PE Offer but Pay Cut
How common is it taking a pay cut jumping to PE from IB? I have received an offer from a lean, reputable LMM fund in a non-major city. Alternative is continue in current capacity, while working unsustainable hours. A little less than 2 weeks to decide. If anyone has examples of scenarios they’ve been in and what you decided, that would be helpful. Many thanks!
Will you receive carry in the PE role? Perhaps you can put some probability on being allocated carry and that carry being in the money.
I was pretty focused on comp when I was a bit younger but when I made the switch from a GP to an LP role the pay reduction was pretty steep. However, really enjoying the role and can see myself doing it for a long time. I think the way I was working before was unsustainable.
No carry that I'm aware of- something that I will be sure to better understand though. That's insightful on the job switch.
It's not atypical, especially when jumping to LMM. Some idea on the pay difference you're staring at would be helpful here.
Helpful to know - most likely in the 5-15k range from current all in to 35k from the position I'd otherwise role into should I choose not to take
Is it a strict two and out program or is there opportunity to stay on past 2-3 years. How many deals do they close a year?
I'd say it is not only common but expected to take a paycut moving from banking to PE in a junior role, particularly if you're going to a LMM fund in a non-major city. Banks have continued to try to find ways to improve retention of junior employees, from protected weekends, to A-to-A promotes after 2 years, to blocking PE recruiting, to pay increases.
I wouldn't make your decision based on pay unless you're looking to exit the industry in the next 3-5 years. Long term a few hundred thousand difference (cumulatively over a few years) won't make a difference if you stay in the industry. Work/life balance, the type of work you'll be doing, the city you're living in -- these will be much more important factors for you, especially when you consider you have nearly your entire career ahead of you.
Very insightful - its ideally just pennies in the long run. Thank u for the post.
Not totally uncommon in the LMM - you need to weigh the tradeoffs between WLB, interest in the work itself, and upside potential (path to carry).
Personally, was weighing a PE offer and an 3rd year analyst promotion, where comp would've been pretty much the same. Hated banking though and have never looked back.
Pretty typical for MM and below. It’s up to you to find out 1) how much better the hours will be 2) if you’ve got a realistic chance of getting carry and 3) if you’ll like the work more. All easier said than done.
Very typical. I made this move 4-5 years ago. Now the difference might be even more substantial considering how much banks have increased their pay since 2014. Work life balance might be better. I would ask for a pathway to get carry (if they won't give you right away). And discount further on the values of the numbers on the carry they will give you.
I was in a similar situation a few years ago, where I finished my analyst stent and transitioned to a reputable MM fund (>$1B), and I took a pay cut... especially if you were to comp it to an A2A (1st year IB associate). For me, the hours were better and the work was interesting so the pay cut bothered me but not to the extreme. If your longer term goal is to be in PE, then taking a modest paycut for the experience is also worth it. Both PE and IB, are in fact, apprenticeship focused businesses. I would stay positive, absorb everything and prove your worth for a potential senior associate / VP promotion in a few years. Go get some deals done!
What kind of hours can be expected in lmm pe assuming non nyc. Is 60 reasonable to expect when not on a deal
The answer here is always firm-dependent, but yeah 60 seems reasonable.
For a datapoint on the low end, I’m in at 8:30 and often out of the office by 6:30 most weekdays and sometimes by 4:30 on Friday with a few hours of work on Sunday to catch up before the week. If a deal comes around we sprint as hard as anyone else, so a couple weeks of 3am nights every other month or so is common, but otherwise it’s great WLB - maybe 50-55 average during off-peak times.
On the other hand, I’ve spoken with associates at similar sized funds who actually ended up with worse hours than banking. Check out the founders’ backgrounds - if they’re ex-Jefferies M&A, it’s probably a different story than if they came up through a family office or something.
helpful data point. To your last point however, would you expect to see a correlation between higher pay and IB backgrounds of partners, as compared to those who came from family offices or big4, etc.
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