Why Investment/Development to Capital Markets?
I’ve seen multiple people on LinkedIn, especially in NYC or LA, who appear to have transitioned from a senior/executive/partner position at at investment/ development firm over to a capital markets/advisory firm (mostly boutique). Why would someone make this transition? Is there any upside to this?
Example: I’ve found multiple at Ackman-Ziff who did this.
Faster money. If you come from a good PE fund or development firm that's constantly looking for money to borrow / looking to invest money, you basically have a cheat code upon moving to a brokerage position as far as finding investors and/or borrowers goes.
Also, some people find that they can't or don't want to stomach the risk associated with the ownership side of the business, particularly on the developer/GP side. So for someone looking to do more pure deal work with no downside risk, this could be an attractive move. As you said, they also have a highly applicable skill set and book of business day one.
dope username
I can see this if you just want to do deals by volume without getting to the nitty gritty details of being an owner/operator.
Higher ceiling, less work
I'd dispute that advisory work has a higher gross ceiling, but it's certainly a higher ceiling relative to risk.
I'd say there are more higher paid brokers/consultants/advisers than their principal equity counter parts. Whether which side has the higher ultimate ceiling is up for debate (equity investors would have the highest potential ceiling perhaps but I'm more focused on high level employees are larger companies) but at say a $1MM gross earnings mark there are more brokers/consultants earning that than senior people at large landlords and development firms.
Thats my wild speculation.
Is this true? I always thought that while the compensation can be quite high, it can be much higher on the principal side, and build your net worth much quicker.
If you're contributing equity in a deal but you're going to have to take into account the risk somehow when comparing. But a top equity side position that doesn't contribute capital vs a top broker/consultant there are probably more brokers making more.
Once you start contributing capital then its a whole other thing, with potential unlimited upside but financial risk involved.
I completely agree with @SHB 's assessment. I would piggyback by saying that the rule of thumb in Cap Markets is that the take home pay is 50% of fee volume although it is typically on a sliding scale. Fee volumes generally range but on smaller deals on the senior debt side fees are 1% and 2% for mezz/pref/JV. On larger deals the fees scale down but very large deals still pay $1MM+ in total fees. Assuming that a broker does 2 very large deals per year, they can make $1MM+ in commission or conversely 10 middle market deals averaging $30MM will get you to that mark as well. It's completely within the realm of possibility for a 30 year old to produce that type of volume and a successful originator can make that amount perennially.
Retirement can also be very cushy. To give an example in our market, there is a guy that has 3 correspondent life co relationships. The dude is semi-retired but still manages 10-15 deals per year and probably averages around 4-6 hours of work per day including lunches and golfing hours. He has produced between $300-$700MM in deals every year for the past 10 years and only has 1 person working for him underwriting all of the deals and handling the closing process. He easily makes over $2MM/yr since he owns his own shop and takes on no risk to make his income. I imagine that for being a senior person at a large developer/PE shop with no risk in the deals, these types of opportunities are seldom.
The way that I would look at things is being a VP at a Middle-Market REPE shop with stable capital is better than being a broker who does $50MM-$100MM a year in volume. There is more downside protection in REPE and income is more stable. Being a $200MM+ a year broker is better than being in a high level position (Director, CFO, COO etc.) in a REPE shop since money is better over the longer term and there is greater autonomy in brokerage.
agree with SHB
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