Debating MF PE vs Staying in IB
BB coverage analyst 1 here in great group. We send 80% of class to PE every year, and usually half of those are to MFs. I recruited and got a MF offer back in the fall, but I didn't know if that's what I really wanted. X months later, I've drank the cool-aid that banking sucks, but while it's a refreshing thought to leave, I am equally as reserved about joining the MF. While I was given a stellar review, I still don't feel like I know anything about finance other than high level concepts. Deal activity has been slow in my group so definitely haven't gotten the same experience as the classes prior. My main concern is attrition. I know most that many who go to MF pe get kicked down the road after 2 years. I do not intend to get an MBA because I wouldn't want to take out debt or ask my parents to cover it, and given the need for strong associates in my IB group, I might be shifting back towards staying.
I've read the "those that have stayed" threads and "MF PE life" threads, and in all honesty the decision isn't quite clear. Not as clear as getting into IB way anyway. Seems like the pros and cons of both about equal one another, and the safe bet would be actually to stay on since the group likes me. I also have to be honest with myself and ask if I could be top of the top (under the assumption MF PE usually draws down on great analysts). Really debating between the two, and I am more confused now than when I started. Like many of you, I'd like to just gather some zeros in my bank account no matter the avenue. While I find PE interesting, it's not as if my ideas are being capitalized on within the 2 years. Curious if anyone has any insight.
I think it may helpful to write down where you want to be in 10 years and what steps you will have to take to get there. Do you enjoy your IB role and could you see yourself working in that environment moving forward?
You can always come back to IB after a 2-year stint
Ask yourself if you’d be a better MD in banking (primarily relationship driven) or PE (primarily returns driven). Make your decision based on that
I see the logic here, but isn't that an impossible decision given I have no serious data points or exposure to either? Not like I'm shadowing an MD to see where the plays are. Of the meetings I've been in, it's just talking coherently about the space/where we think opportunities are.
Obviously you’re not going to have perfect information here, but you should dig into it as much as you can if your ultimate goal is to pick an industry where you can get to the top. Speaking from my limited experience, MDs in IB are defined by how much revenue they bring in based on their relationships, meaning network is everything. MDs still have to do quality work to maintain these relationships, but I have seen that business is typically won due to connections rather than better perspective in pitches. In PE, these connections are still very important for sourcing, but MDs are mostly defined by their investment track record. There’s more pressure on being right because you live with the consequences of your investments (whereas bankers don’t suffer as much if an acquisition leads to poor returns) and much less room to bullshit. But you’re also not managing a client book like in banking, which if you’re not a good sales person, sucks.
The nice thing about PE is it's pretty easy to switch back to IB after your associate stint, while difficult to secure another PE offer if you stay A2A in IB. I would also argue I would be a far better banker post-PE than I would've been staying in IB because you get to experience the other side and understand how the M&A process works from the buyer perspective. Regardless, if you're smart enough to get both these offers you're likely going to do well in life no matter which avenue you choose, so don't stress too much.
Great perspective
In the end, it comes down to what type of work you are most interested in. You will make plenty of money in both industries. You will be working horrible hours in both industries.
Do you want to work in an investment role where you spend time analyzing and understanding investment opportunities at a very deep level? In that case, go for PE.
Do you want to work as an advisor where you don't go as deep into companies but rather spend a lot of time creating outputs, co-ordinating workstreams, and have every final decision made by the client? In that case, stay in IB.
Personally, I love analysing the pros / cons of stuff, solving problems and being intellectually stimulated. I've found that in IB, 99% of stuff you do just comes down to execution and going through the motions. As such, I'm not very interested in staying in IB after my analyst years.
I did a long-term internship at a MF before going into IB and what I also appreciated about PE was the predictability. I probably worked as many hours as I do in banking, but I knew what to expect for the coming 1-2 weeks ahead and having things blow up in my face was very rare. Meanwhile, in IB I can't even count the number of times I thought I would be able to leave at 1am just to have something blow up in my face at midnight, resulting in me having to stay until 4-5am.
No offense to anyone on either side, but I find these types of comparisons hilarious, because from what I've seen (as a junior employee), the skills required to succeed and differentiate oneself in either role are quite similar. Basically, folks like to say IBD = sales; PE = investing. Yeah, investing requires good judgement, and analysis, but these days in PE the most differentiated and important skill for long-term success is sourcing, which -- guess what -- is sales. And to be a differentiated MD who's building repeat business, you need to offer good advice and actually contribute good ideas. So to succeed in either role, you need to be able to source and you need to be smart. The ingredients for success in either role are quite similar. I suspect that a strong MD in banking could do well in PE, and vice versa. This may be an unpopular opinion but just my $0.02.
I think the most compelling argument I've seen is the note a couple comments up, where someone pointed out that you can always go back to banking from PE. If you have the MF offer, try it for a couple years, and if you decide you miss banking, you can always go back. As someone who did the classic 2 years in banking and 2 years in PE, I found the experience in PE pretty jarring. A lot of the junior camaraderie, etc. that made banking bearable was gone. Maybe I got unlucky with the specific PE firm, but I found the people a lot more cut-throat. I suppose this makes sense, to some degree, given the supposedly larger quantities of money on the line.
I agree with you that the required skills are quite overlapping (especially at the junior level), which is why PE recruits heavily from IB. However, how you utilize those skills differs.
Leave your group on good terms, give PE a try, and if you hate it you can very easily come back to IB and even the same group. PE will at minimum make you a better banker and you won't have the opportunity to try it if you stay in IB.
Also fewer and fewer PE firms, especially MF, kick their ASOs out after 2 years. Saying "most" get kicked out from MF to MBA is a vast overstatement. If your firm is one of the few that does, you can just hop to a different firm pretty easily. MBA is no longer a requirement or even common honestly.
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