Sr. ASO level - struggling MF or great-returning UMM?
Fortunate enough to have received two offers as a lateral. One is one of the struggling megafunds (rare that a seat is open there), one is a ~$4-6B MM that has the classic doubling fund size acceleration, top quartile / decile returns profile.MM in a suburb of a big city, MF downtown (I am downtown too, this info for commute purposes).
I'm really torn on which one to pick. B-school placement (in case I apply down the line as an older person since most of the partners have the credential) is pretty equivalent between the two, and may not matter for me anyway. Carry DAW probably edges higher at the MF given it's about 3x the size. But it really has had middling returns and I think I'd be kicking myself if the MM grows into like a $10-15B fund (who knows if their strategy is scalable, though they've prevented creep so far).
I'm sure this is not an uncommon situation, maybe more so for post-MBAs than laterals, but what are y'all's philosophies on deciding this?
MM since this is your "partner track"
MF would make sense for someone just coming out of a banking analyst program
OP. Yeah I’ve heard that standard logic and I’m not sure it pans out. If anything, MM firms seem to be more protective of their founders / partner tracks in general than MFs who promote to partner with much more regularity
For sure MM. The struggling MFs like Carlyle / TPG / Bain only have less room. One other point is that the MFs have slow capital cycles. Much better off realising slightly less carry much earlier. IRR and liquidity do be real
Bain is not one of the struggling MFs 😂 who told you that?
/ Onex?
Do you not know what the carry DAW is at the VP level at each firm? You should ask.
What is your background prior to these roles? Might be in a similar spot depending on your background and wanted to get your perspective
same here
At a struggling MF, and it is not pretty. Feels like the smart A1-2s are gearing to leave, and the UMM you described is exactly the ideal target. MFs have become AUM aggregators which focus on % fees and regular deployment of capital, so main platform fund sizes have started to remain flat and returns have stayed in the 10-20% range, steadily decreasing. Carry isn't growing and there is less focus on investing, so the chance for significant wealth creation has greatly dwindled.
Let me guess… STG and TPG
weird thing to blast about
Further I’ve gotten into finance the more I’ve realized I do not give a fuckkkkk about the brand of my PE shop.
I’d almost rather go to a UMM/MM and have the opportunity to make the fund grow massive and skip business school altogether.
Without a doubt I would go to the MM assuming other variables (team, location, sector) are neutral in your evaluation. This industry is consolidating and as the last few years have demonstrated, brand alone is not enough to raise a fund going forward. The MM with a great track record should have upward mobility and plenty of carry to go around as you advance in your career. That said, I cannot emphasize enough that cultures vary widely, and being with the right team is paramount.
A follow-up question would be, what's the crossover point where you'd go with the younger fund?
Carlyle is super ballyhooed for reasons largely outside of flagship PE IMO. Shareholders may care how mid-market or the geo or credit funds do, but flagship PE professionals surely don't. And returns have basically sat at 2.3-2.5x range since inception. That's not terrible all things considered.
TPG is a dfiferent story. They've sat at the high 1's or low 2's through and since the financial crisis, with some real fundraising issues. Kind of a worse version of the same story.
Idk why BX doesn't get more attention for this but its returns post-crisis are also right at either side of 2x. 2016 fund may bump up since it's significantly unrealized, and they maintained track record through the '08 crisis, but still.
Apollo and KKR have killed since inception but I actually don't know / it's hard to suss out cleanly on first glance how their latest 1-3 funds have done.
So basically, which of these profiles screams red flag compared to an MM? Would you take any? All of these? Or if only a few, what's the cutoff?
Carlyle’s PE buy out performance is concerning and frankly it’s unclear if they’ll make carry in certain geos…
What do you mean? The Asia and Euro funds have been fine to good iirc. And why would flagship really care? And on what metric is BX meaningfully better than CG returns-wise?
Feel like the MF segment has limited room to acquire huge assets especially when up against other top MFs. More companies to realize value with in a high performing mm
I would also take the MM if I were in your position. I think the value at being at a successful firm far outweighs the benefits of a larger fund, particularly as we enter a period where generating strong returns is not as easy as it was in the past.
How'd you manage to get these offers coming from an MM fund in this environment? That's impressive
OP. Without revealing too much, I never said I was coming *from* an MM
also here to say it's impressive. no need to dox yourself, but to the extent you're comfortable with mind giving a high-level background? i'm an aso3 recruiting from a well known firm as well and market's been brutal. feel free to pm me if that's better as well
As others have mentioned, it’s really going to depend on the funds themselves. I went through the same decision making process last year (as a lateral coming from UMM). I ultimately chose the “lagging” MF over what I felt was an up and coming MM.
Don’t want to share too much publicly, but happy to DM to go into specifics.
Probably the growing fund but really dig into culture. Some of these up and coming funds have brutal cultures and it's not necessarily correlated with fund size. I'd also give DAW a sober look as the high performing fund could easily revert to the mean from here.
what's "prevented creep so far" mean?
Misson / strategy creep
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