Is Private Equity oversaturated, overhyped, and overrated?
As someone who just landed an SA 2023 internship and is looking at first year analysts getting recruited for private equity after ~6 months of full time experience, I was hoping you guys could explain the allure of going into PE so early. It's not like the hours are significantly better for 1st years, you get less deal flow when compared to a BB/EB, and compensation is on par (unless you somehow are able to get carry at 23), so why are people so eager to get into PE the moment they step into the offices of an investment bank? Is there a post-PE move I'm not seeing or am I just not getting the picture? It just seems to be an oversaturated, overhyped, and overrated industry imho.
Generally more options open from PE vs IB as you get more senior - PE has better b-school exits, can go to a HF, lots of different types of investment roles, and can always go back to IB. IB exits are basically just corporate roles as you get more senior.
Senior PE people also make more money (at least in theory) and there’s definitely a higher ceiling. It’s not some magical promise land but IB sucks and PE at least gets interesting at senior levels
Everything you're saying is true, it's just one way of interpreting it. The other way of interpreting it is 1) you definitely get just as many reps but they vary in how deep you go on each; 2) each rep where you do go deep is much deeper than what you get in banking, coordinating the diligence process is a whole separate skillset and you have other analyses you run that you don't think about in banking so it's a bit more intellectually stimulating, 3) most people go in with the long term carry comp in mind which vastly exceeds most banking comp, 4) great MBA placement, banks not as much (I did not see a single bank only admit at H/S admit weekend whereas PE people are everywhere), and 5) it's a good stepping stone for a lot of people into HFs that prefer private equity experience (e.g., 2+2 or 2+1 before HF) or later stage VCs that want to hire from (technology, usually) PE firms.
Okay that clears it up a little bit, I didn’t know the trajectory was PE -> Business School -> HF, I always thought business school was a means to get into PE. But is there then, any benefit to fast tracking getting into PE versus a longer tenure in IB aside from eventually getting into a Hedge Fund quicker? Or would it be better to stick out in IB longer so when you do transition you get carry instead of having to grind it out in PE?
If all you care about is comp and hours, sure juniors in IB and PE are similar in that regard. But some people actually like investing, want to exit to HF, want to go to business school, want to become senior in PE and make investment decisions. There is a lot more to a job than comp and hours.
I would echo the others and add that in my experience hours are better and deal flow is significantly higher, while comp is likely slightly lower. On top of that the work has been significantly more interesting. you'll learn pretty quickly in your SA that IB at the lower levels is much more about making powerpoints and logos look pretty than it is analyzing companies and at the higher levels is more about being a salesmen for your banks capabilities. You still have some of that in PE, but there's a much heavier emphasis on analyzing companies from an investing framework.
Also the reason for the quick jump is it's much harder to break into PE after your analyst years. Don't see that many IB Asoc or VPs making the move.
Okay that really clears it up, so thank you. As someone who just got done with recruiting I was just surprised with how accelerated cycles are was wondering why the mass exodus happens and why it happens sooner and sooner every year
I think there are some things that mixed together make PE extremely attractive:
I laugh when I read “in baking you make the same”, dude the money you make as An/Ass are peanuts compared on how much you can make on the long run and taking career decisions based on 20k more at An level it’s borderline retarded.
Also I forgot: the dealflow is quite overhyped, you learn way more on deal management at BX / APO vs any banks
Depends on the fund, but at the junior level maybe it's overhyped. Maybe.
At the senior level it's amazing and underrated if anything. I'm doing complex creative things every week and the hours aren't bad and there's lots of team events and happy hours. Clearing 7+ figures a year consistently doesn't hurt either.
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