Hoping you guys can help with this or at least give some views/opinions, and apologies in advance for the long-winded post! In summary as I've mentioned before in other posts on here, I'm an ex-IB guy now in MM PE in my early 30s. On the whole I enjoy my job however in recent months have had a growing sense of dissatisfaction/burnout which I'm getting worried about - particularly after the Christmas period where everything was shut down and I could relax with friends & family, I found myself almost dreading going back to work this week. I think this is being driven by a combination of the last couple of years having been tough for PE work/returns (for my firm anyway) and consistently feeling under-appreciated in terms of comp, combined with my general unease around approaching my mid-30s and thus no longer being "young" / feeling I have everything ahead of me. And I think you guys on WSO are the only people I can ask for opinions on this (as friends/family would probably just think I'm entitled/unappreciative, which perhaps I am).
Anyway, enough pre-amble let's dive into it:
Firstly, I would say that my headline comp has been decent - when I joined PE 6 years ago total comp was $200k, this is now more like $350-400k. However in my first few years at the firm I was a serious workhorse, regularly putting in 90-100hr weeks - not only to make sure I was a top performer, but also to develop my skills with an eye on getting promoted (and also fuelled by my insecurity around coming from a mediocre IB shop rather than one of the most "prestigious" banks e.g. GS/MS). After a couple of years there I found myself pretty much running/executing deals myself with minimal oversight from my VP/Principal (and practically nothing from the partners), in addition to port co management duties.
So my comp went up over time and I was also granted carry which I was very excited about/grateful for, however due to it being slightly opaque I perhaps didn't appreciate it wasn't as much as I thought. Also more importantly I was subsequently granted very little additional carry over the next couple of years, despite always getting glowing performance reviews and decent bonuses. Even when I became a VP in early 2020 it came with only a small amount of extra carry which I was surprised about.
Ultimately the first fund (2018-21) I had carry in did spectacularly well, due to our quality of deals but in fairness also due to the buoyant macro economy. But my actual carry payout was quite disappointing, as I was paid out less than $200k gross despite several VPs/Principals only a couple years older than me taking home $500k-$1.5m, and some partners making high seven-figures/low eight-figures. Whilst I know the average person would think $200k is a fortune I couldn't help but feel dejected especially as I felt I did as much if not more than some of the VPs frankly, and certainly more than many of my fellow associates. Thinking about it the reason they got paid so much more was due to a combination of being a bit more senior + probably negotiating/expecting better rather than just being grateful like I was + coming from a "prestigious" bank into PE so maybe starting off on a better package/foot with the partners.
Since then the environment clearly hasn't been great for PE firms (or mine anyway), so my carry in the latest fund is pretty much worthless and bonuses were down last year and are expected to be even lower this year. But at the same time I seem to be taking on more and more responsibilities, including taking on more struggling port cos from others to manage/turn around. In fairness my hours are much better as VP than they were as an associate (more like 55-70hrs consistently) so I'm sure someone in IB reading this will think I'm being ungrateful. But even though the hours are less the day-to-day intensity is higher as with having to manage various associates below me in addition to my daily responsibilities, I have very little downtime during the day (in contrast to when I was an associate working longer hours).
I have asked my partner about a timeline to getting promoted to Principal but just got told "I need to keep stepping up my game" and other vague suggestions rather than anything concrete, and I've been running deals and managing port cos independently since I was an associate so frankly am not sure what more I can do. Equally I've asked about more carry given my ever increasing responsibilities but have been told basically just be grateful to have a job in this market - which is a fair point, yet even when we were in a raging bull market my comp (either bonuses or carry) was never spectacular, so this equation only seems to go one way.
My biggest issue is, what are my options here? I know I'm already well-paid compared to most jobs, and don't fancy going back to IB - so if I leave I will take a big pay cut. I'm single so have no wife or kids but would like them in the near future, so I'm quite reluctant to leave for a role paying far less e.g. corporate development which might have its own issues. But then is the only thing I can do is stay where I am and feel constantly under-appreciated? And given my age I'm worried in 5-10 years I'll be in virtually the same place only earning slightly more in comp, while many of my less hardworking peers have ended up as IB MDs or PE partners.
Anyway sorry that's my long rant/life story over lol. So basically just wondering if you guys had any advice/thoughts, or if you'd been in a remotely similar situation and what you ended up doing? Thanks in advance.
Sometimes you have to make a move to either force your current company’s hand or to get a step up in comp
The curious thing about your post is that you don't once mention lateralling to a different PE firm. Ask yourself if that's because you don't think that's an option or if it's because you don't want to be in this industry anymore. Try and separate your current firm experience vs. the industry as a whole when you ask yourself that.
Agreed.
Thanks yep that’s a great point - I guess my worry with a lateral move is that given I’m not working for a MF with a brand name, there’s no reason for another MM firm to give me a sweet package ie lots of carry right off the bat. So I’m worried that I’ll end up in a similar position work and comp-wise but without having the specific deal & port co experience/internal relationships, ie having to “start afresh” and so being in a technically worse situation.
Having said that, as my OP demonstrates it doesn’t seem like my knowledge and experience is fairly valued at my current firm anyway imho, so perhaps I’m just undervaluing my “worth” in a lateral move.
Pardon if this comes across blunt but my reactions are:
If you are looking for something very different yet still related, there is the PortCo world. You seem like you have enough experience to be CFO of a small to mid size PortCo. Could be more fulfilling in terms of feeling like you're actually building/contributing something rather than pushing paper, it's something different, new people, new things, new job functions. Cash comp might not be a drop off and you'll trade one form of carry (all portcos in the fund) for a much more concentrated form of carry (just your co). Grass isn't always greener though always have to keep that in mind.
Sounds like this a comp issue my friend. Push hard to try and lateral
Thanks - any tips or experience on the process of lateraling in PE? My worry is that given I’m at an MM rather than a MF with a brand name & “prestige”, I wouldn’t get a massive bump from my current comp or get offered lots of carry immediately, so could end up in a similar situation over there but without the benefit of the internal relationships I have currently (not that those have helped me a huge amount so far as my OP said).
You’re not the only one. I’ve talked to a dozen VPs at firms that are having trouble raising the next fund and don’t know if there’s room for another Principal or MD. And given the fundraising environment, there’s probably more dissatisfied VPs out there than there are funds looking to add to the mid ranks. It may take a good M&A rally to drive enough realizations to feed new LP commitments into the next vintage of funds. Which would in turn create more opportunity for VP/Principals in the following years.
That said, the best way to find out is to look. Put a deal list together of your investments. Lay out specifically how value creation played out in each deal (rev, margin, M&A, multiple exp), and detail your specific contribution to each deal’s value creation. Calculate the gain you’re responsible for and how much carry you’ve generated for the funds. Then start talking to head hunters and let them know what you are looking for. If you are an experienced PE professional that is responsible for value creation and significant gain / carry, funds won’t care where you did your analyst stint. Your recent experience and track record is a better indication of your capabilities.
Now if you do the math above, and you haven’t really generated that much gain or carry for the platform, or if you have more losers than winners, then maybe your Partner is right: you might be lucky to have a job and should perhaps keep your head down and work on improving those numbers. Managing deals and giving partners leverage is good for an associate or VP. But to be a successful senior member of a PE investing team, you need to drive results - i.e, realized value creation, equity gain, and carry $.
Yeah if just a simple comp issue my suggestion isn't going to get you anywhere anytime soon
Try drugs
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