Reasons why one should not go into PE in 2022?
Hi all what are some smart reasons why one should not go into PE in 2022 and after?
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The smartest reason why you shouldn't go into PE is if you don't want to work in PE. Otherwise, none. Go for it.
Lifestyle does not meaningfully improve and you know you’re over that.
Lifestyle doesn't improve at junior levels, there's more stress (your fuck ups have bigger consequences) and many don't make VP - either through burnout or just not showing the necessary skills while an associate. If you're in IB and your group has good culture / WLB, there's a lot to be said for staying there - particularly if your bonus is 100% cash rather than partially in stock with vesting requirements. Unless you want to go to HF or stay in PE, I don't think 2 IB + 2 PE opens up many more doors than A2A in IB does.
Not sure if you've seen this to be true as well, but based on my limited experience, lifestyle as VP in PE is much better than VP in banking. At least the way I've seen atthe funds I've interviewed at and took an offer at, compared to my VP's in banking now
The benefit PE VP has over IB VP is line of sight over time. PE VP is typically driving the process so sets timelines on when they want different deliverables from their associate / advisors on the deal etc, so short of an MD blowing up their weekend / evening plans with a last minute urgent request they can at least plan things. IB VP doesn't have this given it's driven by clients.
The benefit IB VP has is once a deal is closed they move onto the next one. They don't have a PortCo to manage, these can become very stressful if they're not performing / you're having issues with the management team etc. PE VP's name is against them, so they also have the stress of making sure they don't missing something in DD.
This aside, I think this is somewhat missing the point of my original post. Many don't make VP in PE, either through burnout or not showing the necessary skills while an associate. If people are looking for a reason why to not go PE I think this is a pretty valid one as the main benefits of PE don't kick in until you make VP (ability to manage schedule, carry, more interesting work). Until then, it's arguably banking 2.0.
One thing to note if comparing lifestyle further up the chain, I think PE MDs have a lot more stress to deal with than IB MDs. I don't want to be a PE MD based on what I've seen from my boss and other MDs. Both have to worry about origination and closing deals, but most PE MDs also needs to worry about PortCos and fundraising on top of this.
Because you didn't get an offer on-cycle and are trying to cope.
I know a lot of people in this situation wanting to convince themselves they didn't want it anyway, even though they'd take an offer if they actually got one.
Easy—aside from not wanting to do that role, it often is trading two years of your life after a banking stint. Some are comfortable having no social life from 22-26, but I think that’s the sort of decision you can regret in the long run. Post IB, you likely have amazing corporate finance training and could go assist many companies or do many interesting high-paying roles with more balance, so adding the 2 years of PE is sorta a waste if you don’t plan on doing PE. Also, I think 2 years out of social life and not being in shape is ok, but 4 years is where you really might have done irreversible damage. Let’s say you had a great friend in college and you both moved to different cities. If you haven’t talked to him for 2 years then try to reconnect you likely can save that relationship, but 4 years—at that point you might just not be friends and the person has moved on. Similarly, if you didn’t exercise for 2 years you might be able to come back and be an active healthy person for the rest of your 20s, but 4 years of inactivity at 26 might make it really hard to get in great shape ever again.
Overall, I think it depends what you want to do, but if you ask many people they will say PE isn’t conductive to entrepreneurship or working for a company, while IB very much is. Unless you wish to do private equity, you really are getting specialized expertise that likely isn’t that conductive to other roles, while working insane hours. Unpopular on this forum, but most the people I know who did PE seemed just incredibly lost in regards to life and what they wanted to get out of it as well as what their ideal career is.
Edit: additional very legitimate reason on a more economic side—the industry is overly mature and had massive tailwinds previously, which won’t be the case in the future. Multiple expansion is a direct result of interest rate cuts, if we think rates will go up over the next 10 years, asset prices will go down and borrowing costs will go up which will make the returns in that industry way worse than historically they have been. This will mean firms will underperform and the asset class in general will have less enthusiasm behind it which will make it harder to raise new funds, so a fund you work for could not raise a future fund, or if your plan is to raise your own fund it might be significantly harder in the future. Finally, underperformance will mean people are paid less which will make people in the industry more pissed off than they already are.
On your last point, interest rates were much higher 1980s, when PE and LBOs were just starting. Secondly, from 2000 to 2020 PE outperformed the Russell 2000 and S&P. I really don't think current market conditions are an indicator that PE firms will struggle in the future.
Yeah, you don’t really understand what I am saying. It’s not where rates are it’s the trend—rates going down over the course of your career versus rates going up.
Sorry, can you clarify why PE isn't conducive to entrepreneurship or working for a company whilst IB is?
PE you are running the whole process, you get to know how to manage consultants, lawyers, bankers, make strategic improvements to businesses, how to buy businesses, do add on M&A deals from the perspective of the company and how to sell businesses
IB you just advice on buying/selling the business...
Unless you mean 2 years of IB and out, I'm thinking you are talking about LT career in IB
I think a lot of your other points are v. valid but I'm having trouble with this one, happy to be corrected
Yeah—more often than not this isn’t what you do in PE. It’s a common misconception. Generally the more operating focused work gets outsourced to operators or consultants. More often than not, the associate role ends up being more evaluation/ execution and process running or sourcing. Pretty sure Patrick has talked about this, aside from this being true based on the experience of my friends. IB is conductive for 3 reasons—1) you learn how to raise capital which is something you will likely need to do 2) you gain finance understanding to build out an operating model/ navigate cash management 3) you build speed in just general office skills
x
The direction of the 10-yr yield
Has PE ever really been tested in a recession? Curious on studies regarding performance during 2008-2009. Regardless I think Banks would be the safer route if you have a pretty gloomy view on the economic environment.
PE is pretty lame if you don't wanna do finance as a career
Why not go into PE? The industry is practically a money machine.
Illustrative example: Blackstone's AUM today is $881bn. Assuming ~15% CAGR (in-line with historical IRR), Blackstone AUM by 2050 should be >$50tn.
For reference, the total number of US dollars in circulation today is ~$2tn.
No offense, but hope you don't model the same way you've done this assumption or its getting serious
What's wrong? 15% CAGR in perpetuity is completely reasonable.
>For reference, the total number of US dollars in circulation today is ~$2tn.
There's close to $22 trillion in circulation. Only $2 trillion is in physical dollars and coins.
There's close to $22 trillion in circulation. Only $2 trillion is in physical dollars and coins.
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