Megafund vs. MM Private Equity

Approaching the end of the year once again there are quite a few discussions and rumours floating around between analysts in the city. Who is going where, what opportunities are people looking at and what are other analysts considering a good move after your analyst stint.

Given the changing environment some of the larger PE firms went public and are now becoming more and more integrated in terms of product offering. It seems that smaller funds have a lot more to offer than their larger counterparts in multiple aspects. This starts with advancement opportunities, goes through pay, deal exposure, responsibility etc.

While the megafund used to be the most sought after I get the impression this notion has changed. Places like BX or KKR offer everything from traditional PE to credit, to hedge funds to advisory, capital markets, consulting, you name it. At the same time many senior people are in place, will continue their work until they are 70 or older and advancement opportunities to the level where you actually participate in a meaningful way in the funds earnings are highly limited. Pay at the places seems to become more standardized and generally has less upside potential than in earlier days. In London the highest earners in PE are people who run much smaller places and outearn the big guys by many times it seems (exceptions to the rule exits ofcourse).

Additionally it seems that many of the good associates use the megafund as another way of getting something better afterwards. There is either the hedge fund or smaller PE firms where they have more advancement opportunities and possibilities to earn more. It seems exposure on a billion plus LBO deal to the actual business is much more limited than on a 100m deal and involvement with management and their actual connection to the firm is quite different on larger versus smaller deals.

I still think that going to a megafund has the same advantages as going to a BB when you start out in banking but it certainly does not provide the most personal development opportunities that many strive for to achieve after the 2 or 3 years of M&A at an investment bank. In general I get the impression that this will continue to change and while megafunds become more and more like integrated financial institutions, some smaller PE firms will become the new megafunds etc.

Please feel free to share your views

Comments (3)

Jul 2, 2012 - 9:53pm
labanker, what's your opinion? Comment below:

Meh. I would say the megas still carry the day in terms of prestige, pay, and experience. Yes most are two and out, but then again, a lot of MM are two (or three) and out.

Not sure about "standardized" pay unless by "standardized" you mean "a lot more than MM shops."

Overall I'd say if you can land a mega, do it, if not, do a MM shop. Mega will probably put you in a slightly better position post associate stint, but either way you will be rich and have a solid resume.

  • 1
Jul 2, 2012 - 11:46pm
BobLoblaw12, what's your opinion? Comment below:

Great topic to bring up as this year the largest funds are waiting until Jan 2013 to recruit whereas the larger middle market shops had their pick of analysts in March. Megafunds are still the most sought after but top analysts this year took offers from smaller shops without a second thought. Historically you could strike out at several megafunds before the MM started interviewing, but now analysts are forced to think about whether to take that MM offer vs. how badly they truly want to work at a megafund.

Best Response
Jul 3, 2012 - 2:48pm
brandon st randy, what's your opinion? Comment below:

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Too late for second-guessing Too late to go back to sleep.
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