Is PE still the best path for wealth creation?
So you broke into investment banking. Then private equity. You start to understand how money works. But here’s the thought that keeps nagging at me.
The more time I spend in PE, the more I find myself asking about the ROI on my own time, brainpower, and energy. My ETFs have delivered returns that rival or exceed many PE funds (let's say 3.0x 25% IRR as the "base case") with far less stress, fewer late nights, and none of the complexity of managing lenders, boards, and portfolio company politics.
For senior monkeys that have been there, done that, do you still think PE is worth it? Or have you found other paths that are more compelling?
Guy who's dad is a SMD at a EB. I have talked about this extensively for him. General summary has just been, ultimately the way you find the best path for wealth creation in your personal circumstances is to find a job that reasonably accompishes the folloiwng 3 things: something that you are reasonably interested in, something that you are reasonably good at, and something that has a relatively high celling for pay. For him, he was far more interested in the idea of selling and relationship buliding more than investing, so he stuck to IB (first at at BB then now at a EB). The most successful person from his analyst class by money founded a ~1bn AUM LMM PE fund, can find success outside of MF PE or BB/EB IB within finance.
You can make insane money in most of these career paths of IB, PE, HF, corporate roles, start-ups, etc. the best path is going to depend on you as a person as different things are going to be fits for different people.
This is bad framing because there's no clear evidence showing that it ever was THE best in the first place.
I mean it’s pretty clearly been the best place to be in finance over the past 25 years. Especially if you were at a firm that was able to scale.
Survivorship bias is a thing. The question didn't specify just finance though even just limiting it to that universe you're wrong, but that's ok prospect.
Most freethinking MF PE analyst. Watch out for that associate year 2 review when you and 80%+ of your class are told you are not getting promoted to senior associate because the firm has too many Senior Associates and VP's already.
It is still one of the best risk-adjusted paths, but the key question is whether LPs will continue to pay 2/20 if returns compress and there's no longer demonstrable and consistent alpha.
I don’t understand this whole pre-amble about ETFs. What are you trying to say? That life would be better if you had a boatload of money to park in an ETF and draw a fat dividend? Yeah no shit. The problem is you don’t have starting capital. So you need a way to get that. Which means working hard. PE is pretty good at getting you cash early, but there are other ways too (lawyer, banker, hedge fund, get lucky with a start-up, tech, etc.). Pick something you can do for 10-15 years to accumulate your starting pot and then reassess
I’m asking for a path that is better than PE. ETF is a brainless example of how underperforming PE is as an asset class and I think LPs notice that too.
IB might be better as all cash comp and easier to move up
Not if you work at a public bank
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