPT monkeys and VPs are still process guys. Not very different to IB in this respect, but that's why PE mainly hires former bankers.
Nope, much more interested in creating a nest egg in IB ($5-10M) and start my own consulting business where I get to choose my lifestyle (work 20-30 hours a week if I can to or 50+ if I really want to). The particular business niche I want to eventually start would involve a ton of networking / golf. Similar to what IB and the rest of the corporate business world is but at a much smaller/personal scale.
my wet dream except with basketball instead of golf (not memeing)
my dream as well except tennis instead of golf or basketball
what niche is that?
Executive search/talent management in Healthcare. Help clinicians find new avenues of revenue streams outside of their normal jobs (side gigs or career switchers from clinician --> executive/corporate roles etc). Kind of similar to what sports/entertainment agencies do for their clients.
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