Should I leave my cushy MM PE gig?
Currently at a relatively cushy MM fund as a 2nd year associate (joined early last year from IB). Life is relatively chill for PE, seniors are chill, hours definitely ramp during crunchtime (for example went to bed at 4AM every single day this week) but otherwise not bad (typically working 9-7 M-T, 9-5 F, and no weekend work). Clear path to VP promotion.
Two issues:
(a) comp is relatively low, and this was not properly disclosed during recruiting. I'll make $210K as a first year ASO which feels low for our AUM ($3B latest fund).
(b) we are pretty non-technical - our models are very, very simple. A typical financial model here has no unit drivers, is annual, assumes % EBITDA margins, % of revenue to NWC, no balance sheet projection. I would say we are a firm that relies on our deep industry expertise (which we are very, very good at) but has terrible financial acumen.
My concern (immediate comp aside) is that I'm going to plateau in technical development at this place. I am already the best modeler in the entire company, which I don't feel great about. My concern is that if/when I want to switch later in my career, I will have missed valuable development that will prevent me from certain opportunities.
I would also like to add that this very simple technical approach may save some time, but it actually sometimes creates a ton of work. It being so easy to adjust EBITDA margins means my VPs/MDs are constantly changing model assumptions, and often different counterparts get very different numbers that are difficult for me to back up or bridge and I need to spin wheels trying to explain why our EBITDA changed so drastically from the previous iteration. Or a partner will ask why cash flow decreases in Y2 and instead of pointing to a specific CF driver, I'll need to dive into the #s and invent a reason why we assume XYZ. It's honestly exhausting and I wish I had an overcomplicated 50000 row model where I can point to these exact factors. It also adds time when external parties (lenders, coinvestors) ask us for materials because they typically ask for monthly projections and other levels of detail that we do not use in our own models, so I then need to retrofit our annual/simple models to appear more complex/monthly for lenders...
Curious to hear people's thoughts. If I'm already an above average modeler/technical employee as an ASO2, how much will it hurt my long term career if I plateau here vs. moving to a more technically focused firm.
I will also add that we are quite good at commercial DD, which is why the fund has been historically successful.
Is it all creating extra work if you only work 9-7? Seems like it’s kinda stupid but not creating more work than you would have elsewhere.
I think during crunchtime, the extra work from how we approach modeling probably brings me close to normal PE hours (hence going to bed at 4AM all of this week) but it's honestly more annoying than the "normal" workload b/c I literally feel I'm just making shit up all the time.
Why don’t you just build the model more complex yourself? You could differentiate yourself in your firm this way by being more rigorous, no?
(Ignore title, actually had a similar situation at my LMM PE when I joined as an Analyst and taking the lead on making the models more in-depth gave me a good rep for my Aso promo).
Common misconception, higher ups will say it's false precision (which may be fair depending on the level of data access / visibility you have)
And it certainly would be
But would you not atleast be able to say "EBITDA margin increase driven by assumption that top line growth is 7% higher driven by contributions as follows: increase new customer acquisition - 2%, price increase YoY -3%, product mix improvement -2%. This flows through to EBITDA due to additional improvement in cost control - procurement savings 1%, lower CAC -2%" etc etc. then these could all be challenged / discussed as opposed to just going yah revenue +5%, margin +3%, dunno why.
Maybe but in my case specifically this didn't really happen. I mean if you address it in the right way I don't see how being more analytical in your approach would hurt
The amount of your time / energy (and space dedicated in this post) focused on modeling makes no sense to me. Performance is not decided by models. Good deals are not driven by models. Modeling, almost always, at least in my opinion, is just double checking the validity of your initial investment thesis (i.e. making sure the return maths, directionally, work should you be right about the trajectory of the company here). I promise you can go on to be the next Warren Buffet / Marc Rowan / Jensen Huang without having spent your PE associate years making "robust" "sophisticated" "bottoms up" LBO models.
It sounds like the fund is going well and you all make good decisions with your current diligence process / industry expertise - maybe focus on learning more of that?
Also don't tell people you are "already the best modeler in the entire company" - it makes you sound like a dork.
FWIW comp does feel quite light for a $3bn fund. Probably taking 1/3rd ish pay cut to banking for what doesn't sound like a 1/3rd improvement in WLB.
I'm not telling people I'm the best modeler to brag, and neither am I telling it to people internally. It's just the truth - and doesn't make me particularly comfortable given I don't feel I've learned everything there is to learn. The point is that it's a little strange that a brand new ASO2 is the best modeler at the company (enough for the partner of my group to comment on it). It does not make me feel secure about my future learning curve, if that makes sense.
As for your point regarding the importance of modeling - broadly agree, but I honestly feel sometimes our models don't even provide directional guidance and literally just fit (a) the partner's internal thoughts about how fast the company should be growing/what their margins should be and (b) the commercial readout that Bain/McK/BCG provide us (e.g., market is an 8% grower, this is a fast growing company so rev. should grow at 9-11% and lets sensitize for that).
I mean, maybe that is not necessarily wrong, but I'm already seeing a couple of investments begin to blow up b/c we didn't do our proper financial due diligence before investing and didn't fully understand the revenue drivers of the business.
As for what I'm fearing I'm missing out on - regardless of whether or not being a good modeler makes you the next Warren Buffett, PE firms will demand a certain level of competency. If I don't continue to learn the technical part of the job, I'm a tad concerned that it will make it difficult to exit to another PE firm if/when that needs to happen (e.g., I don't get VP promote).
And yes comp sucks. I do technically have a $500K carry allocation but it has a 7-yr cliff vest so internally underwriting it to $0. I also need to pay in a portion of the GP commit (~$11K) which sucks...
w/r/t to the "best modeler" comment... I was being flippant, I get why you mentioned it here (but srs dont actually tell people that in real life)
Points are fair enough - good news is there is no secret ancient alchemy to modeling that you cant self teach / hone yourself independently - per other suggestions in the thread, just make your models a little more thorough than the firm standard to "keep the knives sharp" and I am sure you won't really be disadvantaged when/if it comes to trying to lateral.
Already seeing a couple of investments blow up ~1 year in isn't great especially in context of tough carry structure.
Ultimately no one on an anonymous online forum can make the decision for you if you should stay or leave - personally I would make the go/no-go based on (1) do I feel like I am still learning and becoming a better "investor/deal maker/PE person" in my current seat [going to re-iterate, I do not view modeling as a major factor in this criteria], (2) do I like the firm and people I work with, (3) do I see a real future advancing at this firm [including expectations for fund trajectory], and (4) is my comp relatively appropriate per current WLB [including expectations for future earnings potential].
Walk me through the carry set up? Is 500k the Dollars at work? Does the carry re-up each year (by end of associate tenure, you'll have $1M in carry)? There's no partial vest let's say if you get booted out post Associate tenure?
210k is your full cash comp? So 105k base and bonus?
The carry could def justify the lighter cash comp, but want a few more details before I give my opinion.
This is what I came here to say. Analyst/Associate years it's important to build a somewhat techincal base so you can understand deals, but whether that requires you to be a crazy detailed modeler depends on the shop.
Personally, I'm a believer in your firms philosophy that modeling is a good check the box to confirm the thesis, think through the deal, but that more emphasis should be placed on knowing the industry, operating plan for the business, etc. Especially in the middle market which is where you operate.
To me, your gig sounds perfect, a little undercomped, but keep pushing them on comp and try to grow into an actual PE professional. Go out and source deals, build a thesis on a space and try to pitch it, get involved with portcos, find some add-ons, get more involved with the negotiations, etc. Think bigger picture on what a PE Partner is trying to do, find good deals, execute good deals, grow the businesses, and then exit. That is what will get you to a Principal/Partner level, rather than being able to build a 100 tab model with every bell and whistle imaginable.
If you're optimizing to try and make it to the top at a sweaty UMM/MF type of place, then yes, you should pivot and find a place that will grind you down in terms of modeling. In my opinion, that would be myopic and probably not a great use of your time, but to each his/her own. There are plenty of people in finance who over-index on the technical side of things and try and use that as their differentiator. The issue to me is, that only takes you so far, and at the end of the day, no ones cares. As others have said, modeling is a commodity skillset. Whether it's AI or some guy over in India, those people/tools will be able to crank on a model. What is harder to find is an investment professional that deeply understands a few verticals in the MM space, someone with strong relationships with bankers and businesses, someone who can put together a deal, has a vision to create value and grow the business, someone who knows LPs and can pitch them to raise a fund, etc. Use the time and opportunity you have to become that type of a PE professional.
Modeling as a skill is overrated and gradually becoming more and more commoditized. I have friends at MMs in equities who don't even build models themselves anymore, there's AI apps that let you spread financials and use prompts to add more detailed analysis on any driver you can think of. They might do a little personalization to add their own assumptions just out of habit but that's easy enough to do through the apps too. IMO building the models themselves is going to become a completely superfluous skill as time goes on and what will be the major difference makers are the qualitative observations and industry-specific knowledge you can apply to your investment decisions which is what it sounds like your firm excels at.
Cushy PE job like yours is definitely underpaid at a fund that size, but how does it scale? ASO comp is peanuts in the long run so even ~$50k-100k discount IMO isn't a bad tradeoff for still making >$200k and getting to have a life outside work. If my gig was like yours and I enjoyed the work + had a promotion path in front of me, no, I would not leave. There's more to life than spreadsheets and investment decks despite what all the Henry Kravis wannabes on this site will lead you to believe.
thanks for the insight, just curious if you could find some of the names of those apps and pass them along. Interested to see how advanced the tools are becoming
You have a clear path to VP, a role in which you’re not doing so much modeling and are leading non-modeling work streams (which most people agree is the more interesting part of the job), and you are worried about…the modeling?
Leaving that aside, let’s assume you like PE and want to stay. You have agency to be some of the change you want to be - you could start off by making your projections quarterly (and tell the lenders to pound sand for their fucking monthly models), and make some very basic extrapolated revenue and cost builds (price X quantity, billings ramp, COGS as % of revenue, break out SG&A into a couple parts and grow fixed vs. variable). Pretty much what you might do for a 2-day interview case study, which seems like a good middle ground between the way you’re doing it now and the stupidly large operating builds I’ve seen. Then, make a toggle that can flip the model to grow at X% per year because of the market, which you can then sensitize. Now you can ease your own paranoia while also allowing for the simplified projection approach if needed.
Comp is addressed elsewhere - presumably you’ll get a decent bump at VP with carry allocation (even if you leave partway through vest, hopefully you’ll be a good leaver as your MDs seem nice).
Thanks - this is helpful. My biggest concern is that the simple modeling here will limit my exit options if/when I need to leave, but the comments sound like that won't be a huge issue as by the time I would likely lateral (VP ish) modeling is no longer the most important part of my workstream.
I don’t get the focus on modelling here. Later in your career you will need more soft skills on originating and closing deals. The model is never right anyway, and it’s a junior skillset
could you provide some geography and/or COL context?
NYC
is this an sf based fund haha i think i know someone in a very similar position
Know it was crunch time, but damn 4 am every night this week for $210k is disrespect. I made $230k as a corp dev associate working 35 hours (although my firm does pay higher than market). Not a dick measuring contest, Im just saying if those hours are somewhat common, you should leave for comp
Other than comp it sounds like you are in an awesome spot. I could write a really long (and cathartic) about how out of control we have got with modeling but that's for another day.
If you're in a major city, the comp certainly feels low. Perhaps there is a window later this year to approach the decision makers about bringing you up closer to peers. You need a couple years of (very good) individual performance for that to be a healthy conversation. Other than that, the modeling is a non issue. If it's causing you real heartburn when they change it, want answers, etc, simply talk with them and explain why it's not that simple and what you could do to make it better going forward with their blessing.
TLDR: If 1) you like where you live and 2) you like the guys & gals you work with and work for, and 3) the firm is healthy in terms of performance / fundraising, it sure sounds like you've landed in a wonderful spot.
Would love to see that post - curious how other PE firms do modeling. My models in IB were pretty detailed, but I've yet to see a PE operating model.
Bump
Sounds like paradise
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