How is PE so popularized as an exit opportunity despite the fact that most don't even last there? After missing out on promotion, it seems most people either lateral to another fund (and still often don't get promoted) or just exit to corp dev (which you could've done directly from banking). Is it truly a sheep herd mentality thing?
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There's probably some sheep herd mentality / grass is greener to it (same as applying for IBD at university by the way), but remember that most people apply for things assuming that they won't fail, and at least have a good likelihood of doing well.
If you believe that, PE can be quite a compelling career path, with the chance of outsized carry returns for evenly modestly good PE professionals that bankers can never hope to achieve (except the handful of legendary bankers).
I do believe though that a lot of applicants to PE do so without full consideration of the drawbacks (similar hours, years before carry pays out, locked into one firm, etc.) But honestly, I get it. Especially when MFs are recruiting people the minute they hit the desk at their bank - there's hardly time to get to know deal dynamics let alone how PEs work.
That said, I think PE is a lot less bleak than you paint it out to be - IB isn't a bed of flowers either.
Yeah agree. Here's another thing. Two IB analysts make an exit.
One goes to corp dev and by year 3 is usually promoted.
One goes to PE and gets kicked out after two years and then goes to corp dev. He is a first year in corp dev and likely not the same position as the guy that has been there 3 years. It's sort of tortoise versus hare situation.
I don’t agree with this, while the PE associate might be behind in years of tenor at that firm, I can say wholeheartedly they are likely 10x better at basic things (modelling, analysis, managing up, communicating), and the next firm will see that.
Even though it’s a 2 and out program, I’m convinced it’s the experience that just makes you way more effective as a professional, than the opportunity to make VP/senior associate.
I do agree but when you are making the jump from banking or PE to the corporate side, there is a bit of skepticism on your performance of basic corporate duties. It is a bit of a different world that you have to get used to. So, you will likely start at square one unless you're way more senior.
However, I do agree that longer term those PE skills will still come in useful and will be an advantage but nonetheless, you are playing catch-up with someone who has been there a couple of years and doesn't have a bad background either from banking.
Edit: Also would note that some of your comments are an exact example of the friction that can happen when switching to corp dev. First advice: don't act like you are God's gift to finance because you're not and people have been running that company for 5, 10, 20 and 30 years or more before you got there. No one is rolling out the red carpet and promoting you to VP tomorrow.
Just wanted to touch on this separately in a different comment thread. This is actually one of the weakest points of a PE associate. They have terrible communication and managing skills.
You're moving from a world where people are willing to work 80 hours and a week and ridiculous requests can be made on the drop of a dime to an environment where your employee is a B- student from a state school and is clocking out at 5 pm and frankly doesn't give a shit about your current project. Further, you are not working with a small 3 or 4 person team of rockstars but have to navigate an organization of hundreds if not thousands sometimes. It is a completely different managerial challenge. An environment where every employee is super smart and willing to work all night and all weekend is terrible preparation for managerial skills.
Caveat being it’s pretty tough to go from Corp Dev -> PE, while the reverse is very common. Probably also have a stronger skillset/more visibility into the company you’re leaving for. Given that PE recruiting happens during IB training, it makes sense to take the path that closes less doors. Unless you are 100% sure you want CD long-term, it may be worth giving PE a shot.
Yes, agree but I would argue that most people going into CD know what they are getting into and are not trying to jump to PE or a hedge fund or another bank after that unless going back for a MBA.
Being in a position where we hire for CorpDev roles pretty much constantly, all else equal I would pay a significant premium and give a higher title to a kid who did a couple years as a PE associate than to someone fresh out of IB. Even for someone who did 2 years of IB then 2 years of CorpDev, I would still be more excited about the PE hire due to perceived work ethic, deal reps, etc.
Speaking from experience - the ones with PE experience tend to be much stronger than the ones with CorpDev experience
how much do you generally pay for a CD role to someone from 2+2?
Because IB is toxic AF. This is literally a perverse case of prison vs the projects.
I’d rather live in the projects than in a 4 walled cage. Man if IB even tried a little to change their culture and comp, maybe people won’t be heading for the exits.
It’s just what it is
Curious as to what you say about exiting to the corporate lifestyle instead? If PE is only slightly better in terms of WLB and most don’t end up staying, why not just take the immediate paycut (as most will end up taking the paycut 2 years out anyways)?
The MD who wrote the 1994 DLJ "Too Busy" email had a similar comment:
"Investment banking has changed – margins have fallen along with growth, and winning business is increasingly about the franchise rather than the individual. In these circumstances, junior banker jobs are more like apprenticeships than a springboard to a long career in a fast-growing firm. If you ask juniors to overwork consistently without offering them any benefit except the option to move to the buy-side if they’re lucky, you’ll end up with a workforce that doesn’t see the benefit of long term career at their own firm."
This prompt assumes the idea that most *want* to stay in PE, when by the year mark (or even before joining), the "despite" is actually a "because."
Most of the attrition is voluntary. There aren't that many 2 and out funds anymore, and those going to 2 and out places are the type who are really looking to go to b-school.
The attrition is really because PE is advertised as the golden exit and it's often just as bad as banking. Making $300k isn't all that when you still can't go out for dinner on any weeknights or reliably take a weekend off.
I don't know what type of people you're looking at who are consistently missing out on promotions but if someone is coached out from a top fund they typically go on to do fine if they land at a lower fund.
Interesting to note. I guess a similar question arises of why PE when people are voluntarily leaving the space after 2 years then. As you said, probably comes down to a bit of false advertising as a path better than it actually is
How bad are "typical" PE hours? I hear that its not that far off from banking but being the client and also far less live deals (and then managing PortCos instead of churning through more live deals constantly) should result in better WLB right?
It'll be impossible for you to get the straight answer you're looking for because the truth is, every firm and every team is different. I have friends at smaller funds in the office until at least 8-9 every night, whereas my VP and Partner leave by 6 the latest every day and there's no culture of FT so I'll leave shortly after. With that being said, I'll still follow up to emails and flip through CIMs or other review materials when I get home to stay ahead of things. Personally, that aspect of the job has never felt like work to me and I've found the job more than manageable but everywhere is different. I interviewed at a lot of quality firms but really made an effort to choose the firm with the best "culture" (hate using that word) and best perceived WLB. The hours will definitely increase during live deals but not to an absurd level and I can count the number of deal sprints I’ve had in a year on one hand. I came from a PE analyst program as well so maybe that helped with my expectations of the work
1) Maybe people don't even planning on staying in PE long term. Just banking 2.0 as a stepping stone to M7 or industry exits.
2) People overweight small probabilities. Behavioural bias. It's why people still buy lottery tickets
IB (2 years) --> PE (2 years) --> PortCo CorpDev / CorpStrat Manager (sky's the limit, can try to advance to VP / C-suite level or maybe do a search fund). At each step you're making probably on average 150-200K for 4 years by the time you turn 26. If you have long term goals of going corporate, the IB / PE experience is very well regarded in investor-backed companies and large private / public companies (only comparable to those exiting from MBB IMO).
I have seen some people take very unique career paths post their PE stints (seen one become a Chief of Staff of a prominent European soccer club which was a Portco of the PE firm they used to work for).
Agree with the grass is greener idea but I genuinely believe having IB / PE skillset at 26 is an extremely hot commodity if you realize finance isn't your thing and you want to go work in an industry that interests you (which honestly ends up being a lot of people who end up leaving PE and decide against pursuing an MBA for the chance of landing PE again after). For example, there is a poster on here whose mentioned they're making around 170K with on average <40 hour work weeks post IB/PE in the media and entertainment space (without an MBA and from a semi-target school). At the MBA level, this type of job is unheard of outside of maybe the M7.
you want to do something in finance, without being part of corporation, and you also think that beating the S&P it's stupid = PE.
it's like IB but with smarter people
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