Why are people so fixated on going to MF from IB?
It seems like most people going into IB want to exit not only to PE but to a MF. People choose groups not based on their interests but rather on historical exits (this has created a self-selection bias where people think that only certain groups are good for exits whereas it is more than likely that these groups are simply hot spots for people that want to exit to PE so naturally more people get offers). Anyway, do people chase MF simply for the prestige or slightly higher pay? For people who went into MF, did you do it because you were actually interested in the work? Did you go into it to open up more doors in the future?
To me, MM is much more attractive for a few reasons: - Less likely to be 2 and out, more room for growth - Less financial engineering and more thesis-driven change - Leaner teams - Simply more potential companies/deals - Better lifestyle overall
I assume most people know that the chances of getting promoted to VP in a MF or even UMM are tiny so they will more than likely have to move downmarket so why not just start there? At a certain point in your career doesn't it make sense to have a job that you enjoy and want to stay in rather than always thinking about the next step?
I am not hating on MF at all but am just trying to understand the fixation around it. Am I just thinking about this the wrong way?
Generally speaking the pros of MFs are comp and exit options. Like you mentioned, you can always move downmarket later and having a MF on your resume can help immensely.
I'm a LMM guy, and I think it best suits my current skillset and my long term goals. That said, I'd do a well-compensated 2 year stint at KKR in my 20s for the experience if I had the option.
That said, I think there is some benefit to starting in the MM instead of MF. Especially in the LMM, you have to learn the softer PE skills almost immediately - before you hit VP you are on boards, do some sourcing, negotiating, hiring professional services (accountants, legal, etc), helping fundraise, etc. That learning curve can be harder for the banker-type than building returns models and deal memos.
That makes sense, thanks. Do you feel you would be better at your current position if you had done 2 years at a MF?
I don't think I would be better at my job (Associate / Sr Associate). Having been in the LMM for a few years I can do more of the value-add things like I mentioned above.
Really its about being better at the more senior levels. My thinking is that the network building you get at a MF and just the sharpening of being in the room around the more complex/hairy deals are things I won't get as much of in the MM. Also the blue chip on the resume is an ego boost that I wouldn't mind.
When you say LMM better suited your skillset, can you be more specific?
One of the underrated areas of being upmarket I’ve heard live from some mentors but not on this forum is that you develop connections upstream of where you end up.
Here is an example: John works at an UMM doing UMM Healthcare deals. He does not get the VP promote (bad timing) but he is a top employee so has no trouble getting his pick of MM VP slots. He ends up at a blue chip MM Healthcare shop. Once there, the MM is looking to grow AUM and get into larger deals. John has some UMM connections with bankers and business brokers and so has a competitive advantage over his peers in getting attractive deals done. He is doing deals the firm wants to be doing, not what they currently do.
This is illustrative only! But the idea there is right. And it’s intriguing. I’ve heard this from a couple senior folks so interested to see reception on the forum.
Gotcha, makes sense also. But at the same time, how valuable are those banker/broker relationships? Wouldn't any senior banker happily include a new PE firm in their processes if they are looking to move upstream? I imagine it isn't too difficult for PE firms to get into contact with bankers.
However, your post is making me think of something that could be a competitive advantage. Using your example, John would know what the UMM players are looking for so he could shape his companies at the LMM firm to fit the mandate of his former and similar firms to best position it for an exit... Just a thought but would love to hear from PE pros if this is realistic/actually beneficial
I mean, yea, that is true, I know for a fact that there are firms doing that with IRR>30% and not even software focused. They are LMM roll up shops with unique strategies because they know what platforms are desired upstream.
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