First post, and a burner account for obvious reasons. I discovered this website recently, and I am shocked at the amount of information and help young professionals can gain here. However, I noticed that there is little info from older members. I hope that I can offer some helpful and unique insight.
Here's a bit about me: I am in my 50s and semi-retired (high school econ and math teacher). My career was pretty similar to the "typical" IB --> PE path, with a few deviations. I did my three years at a bulge bracket bank. Following that, I went to get my MBA. I landed a spot in a PE fund (1-5B AUM) and rode that all the way to a partner position at that firm. When I was in my early 40s, I opened my own PE shop (250-500 AUM) with a a few of my coworkers. I stuck with that until I was in my 50s, and now I do what I love: teach high schoolers at the school I went to as a kid.
All questions are cool with me, and I'll try to answer them all quickly. I know this is very corny, but there are no stupid questions. I'm used to that, I teach high school . I hope you find this helpful!
I definitely think that the outlook for private equity is better than that for sales and trading. However, if you are much more interested in macro / markets, I do advise you go for S&T/HF/AM. My biggest tip is to find a niche. That way, in the case of automation, you will be in a spot where you have deep knowledge in a specific field. As far as finding a niche, most of the time, it happens naturally. However, when given the opportunity, if it makes financial sense, and you think you'll enjoy it, make the jump. However, knowing the markets will certainly help you in private equity. It is still largely based upon chosing a company that is undervalued. The difference is that in S&T/HF/AM, you hope the value goes up. In private equity, it's up to you to make it appreciate.
General advice to an incoming PE associate? I’m pretty exhausted by the process to get to this point and I’m hoping (but not hopeful) that staying at the fund won’t feel like another 2 year rat race. It’s a consultant-friendly shop if that helps.
And is it safe to say that you made enough millions that you chose to do whatever it is you wanted to do afterwards, which was high school teaching in this case?
Remember this: your career is a marathon, and you're still in the beginning of the race. In a marathon, if you run too hard in the beginning, you won't have enough left to finish strong. Your career is the same. Try this new gig out. You might love it and be thrilled that you made the hop. If you are feeling really burnt out after a year or so, consider your options. You can go back to banking, stick it out until business school, go into corporate, ect. The great thing about private equity is that you can go almost anywhere after it. I encourage you to stick it out, if possible, though. I'm sure you'll look back on it with a laugh. As far as actually doing the job, I'm assuming you are coming from banking. It's a very similar skill set, so you should be well off to begin with. The hardest thing is to adopt an investor's mindset, but luckily, you don't need that too much as an associate.
The best part about making a lot of money is that it gives the freedom to pursue what you love earlier than the average guy. By the time I reach the normal retirement age of 65, I'll have done so much and experienced so much that I'll feel justified in living a life of relaxation. I definitely worked my ass off and sacrificed so much, but I look back on it with few regrets. Money can buy happiness if you have the foundations to happiness like relationships and a sense of purpose. If you don't have those, you can work on them while working your job, but if you need to take a few steps back, don't be afraid. Picture yourself with a luxurious mansion, all alone. Not a happy scene, I'd guess. Money buys happiness when you can share it to make others happy.
I'll be honest, my knowledge is limited in terms of how consultants' abilities transfer to PE. However, the founding VP at the firm I started began his career in consulting, and he's become super successful in PE. I'll say this: I'd prefer to give an interview to a banker for an associate role, but once I'm interviewing you, I couldn't care less what your background is. This is my personal philosophy around hiring, and it's worked extremely well in terms of finding talent.
I could have sworn I answered this question, but my reply disappeared.
Comp is very lumpy in PE, but my first PE from I probably averages 3-5 MM per year.
As far as why I started my own firm, it was a combination of better upside comp, no boss, and having no regrets. I earned significantly more at the firm I started.
Now that I'm semi-retired, I am finally spending the money I earned for all those years. I have a very high quality of life, and I feel justified in spending my money due to how hard I worked for it. However, what makes me the happiest is spoiling my wife and students.
Thanks very much for doing this.
I'd love to hear if you have any career or personal advice for someone who is beginning the "late" stage of their career. I hope that I'm not being too abstract, but I feel like the past 15+ years was to just get to me to starting line of a race that I am only now about to embark on.
How should I be thinking about the next 10-15 years? How did you approach this stage of your career and personal life? I'd love to try to put myself on a path where I can maximize my success in my career and happiness in my personal life with my family.
Thanks for doing this.
How would you do it differently if you were about to start in PE as an associate this summer and do it all over again?
Honestly, I don't think I would do anything differently. If I had partied more and worked less, I might not have made it to where I am. However, if I was guaranteed the exact same outcome and income later in life, I'd tell my boss to fuck himself and run off to Bora Bora.
How did you go about communicating to your colleagues when you decided to step away? How did they react?
I was getting pretty close to hitting my walkaway / retirement number at my last firm, but as someone who is very young, I'm sure it would have shocked them and not been looked upon favorably. Everyone just seems to have a built in assumption that I'm going to work until I'm 50+. Interestingly enough, my "retirement" plan is to teach in a math/business related subject, although at a university level and not a high school one.
My plans have since changed as I'm loving my new role (and willingly took a compensation hit), but I know the day will come where I need to have that same conversation.
Lol, we did have a private jet back at my first fund, and some crazy shit happened on it. One that immediately comes to mind is when I was a newly promoted partner on a trip with some of the founders, so I was desperate to impress. We were heading to a major meeting with a portfolio company. We brought along a few of the junior guys, including an associate who had been there for a year and a half and worked primarily for me. His performance was neither here nor there; I wouldn't have remembered him if it wasn't for this.
So we're in the airport getting ready to board in about a half an hour. I decided to get some work done on my laptop, and this associate decides to do the same. I tell him that I'm going to use the restroom since we're about to board. Then he tells me that he'll carry my bag on board if they board and I'm not back. A little weird, but a nice enough gesture. I give him the okay.
I get out of the restroom a few minutes later, and everyone is gone, and so is my bag. I run to the plane and hop on. A few minutes after later we took off, and I turn to the associate to thank him and get my bag back. This is where shit hits the fan.
He looks around, realizes that he doesn't have it, and begins to tremble. I kid you not, the kid was shaking like we were in the middle of an earthquake. He tells me that he went to the bathroom as well, and that he must have left it there. Now, here I am, sitting on the plane a half an hour into the flight, with no laptop and no clothes but the casual clothes I have on. And now the idiot starts to cry. Loudly. Sobbing into his hands and swaying back and forth. Now the plane goes silent and all the big partners turn to me. One of the founders breaks the silence by asking, "What the hell did you do to him?" I, now stuck between anger, fear, and embarrassment, explain the whole story. They all think it's the funniest shit until I tell than that I don't have a suit, laptop, or any of my materials.
Now it goes silent again, and the associate runs to the bathroom and begins retching and throwing up. I feel awful for him, because imagined myself in that situation, but it doesn't excuse the fact that he embarrassed me in front of the founders. He stays in there for the entire flight, and when he gets out he looks like he has seen the devil. We tell him that he fucked up big time, but we're not going to fire him.
A day passes and this kid still won't speak to us. Then we tell him to get a flight home and to take some time off. Regardless, I got a suit from a nearby store, tried to recall what I needed for the meeting and the senior guys didn't put any blame on me. Everything goes great, and we're on our flight home a few days later when two of the partners bring the incident up again. Soon, everyone is crying with laughter because of how stupid the entire situation was. One of my fondest memories looking back, but it was awful in the moment.
You are in the Illuminati is what you're ultimately saying.
My friend who had started his own firm years ago told me that it was borderline torture trying to bring everything together while fundraising. I decided to hire someone to do the annoying, organizational work so that I could focus on fundraising. As a result, I don't know much about the behind the scenes work like you mentioned. I could go dig up some of the old files and info, so I'll get back to you on that.
In terms of fundraising, I was able to raise sufficient funds ($200,000,000 was my benchmark) after about 8 months. I did provide about $20,000,000 myself, and a few of the guys at my old firm with f-you money gave about $130,000,000 combined. Beyond that, I raised about $110,000,000 in the 8 months from random investors.
My founding MD was awesome at fundraising, so he helped massively with that. Needless to say, he's now the head honcho at my firm, and he's done great things with it.
I know I didn't go super in depth, so do you have any specific questions about this?
Exactly. I can't give you the data points for the entire industry, nor do I remember mine exactly. I have no idea what it was at the UMM fund I was at, but I remember that when I started my own fund, I got about 50% as the founding partner, and I gave my founding MD and VP 15% and 7%, respectively. I saved about 28% for when I hired more employees. This, however, was for my fund worth about 250MM. The last fund I raised was about 800MM, and I only got about 35% of that.
Thanks for taking the time to do this Q&A. In your experience why does PE struggle to hire minorities? Not just women but people of color? Most PE fund team pages are almost 100% white male. What has been your experience at the funds you worked and as the person hiring at your own fund? Thank you.
Thanks for posting! Very informative and unique.
I’d love to get your thoughts on a fork in the road I’m currently facing that relates to PE recruiting. I may have the option of going to a small fund ($100mm first fund) that’s run by a mentor and former coworker. This person is responsible for having built me up as analyst in terms of giving me as much runway as I wanted as an analyst to develop my skill set, ranging from priming my modeling skills as a pup to giving me plenty of opportunities to lead calls with sell side clients at the IB we worked at. We were (and still are) very good friends outside of work as well, with my fiancé and I hanging out with his wife and him with regularity. I truly believe that if I were to go be associate hire #1 at his firm that I could voice my desire to get involved in deals at various points and levels that I likely couldn’t elsewhere, and I don’t consider it unlikely that I could pave my own path to a formal partnership 2-3 new funds in.
However, this is a new fund, and I should have the opportunity to explore stints at larger / more established funds, so I’m curious to get your take on whether pursuing this smaller but familiar team is better vs. taking an associate role at a larger fund for my first PE seat. If it changes your consideration at all, I’m unsure how well my recruitment efforts into unfamiliar PE funds will fare, as my academic background is not the strongest and may eliminate me at a lot of stronger places to begin with, leaving me to search for PE roles through independent networking efforts at funds IB experience and PE internships could do to mitigate a very weak academic track record.
Many thanks again!
Sorry not trying to be a dick here but is the OP verified by WSO? I feel that many of his answers are too generic. But this thread is on the front page so I may be wrong?
Happy to offer my view.
So I'll preface by saying that I've also worked in both PE secondaries and PE directs (internship in business school) and I prefer directs purely based on my own personal investing interest. I enjoy digging deep into businesses, understanding business models, interacting with people, and generally being involved in growing and managing a business during the investment period. This can only happen in direct investing as in secondaries you are simply buying an interest (either in a fund or company) and holding to maturity. If dynamics change after purchase (i.e. pandemics, recessions, etc.) there is literally nothing you can do when investing in a secondary since you have zero control and are the will of how good (or bad) the managing GP is. This is something I don't like in terms of investing - have zero ability to impact the investment. So to me I wasn't very excited working in secondaries as a long-term prospect. It was for sure very financially lucrative and I'm sure I would have done quite well I stayed for the long game but I'd be dead on the inside because I just didn't enjoy doing it. Whenever I'd be on a call or meeting with a GP discussing their initial investment thesis, or how things were trending with their portfolio company, or upcoming changes, I would get more and more interested in wanting to be on that side of the table.
In terms of work - I'd say secondaries is quite misunderstood. My general belief is it is perceived as "easy" or non analytical, which is quite comical and couldn't be more incorrect. I'd say I built far more complicated models while working in secondaries vs. doing direct investing. In secondaries you have to quickly learn to understand business models as you analyze various different types of businesses operating in every industry; some can be quite complicated and you need to really understand them since your purchase price depends on your expectations of underlying performance. You won't be building 3 statement models in secondaries (for one you wouldn't have the time) but you will definitely need to be a good modeler in IB in order to succeed in secondaries.
Overall, I'd say it was a great start to my career because I was able to learn quite a bit and even develop a decent network. However, I'd say the con to it is that instead of becoming an "expert of industry" (i.e. working at a consumer or industrial direct focused fund) I've been pegged as a "jack of all trades" type, which generally (and unfortunately) is not appreciated as much as it should be. My recommendation would be if you go into secondaries after IB into a 2yr program really spend the first 6 months or so seeing if you like it and can make a career out of it. If so, work had and stay on the Partner track and you're set. If you don't like it, no loss. You've gained great experience and at the end of the 2 years you can either go to business school or move into another role since the entry point is still valid (pre-MBA associate at PE direct or long hedgefund).
Hope this helps.