Is PE still cool?
When I was an analyst in banking, everyone thought PE was the shizz. Now I feel like PE has become an asset collector and it's not fun nor cool / "innovative" anymore.
Is PE still cool?
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PE no longer makes any sense from an investment standpoint. Just put your money into HY bonds at 9%.
Yup - park your money in junk debt as we head into a recession. I'm sure those issuers will be just fine.
Public HY is basically low grade IG, the true junk bonds is private credit (BDCs).
Too much money chasing too few deals. The industry will right-size but that will take 5-10 years given the inherent duration of capital. Carry is fucked for the time being. If I was a first year analyst today I might think really hard about if they want to do PE for the 2 years learning experience (which is still very good, I don't regret my time in PE) vs trying to actually build a LT career here (really hard).
What would you do instead of PE? I am looking at LMM PE, but starting to think about doing VC or working at a startup. Any advice?
VC has the same issue. Too much dumb money flowing in, not enough deals.
That's the question no one really has the answer to. Since carry went up in flames for most funds, you'll probably make more money by staying in banking with similar hours. LMM might be able to pay out carry since you're more nimble, but your cash comp will be significantly lower. If you go into a corporate role you'll likely take a pay cut, but it might pay off if you eventually make it to executive level.
Something to keep in mind is most people who go into PE leave or get shoved out before making it to MD or partner. If you do the math, there's only so many seats and the boomers partners aren't planning on quitting and giving us opportunities anytime soon.
Yeah, coupled with the fact that competition for the few “Partner-track” seats out there is absolutely absurd. There’s 2+2 post-MBA HSW kids with prior MF experience getting looked past
It seems like LMM banking might be a good deal right now? There are A.) a massive pool of PE firms looking for deals somewhere around $50 - $300 EV either for platforms or add ons B.) A much larger pool of companies that still have good metrics. C.) a lot more PE PortCos that are performing terribly, nearing the end of their investment lifecycle (given all of the stuff bought in 2020-21), and need to bolt on stuff last second to make themselves look better.
Not sure what the risks are though
IMO no long-term risks in LMM IB. Although I’m not in the space currently (at a MM/UMM pc fund; LMM buyout before that), LMM PE is also relatively attractive and has higher upside if you’re at the right shop. There’s ever-growing competition but the universe of targets is vast and it’s relatively easy to exit if you buy/build/integrate/professionalize well.
Internal outlook is dependent on room for upward mobility and sound succession planning ofc (excluding track record, which is obv) but, if you build your network out well, can always spin off to form an independent sponsor shop (and either remain an IS if you have solid capital relationships, or leverage track record to launch a fund) to capture meaningful upside economics sooner.
I truly believe the latter is an attractive career path and can lead to outsized wealth generation vs grinding it out at a MM+ buyout shop where Partners aren’t retiring, the competition for seats is brutal, and the returns are coming down/don’t justify the work-life balance.
Personally, current thinking is to eventually launch a LMM multi-strat/opportunistic shop. Probably about ~7 years out from now until I do that, though.
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