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.
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.