I'm an analyst at a top EB and was lucky enough to land a solid MF offer during on-cycle this year. However, one concern I can't help but consider is the fact that I'd be taking a meaningful pay cut (not just like ~25k but like ~75k+ annually) for the next 2-3 years. I know that there is a lot of intangible value that comes from a PE associate experience - thinking like an investor, managing risk, potential for better WLB and higher comp down the line - but would such a drastic pay cut be worth the difference in experience?
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What bank are you at to where a MF is 75k paycut. Maybe this is just my BB background speaking, but I got paid more as a first year associate at a MF than my BB peers who stayed on as A2A.
IMO; think less about comp, and try to figure out whether you want to be an advisor or a investor or an operator or whatever it is you want to do in the long-run. Ultimately, our careers are not made in the first 4-6 years of post-undergrad life, but it sure does help to develop a strong resume for your ultimate goal early-on. If you want to be an private investor; PE is the way to go, if you want to be an advisor IB is the way to go. If you are successful in either of these career paths, even 4-5 years from now: you will not be super fussed about the comp difference in year 3 of your career.
Don't want to doxx myself, but I can confirm based on speaking to associates at my current firm and getting the target #s from the fund that the pay cut is around that range. Note this is taking into account factors like an A2A bonus at the bank.
Good point - I feel like by the time you're a few years deeper in your career the incremental dollars become less important and the quality of the experience matters a lot more. Just feels like a lot right now since I haven't really gotten used to making this amount of money yet.
You’re thinking about this all wrong. Yes, if you stay youd get paid more but you’re also less marketable for any investing role vs you will be in the rare position where 95% of investing seats will be within your grasp coming from a MF. If you don’t want to be an investor then that’s perfectly fine. But you’re materially changing your TV by staying in banking.
Also, I can all but guarantee that while it’s a relative step down that you won’t feel it at all. In fact, you’ll still make like +100k+ as a first year MF associate vs 2nd year IB analyst y/y. If you’re going to be upset making more than 4x the average US household income at 25 while opening up a world of opportunities vs staying and making 5x then buddy go touch some grass.
The last sentence is so unnecessary. Why shouldn't he care about his salary, this isn't a charity and he's obviously going to be working really hard to earn that compensation
Because salary this early in your career is a rounding error unless you take all that extra money and get extremely lucky with it in your PA. The comp differential between top tier investment seats you get a shot at from a MF seat and what you'd earn in banking at the same YOE is night and day. Experience early on is almost as valuable as $$$ and the value of what you'll get from an ASO MF program is substantially more meaningful than what you'd get as an ASO at any bank which is basically just a senior senior analyst at most firms.
What investment seats aren’t open to bro from MF PE lol
you are literally a sophomore how much can you really know..
You are also a sophomore.
Never claimed I knew it tho
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This situation is like only possible if you’re at CVP, going to a non APO/H&F/CD&R/WP and factoring in the A2A bonus which I believe comes with a certain # of years commitment or they claw it back.
Not even considering or factoring in the other soft / learning oriented aspects voiced by others
maximizing for comp at 24 what happened to love of the game !Alexa set a remind 365days for this account and keywords "TOP MF ASSOCIATE EB ASSOCIATE FEELING TRAPPED/DEPRESSED - ANYONE ELSE?"
Preach!
As an outsider looking in (in markets not banking/pe), I don't think taking this job makes sense. Sure the learning aspect and the opportunity to get into any other investment seat are there. However, realistically, a lot of people who go into PE end up not getting a return after their associate stint, which oftentimes leads them to leaving the industry altogether. Or they end up doing an MBA to stay in the industry which ends up leaving them worse off than they otherwise would have if they just stayed in banking. That risk, coupled with the fact that you are earning 75k less per year is a steep price to pay for... learning? Again, not in the banking/pe game but from my friends in the space, the learning aspect seems dubious since it's oftentimes quoted as just being banking 2.0. I can't see how taking this risk to make less money makes sense because of some vague notion of becoming a better investor. If you are interested in being an investor why not just get into a SM HF seat? Or if you're dead set on getting into pe why not wait for a better offer? My 2c.
Respectfully, it’s very obvious you have no clue what you’re talking about. There are no “better” comp packages at this persons level than at a MF (there’s some variation of comp at MFs but it’d be really bad risk mgmt to try and wait for another MF offer, that doesn’t really happen). As they’re clearly valuing comp highest of all, there’s no “better” PE offer to wait for.
As someone in “markets” it’s particularly surprising that you’d just throw out that they could just “get into a SM” like one just gets into their local state university. Could they get an SM offer from their bank? It’s possible but even from an EB it’s by no means a certainty. And you know who their competition is for that seat? The associates with a couple years at MF/UMM PE shops. While not a certainty, if one is has that type of background they will be highly likely to make it to a HF and actually gets looks from the real cream of the crop (Tiger, tiger ancestors, Coatue, Viking, Lone Pine, etc.) which they wouldn’t even get the time of day from if they’re trying to join from a bank.
The washout risk would be high if they were going to some JAMBO firm but they’re not. Even if they don’t get a return (which they probably won’t), the world will still be their oyster as long as they work reasonably hard and are intelligent (which high probability given the position they’re in)
You need to spend more time in the industry before making these sweeping claims. There are many reputable SM HFs that would take someone from an EB at the analyst and associate level. Risking having to leave the industry or being financially far behind simply because it opens up the possibility for the top 1% of outcomes is not a good trade. With the HF route, you will for the most part end up in the same situation as if you had just recruited for HFs via the bank unless you hit the lottery of getting to a top tier fund. Additionally, any "thinking like an investor" that you develop in PE will mostly go out the window at a HF because it's a different mindset altogether.
Just going off of what OP is saying re: comp in his current and prospective role, the MF would have to match his current comp, or at the very least only a slight discount (eg 10k - 30k/year), for it to kind of make sense. If they are interested in HFs, then they open the top 1% of outcomes and don't lose out on too much comp in the meantime. If they are interested in PE, they could do the 2 - 3 years, expect to not get the promote, and then lateral to a smaller PE firm where they could maybe have more career stability and hope their carry leads to a better outcome than the bank. Taking a steep pay cut to get into PE, and then risking another pay cut going to a smaller PE firm will overweight all of your outperformance to the carry which is far from certain, and extremely back weighted.
JAMBO?
Don’t think this is true. Most MFs are 350k+ and most banks do not pay that much for your 3rd year
It’s incorrect to assume MF Aso = IB Aso, many banks have AS0 / An3. While AS1 in banking might pay more, that’s a year senior
Probably not. Senior associate and VP seats at MF's are limited. Your odds of getting cut after 2 years are much higher than if you were to just stay in banking. All of your coworkers are going to be doing great work. They're going to choose whoever survived and they like the most for promotions. Banking has constant churn and less competition.
Even if you survive, your odds of getting carry are low. My last company's last two funds got wiped out and their current fund is a third the size of their last one. Much of PE's outsized returns were because of interest rates falling over the past few decades. They can't go much lower than they are now, even if Trump replaces Powell.
Even if your fund pays out, a few 60 year old boomers are going to take the lion's share. Everyone can't get a $5M payday. Also, your firm is almost certainly going to have mandatory coinvest if you want to stay. So you can't even use a good amount of your lower comp.
I actually disagree with a few of the other comments here. What is your goal? If your goal is to FIRE then stay in banking. If you want a potential payday from carry, go to PE, but you might be better off at a hedge fund where real money is made. If you care about doing "interesting work," only you can decide where to go. However, if you like your team, have a clear trajectory to getting promoted, and just want to enjoy an upper middle class life you should probably stay put. The grass isn't always greener.
This is probably the best take. With that being said, I'd still probably lean towards going with MF PE cause worst case if they don't like it they can always easily go back to IB with a year jump or at least back when I was looking as a 3rd year MF associate it seemed pretty easy to go back.
Though OP sounds like the FIRE type and probably won't really enjoy the MF grind (which is probably worse than 85%+ of banking groups) in which case they should stay in banking
Covered the reasons why I stayed. I’m at a chill bank where I work 50-60 hours per week as an associate. Stayed A2A after watching family and friends stumble on the PE route (switching funds multiple times, losing carry / fighting to get some, no direct promotion spots). Meanwhile anyone with half a brain makes it to VP3 at my bank if they so choose to, with probably an 80% chance of making director.
At a shitty pay BB though so my pay is about the same as people in my class who left for LMM/MM, but my situation is a relatively guaranteed outcome where I can step down to a chill corporate job here in a 4-5 years, still making $300-400k and looking to semi retire by my 40s. Or I could hope for the best in PE where most of the meaningful comp difference doesn’t realize until your 40s anyways. I was way too late to switch to tech and I don’t dream of laboring forever, so A2A was the best option in my situation. Your mileage may vary.
could i dm you?
Not worth it ! Run away
I would focus on long term upside. I took a minor pay cut heading to the buy side, but I now have over $1M DAW of carry vested across two funds. Salary is not going to make you rich like carry or equity can.
The real question is: would you stay in banking if the MF offer didn’t exist? If the answer is no, then the pay cut is just the cost of switching tracks. If yes, then it’s worth thinking harder about whether PE is actually what you want.
You should reneg on your offer and let someone with half a brain accept it instead.
I had a friend in high school that would routinely mock all the friends going to college for being dumb because he was going to make $22 an hour as a motorcycle mechanic making $50k a year vs. us losers paying $10-30k a year for the next 4 years to only then start making money.
I would maybe re-evaluate your EB comp and well and maybe see if you’d do better as a mechanic.
20+ years in, if you look at my analyst class, with one exception (and even that’s not wildly ahead), the people who stayed in banking (there’s one GS partner, one CVP partner and several group heads at solid firms) are definitely well ahead of the ones who are partners at big PE shops. The carry checks are great when and if they come but they take a long time to come and the time value of money associated with investing the higher cash comp from a good banking job goes a long way; to make a point, I’d rather have had my money in nvidia than in any recent vintage PE fund.
I’d note that a lot of the PE partners do have the potential to make FU money “in the next fund” when the dinosaurs they work for retire and they are the top dogs. But that’s if the next fund does well and by the time it’s raised and they realize carry they will be late 50s. I’ll be on the beach then.
That's a really interesting data point... that would point to a fundamentally skewed risk-reward for PE as a career path, right? Even the ones who made it to the "top" (partner-level) at PE firms by taking on the riskier career path also weren't rewarded as greatly as those who made it to the "top" in banking? Do you think that's still going to be the case going forward or that this discrepancy would even be magnified in the future considering the trajectory of the PE industry?
A lot of sour grapes here from banking MDs.
The fact of the matter is that a middling PE partner has the same cash comp as a median banker. And then there’s a bunch of carry behind that.
Pretty intellectually dishonest to be comparing the friend who became a partner at GS to the friend who went to a subpar PE fund and has had a subpar career.
The partners doing well in PE have 9-digit net worths. And there’s tons of people in that cohort. That’s the crux of it. There’s very few bankers making that kind of coin.
I’ve heard tons of bankers pontificating on the less green grass in PE (grass they’ve never stepped onto without a guest ID badge from the security desk), but I’ve never once even heard a PE partner consider his counterparts in banking. I’ve seen tons of bankers try to get into PE and fail and end up staying on in banking. And yet I’ve never once seen a senior PE person go back to banking.
Why is the most important question not being asked....
You need to first determine which direction you want to go, look down the line what the job becomes in 10 years, and solve backwards.
Is your aptitude and interest more aligned with building relationships & selling or analyzing companies & risks?
You will need both skills to be great in either path. But each job still indexes very differently across this skill/interest spectrum. If you are good at / love doing both, you will be a baller either way, so this question itself is kind of moot...
The comp discussions here are all moot... This only applies through the VP years where everyone's comp is standardized. The after-tax differences of these cash comp variances are so small that the more likely determinant of your financial status at age 35 is more likely to be marriage/kids, housing decision, city selection, any unexpected healthcare costs, etc. So make the decision on what matters. What are you good at and in which role are you more likely to sustain high level performance for the next 10-20 years?
I think this is a really important factor to take into account - I just feel it's incredibly difficult to accurately assess your future capabilities while in your early 20s. For example, I question whether I have the natural "relationship-building" skills that I think are necessary to become a super successful banker long-term. However, others have told me that isn't the case and that I'm being overly critical of my own abilities.
Not to mention, as you go down the path you choose, you should ideally also be addressing your weak points and improving the skills that matter.
Yeah, that is true. That also points to the fact that your decision here is actually pretty easy. The answer is that it doesn't matter -- Associate jobs are mostly the same at both IB and PE. What matters is that you create environments for yourself to constantly challenge yourself and get the elbow room to test what you're really made of. Then you are ready to make the longer term commitment to a trajectory.
So, pick the company/team that you vibe with the most because doing Associate years at Carlyle vs. Centerview, in and of itself, will have no bearing on your long-term outcome (nor will the extra $30K after taxes, which you'll figure out a way to blow on a vacay or impulse buy). What will matter is who you worked with and whether that team gave you a chance to step up into grown-up role on the team. This can go both ways -- the IB MD you spent analyst years with can perceive you as a perma-junior and keep giving you monkey work, or vice versa, you may have earned enough respect that it won't make sense for you to start over at PE with unknown people.
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lol@ the idea that you learn anything about allocating capital as an associate as a MF. And the pay cut is permanent on the upside. TBF the pay floor is higher though. It’s basically a top end corporate job in an industry that’s structurally in very bad shape.
But I do remember discussing with one of my clients that my cut off a sellside fee on a deal he was hiring me on was more than his carry check after sweating a very good investment for seven years.
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