Thoughts on Working for an LP?
Curious what you all think are the pro's vs. con's at working for an LP vs. a GP and potential exit opps. For context, I did the whole IB > PE (GP) route and am now at a large LP working on PE co-investments with GP's all over the globe and also involved in fund investing discussions. For starters, the pay cut is extremely drastic having being used to traditional IB / PE money, however, the work / life balance and the exposure you get to different fund strategies and co-investment opportunities is amazing.
It is very hard to move up the chain at an LP and can often take 5+ years to move up a position, so in a way it almost feels like a dead end, However, the experience / exposure is good, nonetheless. What do folks usually end up doing once they are at an LP, do they typically stay? What are some potential exit opportunities with similar work / life balance that pay slightly more? I saw a couple threads on people asking about exiting to a GP from an LP but no way I would go through those hours and grind again. I would imagine it is almost impossible at this point to move asset classes. Curious to hear people's thoughts on this.
Yes, being an LP is typically the exit opp. The only that comes to mind would be IR if you decided you wanted more sales focus.
Comp at some LPs can be good. For example, someone at a pension fund and family office may do the same role, but the comp would be way different. Generally, I think the best comp will be at a family office or OCIO. Worst comp would probably be at a public pension. Large endowments can also be good
I started at an OCIO… those MDs had it MADE. Pulling at least $1-$2m per year and clocking out at 5pm. Defending your portfolio choices to some highly credentialed endowment boards once a quarter is definitely stressful but outside that, it’s a great lifestyle.
I think my shop was an anomaly in terms of that comp but maybe not?
Not an anomaly
This is a dumb question, but what is an example of OCIO?
Cambridge Associates, Partners Capital are two examples. Their clients are endowments, foundations and ultra high net worth families ($300m+ usually) where they’ll basically just manage their investment portfolio via manger selection across public equity, PE/VC, RE, PC, etc. Their offerings vary from shop to shop but some will do estate planning, some offer co-investments and secondaries. Wealth management / private banking esque but they do less of like the lending, mortgage securing, custody stuff, etc.
Working as an LP is the exit opportunity. You make perfectly good money to live a nice life and you work 40-50 hours a week. Personally I think it’s the best deal in finance. If you want to be a master of the universe then it’s not for you. But if you want to have a family that you actually see, have some hobbies, blah blah it’s pretty great.
As you note, it is also pretty intellectually stimulating because you see so many different investment strategies and get to think critically about their various benefits as well as the less tangible side of things… what makes someone a good investor? What makes a good team? The best LPs in my opinion are the ones who spend most of their time thinking about people and incentives.
The only exit really is when an LP decides they aren’t getting paid enough and then they become placement agents or do IR. It’s rare but it does happen.
Veteran Lp here. This post sums it up far better than I could have.
Though I would say that I personally find the work far from intellectually stimulating. I think it’s boring and not attached to anything real. But the work/life balance and sharpe ratio is way too good to give up easily.
How drastic is the pay cut really
Was roughly 50% for me. Could be less depending on what level you get hired at.
50% total comp paycut from traditional PE for senior associate level roles?
Let’s put some concrete numbers on this. For someone with a few years of experience, you could probably get anywhere between 100-200k base and anywhere between 10k-100k bonus. The range is huge based on AUM and what kind of place you’re working for. Public pensions generally pay the worst. Family offices are all over the place. Shops with large AUM pay better than small AUM.
Lifestyle can also vary widely. Some places do a lot of coinvest and/are really grindy and will have you working until 10/11pm. This is the exception but not unheard of. Some places clock out at 5pm basically every day. The bell curve skews more towards 5pm. You need to diligence the culture of the place a lot before you take a job there.
Is all in comp at around 180k fair for an asso
Sweet at the top, sucks as a jr. Source: started my career at a large FoF + Consultant type shop. I don’t recommend it unless you’re entering at VP or higher. Maybe it’s firm specific though?
It’s not. That also why I left where I started… junior work is mind numbingly boring. It gets more interesting with time, but you really had to work to make it interesting as a junior. This was at an OCIO, I think FoF can be more interesting if you’re also doing co-invest / secondaries.
I also noticed very very few of the seniors had started in that world. Most started in banking or did a stint in PE or had MBAs. Didn’t seem like a place you could rise the ranks as a junior and be successful but had to lateral in from somewhere else.
Agree it can be a little more interesting if working across investment types - I was silo’d in primaries which sucked. Same dynamic as yours though re: senior folks. All came from banking or direct PE. This was quite a few years ago for me and a handful of analysts my year +/- a year or so have risen to principal but I do not envy their grind.
Important to diligence where you’re going though. At a large LP but experience is different. Banking hours for average banking pay but no exit opps (except for other LPs) and slow progression because no one from VP upwards leaves. GPs think you’re mentally challenged and a pain in the butt and you still have clients that ruin your life on the other side. The worst of it all is that your 80h weeks have no meaning because you only get deals that a GP you trust has already approved but you still do all this work just to signal internally and play the game for clients.
Started in LP land, meandered around before finally landing at a UMM. I left the cushy LP job because it became very boring after 2-3 years. My learning plateaued in many ways, and if you do primary fund commitments, you can't shake the feeling that nothing of what you do is really needlemoving. To each their own though - now with kids I can see the attraction for some but I'm still not sure I'd want to go back.
Comp is now about 10x btw - but I was at a Continental Europe LP known for meh pay, while I got carry payouts just 4 years into my UMM career (luck of the draw).
Pay gap is not that wide in the US markets
Thread and most comments are asking about US
Think comp would be only 3-4x higher if carry is excluded, which might be depending on the LP, although I know from friends that they'd have higher bonuses at GIC to comp for this - up to 200% not uncommon. I wouldn't underestimate the importance of the learning plateau though, as it definitely affected my work satisfaction.
How was the move from LP to GP/UMM? Looking to do the same at the junior level…
Very time consuming - did an MBA, then a stint at an MBB in their CDD team, then finally moved to GP. Works better in Europe, not sure it would in the US. I know of at least 2-3 other MBAs who did the same thing though.
Should one re-tool a deal focused resume if trying to make the jump from PE to an LP?
see MD/D level at endowments make 7 figures in 30s? seems like a good deal for the stability and wlb
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