How do PE Salaries Work? Are they as high as people claim?
Hi,
I'm a rising junior at Princeton University with a decent (3.5+) GPA. I've never been keen on going down the finance track. I do acknowledge the importance of understanding money, but I've always heard stories of people feeling depressed/unfulfilled after a career in finance. That said, I care about money, and if the compensation is high enough, I can potentially live with that. A few friends at other universities going into private equity have been telling me that the salaries in PE are high enough to justify the change in career path. When I look up analyst salaries, they seem high, especially factoring in bonuses, but most of what I found is in the $100-200k range, removing outliers. The top-end seems comparable to computer science salaries with higher hours/week. I've also read that the burnout rate is high and that most people don't get promoted after their first two years, needing to network constantly to get a job. I've been told that people end up with 500k salaries very quickly, but I'm curious what percentage of cases actually turn out like this. Looking at all of this, if the goal is optimizing for money, it seems like finance is a riskier option compared to CS. I feel like I'm missing something, but I need some clarity. Questions:
-
Approximately what proportion of incoming analysts make it to the 400k+ bracket before burning out/fired/aging out?
-
What is an average expected salary working PE on wall street?
-
What is the typical career path of a PE analyst two years after entering the industry?
Thank you for the help,
Anon. Student
Just do what you'd enjoy most.
It's easy as a student to just compare compensation figures and associated risk, but once you start working this actually becomes your life 40+ hours a week.
To answer your questions: both careers will have great earnings, PE is more of a grind and more competitive throughout your career, but if you're willing to grind it out (which is easier said than done) then the upside at the mid-senior level is very high (millions in carry).
Are most people in PE expecting to get to that mid-senior level position? It seems like lofty ambitions to expect to get the thing that everyone else wants. What does the middle-path look like for those who don't make it to the top 10% of positions?
Wrong mindset to have. It doesn't matter what the middle path is, you should strive to be the top. Same mindset I assume you had in HS to end up at Princeton, you should carry over to your career.
Salaries are what you hear. Heavily weighted toward annual bonus. Most analysts at big firms these days will be $100-$120k base. The last few years have been ~100% bonuses due to high deal flow, so all-in comp of $180k-$220k. TBD what that looks like the next few years. PE bonuses should be more stable than banking, since they’re paid out of management fees (recurring) rather than deal fees (cyclical). By a couple years in, $350k-$450k is the right ballpark at big firms. Once you make VP (~27-30, depending on if you get an MBA), that cash number will go higher, but more importantly you start getting carry (equity), which can be easily as much to several times as much as your annual cash comp - this is where the big money gets made. Cash + vesting well into the 7 figure range by your 30s (except you won’t actually see the carry for 5-10 years, if you make it that long)
Software engineers inflate their comp by including their signing bonus and assuming stock prices continue to rise - if you’re at the equivalent of a FAANG / unicorn type tech firm and the fund returns are strong, you should be making several times what the equivalent software engineer makes.
However, and this is important, the hours will be backbreaking, there are far fewer seats total at top investment firms as there are at top tech firms, and most big shops are “up-or-out”, meaning there’s no room for the median employee to stick around their whole career - if you aren’t a top performer at each level, you’ll get coached out (encouraged to begin finding other jobs), or outright fired. This is also different from tech, where there are places you can hang around at a terminal level making $400-500k for many years.
Long story short, at the equivalent level / firm tier, finance pay is comparable in the first couple years but quickly separates and should be significantly higher over a career - that said, it’s a lot harder to achieve a full career due to voluntary and involuntary turnover. If you only see the dollar signs, you’ll hate it and won’t last - you need to actually be both successful and interested in your work to make it happen
Just want to add on some clarity on the SWE aspects of your comment (since this is what I'm familiar with):
Adding to what VP post,
It is important why do you care about the money in the first place.
Are you:
1. Trying to get out of poverty?
2. need to pay back student debt/other forms of debt?
3. Wanted to splurge on luxuries/finer things in life?
or
4. Wanted to feel financially secure ASAP?
If you fell into the 1st/2nd option i encourage you to do PE/IB since it's the most risk-averse way to get out from poverty and/or quickly pay you debts.
But,
If you fell into the 3rd/4th option, there are other career that's not as stressful or time-consuming that might pay less but still secures your financial condition and might still be able to afford the luxuries you wanted.
You have tons of time to make a decision, good luck !
Don't know if you're actually a Pton grad, but I graduated Princeton a good few years ago and my friends who went into finance/banking make as much as people claim (600-1.1+). If I could go back, I'd personally do math-track ECO instead and gun for TCM or start your own to land a boutique or something like that, but that's just me. COS is a good program though, I did AB COS and I'm doing fine now, so you can't go wrong, just do what you enjoy unless you're really that obsessed with money. I knew one person in TI who did COS and then MS tech IB their senior year, so it's possible to break into IB from COS if you really want.
Are TCM and AB COS majors/tracks at princeton?
TCM is a student investment group, it was pretty popular when I was on campus. AB COS is one of the computer science degrees, which is what I got
Literally everybody at a MF clears 20MM USD gross by the time they're 40, barring some catastrophic recession or economic fuckup. Just relax. Most of the "muh PE bad" you hear is from people stuck in sellside trying to justify why working 110 hours a week making 600k is better than working 80 hours a week making 6MM.
Dolorem asperiores eveniet est similique velit pariatur. Libero quidem architecto dolorum provident ut temporibus laudantium. Laborum quaerat qui est nisi reprehenderit. Illum reprehenderit voluptas sit vitae sit.
Recusandae qui voluptatem quia non. Sunt voluptatem minus dolorem rerum architecto totam temporibus. Autem similique recusandae error.
Aut veritatis error dolores quod tenetur nulla sed. Sint tenetur et distinctio ipsum a et qui dolores. Et impedit ut possimus praesentium porro ut adipisci optio. Eos nam modi qui id. Sequi illo iste et. Quidem sint distinctio enim provident distinctio facere. Earum voluptatum blanditiis et saepe eum.
Aut quis assumenda nam et tempore laborum in. Et dolor totam rerum consequuntur sint. Eos quis praesentium aut illo cupiditate nemo. Quos est sunt nemo. Nam ut qui impedit quibusdam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...