2nd year MM ER analyst here (just finished my first year) with 2 offers.
Deciding between ECM career at an EB (effectively becoming a career banker) vs PD FoF (2bn AuM, 4 people) at a large FoF platform (10bn).
The FoF pays € 65k Base + 100% Bonus in the first year (paid at the end of 3 years for y1,y2 and y3) the EB pays € 95k base + 100% Bonus target. The FoF Partner told me the way up is free (from investment analyst to Partner). The only reason why a performing Director or Managing Director is not becoming Partner is due to lacking fundraising capabilities. He also took a paycut coming from a T2 Consultancy more than a decade ago but it was well worth it since the money in PE is being made in the long term.
Just wondering where money is better in the long term
Well, can you fundraise? The FoF role has the potential to become the most well-compensated assuming you can persuade them to award you a significant carried interest allocation. If it's a diversified fund then it will likely track the asset class returns of PE which will be well in excess of the IRR hurdle. Carry % will be lower than at a buyouts fund, but with lean deal teams and a smaller partner bench this can still translate into material wealth accumulation over the long-term subject to performance. EB is better for the short-term dollars but you have to ask yourself whether the WLB is sustainable - and you won't get the long-term carried interest upside.
Some back-of-the-envelope arithmetic: Assuming the FoF's latest fund raised €2.5bn, returns 2.5x TVPI (20% IRR) over 5 years, and charges 5-10% carry above an 8% hurdle, then the total carry pool will be ~€125-250m. As a Partner with 500bps of carry you would be entitled to an unvested amount of up to ~€6.25-12.5m, and that's just from one fund, and will be in addition to whatever salary or bonus you make over the years along with carry from previous funds.
The fact that the bonus is deferred by 3 years is annoying though - is the fund offering to compensate you with some form of interest?
It would be very rare for a FoF to get to 2.5x TVPI. Also, I doubt a primary FoF would be 10% carry, closer to 5%.
Fine - but I still doubt that career earnings would be higher at an EB in Continental Europe or a 4-man private debt shop.
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