Why do junior bankers make so much compared to junior HF/PE analysts?
1st yr banker pay is roughly 20-40% higher than 1st yr HF/PE pay. I understand the HE/PE pay exponentially outgrows the banking pay but any historic reasons for the first 2 year pay gap?
It all comes down to how much value you provide. An investment bank derives more value out of an excel jockey who's primary challenge is coping with the demanding nature of sell side work - and not the difficulty or critical thought devoted to the work itself which is often bland and monotonous.
A PE/HF derives less value from these abilities because buyside work is not as intense yet places a strong premium on higher level thinking and industry experience . As such, the Analysts' post-MBA counterparts bring a lot more industry experience and understanding to the table while also filling the excel jockey role when needed. Therefore a prudent buyside shop would do less to attract young untrained recent-graduates in favor of devoting its limited time to recruiting and incentivizing those who will generate more value.
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