What % of people entering PE ultimately make MD/Partner?
What do you guys think is the % of people that enter PE and end up becoming MD/Partner? Could be at first fund they joined or moving to other funds (i.e. lateraling around). Including all of PE (MF/UMM/MM/LMM).
Would also bifurcate % by those who want to stay in PE vs. excluding those who decide on their own to leave PE.
Below is my guess as a current PE VP (no exact research here just an estimate).
- 20% of total people that enter PE end up making partner/MD. For every 100 PE associates, 20 end up partner/MD (20%)
- 30% of people that enter PE and want to stay end up making partner/MD. For every 100 PE associates, 35 decide on their own to leave (35%). This leaves 65 people that want to become partner/MD (65%). 20 of those 65 end up partner/MD (30%)
Thoughts? Too high?
My guess is it’s meaningfully lower, but interesting question. So many get culled post Associate.
Seems far too high at least for UMM/MF.
There is basically no legacy MF where 20% even make it to SA/VP, and from what I've seen it's very hard to find a second job in PE even if you were at a MF. A few years ago, the Vista/TB's of the world were the only MF's that had super high promotion rates relatively, but not sure if even that is still the case. There are also various MF/UMM firms where there is no path beyond VP, such as the one I am at. I am sure there is a similar grind to climb up the ranks above that as well. I have friends who are associate 2's at MF PE's or people who completed their stints and could not get any PE offer for a firm above ~$1bn in fund size.
I would agree. I think of 100 guys and gals that start out as PE Associates, maybe 10 make partner? Its a long and challenging road, of which few people have the capability, stamina, and desire to grind it out to the end.
Anecdotally, of the folks I knew that started in PE ~4-6 years ago, most are still associates or have left the field.
Even making that VP Promo is so tough, and you're still a long way to partner.
I think the better question to ask if what percentage of VPs make it to partner? I would wager that number is 5-10x higher than number of folks who start in PE that make it to partner
It’s such a firm-dependent question. If you’re at a growing shop adding heads left and right (very rare these days) it could be 20-30%. But would say for most relatively mature funds it’s maybe closer to… 5%?
What happens to all the people that don’t make partner then?
There are very few ppl who make it at their ‘first fund’. Maybe LGP is the one exception
The answer is sub 5% without a doubt - and this was during the boom times. We're in a bear market, so making it from Associate to MD/Partner at a firm today would be 1% to 2% chance. Realistically, 95% of the determining factor would be AUM growth. If AUM isn't growing, the battle for economics (and promotion) are difficult.
OP here. Is the % really that low?
I can see it being really low if you join a MF as an Associate and want to make MD/Partner at that same MF (never leave). However, if we include lateraling down-market or joining a spin-out, wouldn't the % be meaningfully higher
Also including those at MM/LMM where promotion odds are higher than MF/UMM
I would bifurcate it across fund types as well. MF has a much lower probability compared to LMM. At a MF, I'd estimate ~1-5% of Associates eventually make MD / Partner. At a LMM shop, I'd estimate the probability increases to ~10-20%.
From my own experience at a MM shop, on average ~1/3rd of our Associates end up making VP, ~50% of our VPs end up making Principal, and ~50% of our Principals end up as an MD / Partner. That yields a cumulative probability of ~5-10% to move from Associate to MD / Partner and the % has been decreasing over time given limited seats at the top and once someone is senior, they generally don't leave.
These %s roughly align with what I've seen at my MM shop as well.
What happens to those who don’t get VP promotion on the usual expected timeline? Do they keep working as associate until it happens or get pushed out?
We give them some time to find a new role but it's limited. The exits are very mixed - laterals to MM or LMM, business school, joining a co-invest shop or independent sponsor, consulting firms, corporate etc.
1-2%
4 big filters, % moving on:
If you make it through the first couple, there are a lot of ways to make good or even big with potentially lower risk… things just pop up
Thanks. To your last point - can you share examples of what people who leave do that is still high reward with potentially lower risk?
Allocators (joining or becoming one), buying or joining the right biz through network, a rare corporate opportunity, niche areas of finance
You sure you work in PE? you think 20% of all associates in the world who join a > $1B MM PE fund in the US end up making MD at a similar type place? I’m not sure what world or industry you work in but the % is significantly lower than that and your math is way off. Especially if you’re talking more recently and not 2005.
At some of the tougher funds I would say 10-20% of associates make it to VP (through either voluntary or involuntary). Then the next 5-10 years to MD is even a fraction of that…
Chiming in to say that 20% feels way too high. 5% feels like a better ballpark and that's likely even a bit generous. 10% at the absolute max.
Any sense of where people go then? For example, if you worked about 15-20 yrs, you are still way too young to retire if you didn't make partner, but also, at that point, too far into your PE career to really switch to corporate development, etc.
bump
Maybe the better question is if you exclude people who choose to leave, what percent make it? 20%?
No man still much lower than 20%
New question. What percent of PE associates will ultimately go on to have at least a $5m net worth?
Is this not low? Even just 50k invested annually for 30 years reaches 8mm @ 10% compound rate
I view it as enough money to never have to work again and still be sustainably "Upper Middle Class", AKA "Enough Money to be Free". Rich? No. Free? Yes.
at what age? by 35 vs 45 vs. 65 is extremely different calc
Let’s say you get pushed out after 2 years at a MF. Where do people usually go?
Mixture of business school, down market PE (increasingly rare as senior associate PE market is dead), corporate roles. Lots of people end up in Hedge Funds too, but those people usually come in knowing they want to join a hedge fund post 2 year program. I think it also varies by program. It's easier to recruit if at a firm that kicks most out like a CD&R compared a firm that has more of a reputation for promoting like Thoma.
This makes a lot of sense. Thank you.
Def less than 20%
Varies depending on fund size but I doubt more then 5% of associates end up making partner
Even IBD / HF are tight there’s so many people that get pushed out. I don’t know why people on WSO assume making partner / MD / portfolio manager is a given if you stay the course
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