What is the point of doing private equity if you will be pushed out after two years to get an MBA? and then wind up as an associate when you could have just stayed in banking and be close to getting a VP promote?
Am I totally confused about how this works? What am I missing?
| +180 | Future of PE | 38 | 17h |
| +33 | Best industry/job for entrepreneurship? | 11 | 1d |
| +30 | What are you actually using AI for in PE? | 13 | 4h |
| +19 | Burn Out in PE - What Comes Next? | 3 | 2d |
| +15 | Buyside in London with nice WLB and pay | 13 | 38m |
| +12 | Value Creation Initiatives (That aren't add-ons) | 3 | 1d |
| +10 | Undergrad summer PE analyst positions | 3 | 3d |
| +9 | Firm not transferring me to NYC | 5 | 2h |
| +9 | 2028 Oncycle PE | 11 | 2d |
| +9 | Question about HH 2028 | 2 | 2d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Lots of reasons:
There's a few more minor reasons but those are the big ones.
Hours usually aren't better at a MF, but the pay is usually much better. MM PE varies widely depending on the size of the firm, usually hours are better and pay is a little less, but there are some MM firms that pay a ton and are sweatshops.
More paths are open because PE includes an elements of operations work that banking never touches. Even on the investment side, you're usually required to think deeply about how the business is going to run and will probably be involved with many of the big operating decision. It is because of this that PE guys(and gals) usually have more flexibility when moving around. Banking on the other hand, especially past the analyst level, develops less of a varied skillset and while there are still exit opportunities, it would be tougher to convince someone that you could do Strategy/Product/Marketing/Sales etc at a company whereas someone in PE could easily talk about how they restructured the selling process for a company, changed up the marketing strategy, had xyz results, etc.
If you're purely optimizing to make money in the short term an want to be a career banker then yes, doing well for 2-3 years as an analyst and getting a direct promote to associate is the way to go. With that being said, being a career banker is a tough life, the work at the associate level is still pretty tough(I'd argue tougher in some ways than being an analyst) and your upside is limited. As a VP at a strong performing PE fund, you could easily make $1M a year, plus the work is generally pretty interested and varied. In banking, its a slog to get to the top and even as a successful MD, you might pull in a few million a year for a ton of work. The big differences are that in banking you service clients, so you're always at the mercy of what the client wants and there's no concept of carry, so its harder to make outsized returns based on your effort. In PE, you're the buyer, so people cater to you, plus if you get to the point where you have meaningful carry in a fund, you can "passively" make money as the firm exits investments.
Banking isn't a bad career by any means, I've seen people who like banking more than PE and end up moving back into that role either pre or post MBA. With that being said, the fun of finance for me is testing my investment mettle, so to speak. I like the risk/reward profile and want to develop to the point where I can look at business and get pretty good at making them better, regardless of the circumstance.
If you forget about the money and prestige for a minute, I would mention the following points: - The job is less repetitive and more challenging (i.e. you won't spend your nights pasting logos or formatting slides): Every investment is truly unique and there is not set path - You develop financial, legal, corporate and interpersonal skills (e.g. You might be asked to fire the CFO of one of the portfolio companies while you only are an Associate) - Whether you join a large fund or a much smaller one, you will most likely get exposure to very successful entrepreneurs, seasoned investors, sector experts... and have amazing opportunities to learn from them. As a consequence, you grow up / mature faster - The project doesn't stop when the investment is made but genuinely starts when you are given the keys of the company - You may be given the opportunity to help companies grow further and faster (e.g. store roll out in new markets, development of new product lines, etc.) or turn them around - You may be given the opportunity to sit on a Board (even as an Observer) before you reach your 30s - You are on the client side, so people respect you way more (including your former colleagues who used to make your life miserable) - More importantly and that's the case in most funds, you are no longer a resource and your opinion truly matters
Happy to discuss these points further if people are interested.
Camondo
Wow, a lot of really solid posts. Thanks everyone.
Sounds like if you have the opportunity to work for a MF, it's a worthwhile experience for a number of reasons, (work-life, compensation, learning opportunities, exit ops) even if it's only for two years.
A couple things I'm curious about: - I've heard that you can spend a lot time as an associate working on deals that end up getting passed over. Do you actually spend a significant portion of your time working with management teams? What's the breakdown? - Do you ever miss the industry exposure banking offers? Even at the larger MM/MFs, I image the number of people you interact with on a week to week basis is fewer (internally and externally) so you've got to be absolutely sure you like the culture of the fund. Even some pretty large teams, I've looked into seem to have only have a couple dozen associates -- fewer than a coverage/product group at a BB. Does this sometimes feel like a major change of pace (potentially a positive one)?
I wouldn't really cite work life balance, if you are getting a good associate experience you will regularly be working 80+ hour weeks. Work/life balance on buyside isn't that much better than banking you just have more control over your schedule since there are no "clients" but, depending on your strategy, will still be going through banked processes with strict deadlines and you are still the most jr guy so don't expect to be chilling and calling the shots.
Answering your questions, you spend time with management of your portfolio companies somewhat. You'll probably attend board meetings and work with them on strategic initatives/financial planning. All depends how involved your fund is with portfolio company management. During diligence of transactions you will meet management and do calls with them to answer key questions you have/walk through assumptions with CFO etc.
The thing I dislike most about private equity is what you touched on - it's not industry exposure but just general isolatedness of the experience. My case is unique as I'm the only associate at my fund but coming from a banking group with 40 analysts (boutique) it sucks. It's a lot less of a fun environment and given the nature of the work (lots of reading/significantly more cerebral than banking), it isn't very social.