Is Traditional PE worth it in the post-COVID world?
Wanted to ask a philosophical question and hear others' thoughts - is LBO PE worth it in 2022, in the age of focusing on WLB, WFH, and mental health? For a long time, LBO PE was the promised land because of (i) the stacks of $$$ to be made in the long-term, (ii) the ability to work with the smartest people (colleagues and portfolio management teams), and (iii) the ability to work on the most strategic questions (company's merits and risks, strategic vision long-term, etc.)
Fast forward to today where competition for talent is fierce, arguably so much so that BB IB and PE folks are lateralling to other roles (corp dev roles in tech, all stages of VC and growth investing). The comp differential is narrowing between finance and tech and there's an argument that equity at a high-flying series C/D start-up could lead to a substantial equity return at a moderate risk. Even if you're not looking at corp dev, a shift from traditional finance to growth investing (growth equity, early to late stage VC) seem to be a very attractive career path also.
Outside of narrowing compensation, it seems like the work would be more interesting at a firm that is more growthy. This is all coupled with the fact that all of these roles (corp dev tech, growth equity, VC) offer significant more work life balance and flexibility to work remote. It seems like these roles would provide you with a very health salary in the long-term (top 5% in the US, probably better + equity / carry returns if you're lucky) with the ability to work a few months abroad, have more vacation, and more generally having time to spend with your SO, family, friends.
Overall, am I missing something here? Are PE firms (and IBs for that matter) doing more to attract talent?
TLDR; If I'm not trying to fly on PJs, sail on my catamaran, and own a +$10M house in Greenwich, is PE worth it (relative to corp dev tech, growth equity, VC)?
EDIT: Just want to give some color that I'm coming from the perspective of a 3rd year PE Associate at a MM / UMM firm considering next steps.
Bump
Yea
Nope, that's why I left.
can you elaborate on what made you leave
"Worth it" will entirely depend on circumstances. As someone with no real tangible skillset, you can make very good money in this industry without risking any of your own capital. That being said, the wealth creation opportunity in PE has diminished significantly as the industry has matured. Returns have come down, the traditional fee structure is facing increasing pressure, and there is much more scrutiny around PE as an asset class. On top of that, turnover still seems high at the junior ranks.
I have a buddy that works <40hrs week at a FAANG with enough free time to develop entrepreneurial endeavors on the side while still making very good money - I would probably put higher odds on one of his apps taking off than me clearing a $10mm carry check but I'm just an excel monkey so what do I know.
What does your friend do in fang? Developer or business role?
I still think it's still a worthwhile experience for good broad business exposure and skillset, depending on the firm. Particularly if otherwise all you have is IB. If you can go to a place where you get to see some operations (usually UMM or blue chip MM), that seems worthwhile. If you're coming from MBB, that's maybe less compelling, but I do think speaking the M&A language is a rare and pretty lucrative skillset so it's probably still worthwhile, even if a stop on the road.
I do agree it can be pretty painful even if just 2-3 years, but probably long-term worth it for the experience. And who knows, if it turns out you love it and decide to stay, well then you're in easily one of the best jobs in existence to maximize risk-weighted comp.
Bump
It seems like most responses note that PE is useful at least in the short term for the experience / skill set. But what about after you do your 2-3 years as an associate? Is the slog to go up the senior associate / vp / principal ranks worth it relative to a lateral to corp dev or growth investing (which seem to pay well and have significantly better wlb).
Different answers for both - for buyout to growth investing, I’d say better to lateral right after associate program (or pivot after b school). I think it’s a cleaner story, you’re easier to hire at that level, and I can’t really think of a benefit to waiting to lateral from buyout to growth until later in your career (in fact you may add some noncompetes to deal with).
Corp dev / ops roles the answer is more nuanced. Going right away after associate to a portco role can be a nice b school alternative - get some experience but stay connected to the PE world in case you decide to come back. Even if not portco, you again are more hirable in general at the junior level. On the flip side, the corporate world promotes slowly so you might be able to cut in line if you wait to come over as an experienced vp+. But of course that is a lot of life to burn (5+ more years) if you really don’t enjoy the job
More worth it than ever. Fund sizes growing leaps and bounds, much clearer path to promotion than ever, returns going down but who cares check size twice as big and you can invest shooting to double your money you’re in the same spot or better in terms of capital gain
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