Back to IB?
Currently a rising 2nd year at MF that has seen a lot of attrition in recent months. While most exits have been to public markets or earlier stage roles, a well respected associate decided to go back to banking, which has gotten me thinking about my own career decisions.
Feels like this is becoming more and more common in the last year or two given where we are in the economic cycle and the overall stage of maturity for the industry. Putting aside personal preferences for investing vs advisory, do people still think a career in PE is worth it? Anyone else considering a move back to the sell side?
There is definitely an increasing sense of dissatisfaction with PE that is spreading across the industry. Recent classes who have started in this tough market (~last two years or so) are starved for real deal experience and coming to terms with the fact that PE has changed. Negative fundraising outlook combined with the current market backdrop of high interest rates and stalwart private market valuations (driven in part due to the sheer amount of dry powder raised over the last 5 years) are likely to bring down returns, which significantly devalues the promise of carry. If you fully write-off carry, the pain of this job is flat-out not worth it for the mediocre cash comp.
I have a few friends who stayed back in banking who are loving life, getting paid a significant amount more than me (in cash comp) and feel much more secure in their career path. Hard to argue that this job isn't getting less attractive vs. IB and other alternatives and I can totally see IB being an increasingly viable career path. All of this said, I personally enjoy my job in PE more than I did IB and have a decent path upwards in my current seat, so I'm fine sticking with this for now and seeing where it takes me.
“When it’s a good time to fund raise, it’s a bad time to invest. And vice versa.” Very few firms followed this over the past ~5 years and are now paying the price. It’s pretty absurd that as an industry, we were celebrating full $1B+ fund deployments in less than a year. Those that took a more measured approach are in a much better position today and will be the real winners. But, as mentioned above there will be a large graveyard and a lot of pain. Every other week it feels like we get off of a call with a lender or banker where they highlight another fund struggling to raise pushing out garbage into the market trying to get distributions for investors. If you are at a fund that’s positioned well, raised in this tough environment and is hiring instead of cutting heads, I’d actually be pretty optimistic about the next 5 years. If you’re in the other camp, yes, I’d be looking for exits (I.e, back to IB, consulting, etc.).
It still amazes me that the funds often mentioned here that are struggling (I.e, Carlyle, AmSec, Trilantic, Siris, Clearlake, etc.) are still bringing in fresh new crops of Associates. Like who in there right mind is willingly jumping on to a sinking ship. Maybe it’s oncycle but are fundraising momentum, attrition, returns, not top of mind when choosing a fund to go to.
Why would you fully write off carry? I don’t know anyone who has carry that has completely written it down (and I know so folks at poorly performing funds).
The cash comp in IB is definitely compelling, but younger folks views are skewed by the fact that the last few years has been record breaking for M&A.
These guys and gals haven’t lived through a dead market in IB. If deal flow stops, bonuses will crater. At that point, where would you rather be?
If deal flow takes a big dip, I would still take my chance in IB. Maybe you don't want to be in a M&A product group, but a good coverage group will give you reps at pulling together some financing models, maybe some creative pitching to try stay in front of clients. Plus when the market recovers, and comp should recover as well.
If you are in PE and deal flow dips, you have more dollars chasing few deals, and IRR becomes even more compressed. Now you are sitting around for a vintage of fund to recover or close out with less carry. Maybe you get some good reps at operational tasks, but lets be honest, the factors driving slow M&A, typically mean an overall decrease in the broad economy as well. Meaning your portcos probably are not doing so hot either.
following
following too. Know two analysts at my shop who reneged on PE offers to stay
Been in PE for 5 years - several partners i work with havent seen meaningful carry cheques 10+ years in.
Realizing significant carry requires so many things to go right, that it’s highly luck based.
PE just isnt the wealth creation tool it was 15 years ago. In fact this has been the case for a long time but because funds take so long to harvest, its only now that senior people are realising this but its too late for them to switch careers.
a very very common situation:
joined in 2015 as an associate, markets roaring, rates at 0, expect realized carry distributions of $1-2m+ over the next 10y.
2025:10 years in as a director, realised max 200k, no clear path to partner as fund size shrinking, wasted the best years of my life to make less than my less smart friends that stayed in banking (or even consulting / law)
Sounds like you were also just at a shit firm, mate
Im the less smart friend and this gives me hope.
Is this an easy transition from an UMM / MF?
Yes please go back to IB so there’s more room for promotions in PE for the rest of us 😂 in all seriousness, PE is just flat out better than IB in almost every sense, including comp. People who are worried about the future of PE are all under 30 and haven’t been through a bad fundraising cycle. Most MF are raising more money now than ever. Realizing carry dollars has been pushed out over time, but the money is still there. In my opinion, it’s an extremely naive perspective to believe that PE is “done” or whatever crap people are saying on this forum
IB is an easier job, more stability but job is repetitive and you are pretty capped at what you can earn. I think most people remember being an Analyst in banking but the job can actually get more interesting as you get more senior. Path to MD is difficult but pretty "easy" (i.e. little chance of no progression) until that point. I have some figures from my banking group and MDs were between $1-5M during 2022 (GH was more despite less revenue at BB)
PE is a very interesting job at its core with much higher upside. You get better training if you want to leave finance or do your own thing. Culture is much worse (and will continue to get worse with back stabbing, sharp elbows, corporate politics). One thing people don't consider is that with the amount of coinvest and GP investment you need to make, you will continue to be relatively cash poor until something prints
PE has proven to be a money making machine over the past 30 years and I don't think that will stop. It might be less but it will continue to print and it might take longer than people anticipate.
I disagree on being capped on what you can make… good MDs can make a lot by bringing in many deals
Actually nvm I disagree w most of the points and don’t think u really know what you’re talking about here
Not OP that wrote the comment but how come?
The average UMM/MM PE partner should be making higher than the average BB/EB IB MD with an upside of carry that can is theoretically uncapped (though in recent years have been closer to 0 lol). Yes, some MDs make $20M but that's probably more of an exception than the norm similar to how a PE partner making 9 figures is a far cry outlier than the norm
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