Staying in top banking group vs MF PE

Based on the most helpful WSO content, here are some key considerations for your decision:

1. Compensation Comparison:

   • At the junior level, compensation between top-tier investment banking (IB) and mega-fund private equity (MF PE) is often comparable. However, in PE, bonuses may be lower, and a significant portion of compensation at senior levels comes from carry payments, which take years to materialize. In contrast, IB offers consistent annual bonuses.

2. Career Trajectory:

   • Staying in IB offers a more structured and predictable career path. Promotions are relatively straightforward, especially in top-tier groups, and the hierarchy is well-defined.
   • In MF PE, the "2-and-out" model is prevalent, meaning many associates leave after two years. Advancement to senior roles like VP or Principal is challenging due to limited seats and slower turnover at the top.

3. Exit Opportunities:

   • While MF PE can open doors to other buy-side roles, the competition is fierce, and many associates end up pursuing MBAs, which come with their own risks and uncertainties.
   • IB provides broader exit options, including corporate roles, other buy-side opportunities, or even staying within the bank for a long-term career.

4. Lifestyle and Hours:

   • Contrary to popular belief, hours in MF PE can be as demanding as in IB, especially at the associate level. The pressure to perform in PE is high, and the work often involves deal execution and portfolio management, which can be intense.
   • Banking hours, especially as you progress to VP and beyond, may improve compared to the associate level in PE.

5. Long-Term Financial Upside:

   • The real financial upside in PE comes from carry, which is meaningful only at senior levels and requires staying with the fund for several years. In IB, MDs can earn substantial annual bonuses without the long-term commitment required for carry payouts.

6. Risk vs. Stability:

   • Moving to MF PE involves a higher degree of risk, given the uncertainty of long-term advancement and the potential need to pivot after two years.
   • Staying in IB offers more stability, especially if you're already in a high-ranked group with a strong reputation.

Final Thoughts:

If you're risk-averse and value stability, staying in your top-tier IB group might be the better choice. It offers a clear path to promotion, competitive compensation, and broader exit options. However, if you're passionate about private equity and willing to take on the risks associated with the "2-and-out" model, the MF PE role could be a rewarding challenge. Ultimately, it depends on your long-term career goals and risk tolerance.

Sources: Private Equity Pay vs. Investment Banking Salary, Investment Banking to Private Equity - 6 Things You Should Know, Q&A: Former MBB Consultant, Houston energy banking GS vs CS vs Barclays vs Citi - GS for PE exits?