A2A vs. PE

Just wanted to revisit the banking vs. PE discussion and the A2A promotion, given all the changes going on in comp.

For context, I'm currently beginning my 2nd year at a strong BB group and am considering taking the A2A instead of recruiting for PE. All analysts in my group historically have exited for the buyside, but I'm pretty satisfied with my current job. It's not perfect by any stretch, but I like the work and I like the team. The hours are decent too... (normal week is 70-80 as an analyst). Additionally, I was ranked very well in my first year and I'm guessing comp will only get better going forward, should I choose to stay on.

For me, I came in with the mindset of wanting to exit into an investing role, but now I'm not so sure. I feel like the only move that'd be really worth it from a career / prestige standpoint is if I make the move to a solid UMM / MF. I feel like it's hard to justify moving to LMM/MM PE given that I'd be taking a huge paycut (guessing almost ~40% in some cases...) for a culture / job that I'm not even familiar with.

Admittedly, from a senior banking vs. senior PE perspective, I do find PE as the more attractive option (facilitating deals versus actually taking ownership over deals), but at the junior level I can't imagine there's much of a difference. 

What is the latest thinking here? How should I approach this decision with on-cycle coming up? Will I be able to make this move after I take the A2A? Figured I'd ask those in PE to see if any of you had been in my shoes and how you made your decision.

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Comments (77)

  • Associate 2 in IB - Cov
Aug 17, 2021 - 5:40pm

I wouldn't let changes in near-term comp impact your longer term aspirations. Things to consider:

1. Where do you ideally see yourself in 5-10 years?

2. Do you want to do an MBA?

3. Could you see yourself in the shoes of your VP+ colleagues?

If you love banking - stay. If you enjoy banking but want more optionality, recruit for PE and re-evaluate once you get an offer. You can always do 2 years of PE and come back at a mid-level associate in banking. 

  • Associate 2 in PE - LBOs
Aug 17, 2021 - 5:59pm

You should do whatever is best for you in the long run, making decisions based on junior-level comp doesn't make sense since it's so heavily dwarfed by senior comp. The biggest impact on career earnings will be whatever gives you the most longevity.

With that said, it's likely easier to go to PE now and come back to banking later on, if you so desire, than to stick on banking and jump to PE at a mid-level. If you think that PE might be the long term choice I would suggest trying it out now

Aug 18, 2021 - 1:08am

They're two very different roles. In banking, you're basically going to stay a workhorse grinding through minutia and work you can do at 2am blasting music until you yourself start cracking the whip. In PE you'll have to be smart and use your brain to get ahead and add value through writing complex IC memos in the late hours of the night, synthesizing all available information from modeling to an investment thesis - not necessarily something you can mindlessly do. I tend to believe that learning how to think is a better long term strategy rather than learning how to execute. No offense to any bankers; I think they'd probably confirm.

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  • Associate 1 in PE - LBOs
Aug 18, 2021 - 4:02am

I think a lot of people (including my best friend) get stuck at this inflection point. DO NOT FOCUS ON THE MONEY. Both professions will be fairly similar vis a vis comparable levels of prestige/deal volume/deal size.

The thing is, comfort doesn't matter right now. Learning, growth and development are at a premium. If the reason you're liking your job is because everything feels easier, you have good relationships, you can leverage your work a bit better amongst analysts... you've probably hit the peak of the "analytical" part of your tenure in IB. The skills at associate + will be salesmanship, sucking up, presenting, becoming an industry expert and creating narratives. Not saying this isn't valuable, it just is what it is. In PE I think the "analytical" track continues in that you learn to digest a business, its levers, what really makes it tick and see firsthand the challenges on the op-end. You actually don't really become that big of an industry expert in PE. You pay the experts to teach you, and then you synthesize everything together. For banking the journey ends at deal-close. Real life isn't like that.

Now if you're 30+, you're thinking you want to slow down for the family, at that point your #1 priority might be WLB and being a good father and husband which is one of the most respectable things in the world. If you feel like you can get away with more and have better flexibility at IB, then that's the superior choice at that point. Personally, I don't think IB supplants PE at this point either because you're still someone's bitch whether you're at a micro boutique or at a BB. However with PE there is a notable decrease in hours/stress as you go from MF/UMM to LMM.  My opinion. 

Food for thought. 

Aug 18, 2021 - 10:35am

The only question you need to ask yourself is, "Do I want to be a professional investor or not?", and everything that comes a long with it. The level of responsibility you have for your outcomes, not only for yourself and your team, but your LP's and employees of your portfolio companies as well. While I think the work is more interesting, timelines are more your own etc, there is an element of stress that is not there on the banking side. Just realize it is not some magic land where you suddenly work less and become fabulously wealthy over night. There are valid reasons for making the move, but not any of the glamorous bullshit this forum seems to portray. It's just a job at the end of the day. They all are. 

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  • Associate 1 in PE - LBOs
Aug 18, 2021 - 11:08am

All, I'll say is there's a reason why people take a 30% decrease in comp to go to LMM PE (and are almost always happy with the decision). 

  • Associate 1 in PE - LBOs
Aug 18, 2021 - 11:40am

Right, what I'm saying (and feel like I am somewhat of an authority in) is that even with the drop-off in comp, there are very, very few people who regret going to LMM PE vs staying as an ASO in banking

  • Associate 1 in PE - LBOs
Aug 18, 2021 - 11:56am

I'm not just going to kowtow to you because you're superior in title. I've spoken to 100+ people in a similar situation to me + I lived through the last year in IB at a well known sweat shop and turned down A2A

  • Analyst 1 in IB - Gen
Aug 18, 2021 - 12:54pm

OP here. I get that there are people who would take the paycut to go to LMM PE, but if I had to guess, lifestyle is probably one of the biggest motivating factors. For me, I would have trouble justifying the drop off in career trajectory and pay. Furthermore, I don't really believe that smaller funds have more career-track seats nor have better culture (day-to-day dominated by the whims of a managing partner, hours can still be tough, etc.). If I want to preserve optionality, I can't see what LMM PE offers in the short-medium term over larger cap PE or even banking, where I still preserve some level of optionality even after the A2A (at least from the examples I've seen).

  • Associate 1 in PE - LBOs
Aug 18, 2021 - 3:32pm

There is no noticeable difference in WLB at the mid level. In fact I would actually say being an associate and VP in IB might be less stressful and "easier" than the PE equivalent, partially due to staying in one bank and having existing brand equity but also due to a "different" learning curve that organically happens when you switch jobs.

But for me like I mentioned I'm personally not prioritizing lifestyle right the fuck now so this isn't as important to me. I genuinely do believe there is better WLB in the advanced track on Partner for LMM vs banking though. In banking you're ultimately still serving your client and having to adapt your schedule. In PE you are the client and yes, you might have pressure from a Managing Partner, but ultimately you generally have total autonomy in diligence and really just have IC to meet in terms of timeline.

Aug 18, 2021 - 6:04pm

I am of the view that investing/buyside isn't as great a gig as it used to be, due to lower cash comp and difficulty to convert to partner-track/equity. I agree with what someone else said that if you truly want to be an investor in 5-10 years, then yes getting into a PE/HF seat will set you up for that. However if you want to go corporate or just generally want a well-paying and interesting job where you are doing well, then you might as well stay in banking. Your cash comp will be stronger and you'll have pretty good visibility through VP level, probably a more recognizable brand name on your resume, and you can decide where to go from there. 

  • Associate 1 in PE - LBOs
Aug 19, 2021 - 9:29am

I'll add my 2 cents here. I joined a mid cap PE firm (1bn+ latest fund size) a couple of months after being promoted to associate at a top MM. I did take a pretty sizeable pay cut (~20%) and on top of that, had lost all of the goodwill I'd built up with my team as well as the knowledge of deal processes. Starting in PE, I again was at the bottom of the rung doing a majority of the analyses sucked. Knowing what I know now, I'd still make the switch again. 

The hours are so much better, I have much more autonomy, the analyses I'm doing actually mean something and support important portco decisions and the work itself is eons more interesting. Yes im making less money but we're all at a salary point where even 20% less doesn't really make a difference to my lifestyle - im still eating at the same restaurants, im still buying the same shoes/clothes, and still going on the same vacations.

If I were you, I wouldn't worry about the money at this stage of your career (unless there are some high priority extenuating circumstances like tons of student debt, family members that need to be taken care of, illness that need treatment, etc.) because the work that you do will be much more interesting, you'll learn more, you'll have a better WLB, and the money will even itself out in the long term.

Sorry for the long post, good luck with your decision.

  • Analyst 1 in IB - Gen
Aug 19, 2021 - 9:56pm

Thanks this really helpful. Do you think you still have a wide set of options after your MM PE associate stint? What if you don't get the post-MBA seat / partner track seat for whatever reason? That's my biggest concern with going downmarket right after banking.

  • Associate 1 in PE - LBOs
Aug 19, 2021 - 10:52pm

Absolutely, I think that you're just as marketable after PE then you are after banking if not more so, with the optionality to go corporate, lateral to another PE firm, or go back to banking. I was careful in that I chose a firm that didn't have an MBA requirement, and where almost all of the principals and partners started off as Associates so they have a strong track record of internal promotion. And as the other poster said, nothing wrong with staying in banking, but you just won't ever be able to do PE after perhaps your first year as an associate because a) you're probably making too much to want to be a first year PE associate again or b) you don't have the malleability that they're looking for

Aug 20, 2021 - 2:27am

I said the same thing before when banking salaries got raised around 2015. If you want to be an investor then just go to PE despite the pay cut. Like assuming you're not at a large MM/UMM/MF, let's say you get offered a 120-135K base vs a 175K base for As1 in banking. Yes you'll make substantially more in banking but if your interests lie within being an investor, that 40-55K delta won't matter a ton in the long run. In the short run, absolutely yes but it's not like you're being driven into poverty either. And taking on a PE role if it's of interest allows you to get a wider breadth of experience and may help better inform what you want to do in the longer term. If you don't like banking much and stay on as an associate for the money, you'll still be doing banking work and at some point you'll be turning comments to a deck at 2AM thinking to yourself "why the actual fuck did I stay here".

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  • Intern in IB - Restr
Aug 20, 2021 - 8:12am

It was my understanding that the hours in PE are no better than an IB analyst's?

  • Analyst 1 in IB - Gen
Aug 20, 2021 - 8:53am

Do you think there is a size / reputation cutoff for PE such that a move from a top BB group to [small / no-name fund] becomes not worth it? Seems like consensus here is that PE is great, but I get the sense that PE recruiting is incredibly difficult to place in one of the more worthwhile funds.

  • Associate 1 in PE - LBOs
Aug 20, 2021 - 12:52pm

Thanks Bueller, 100% agree with you. On the hours, I think on live deal sprints and in the heat of final diligence, hours can similar to banking. I think the big difference, and you've likely heard this before but it's true from my experience, often times you're the one driving forward analyses and can set your schedule (apart from live deals), and given that you're doing work on your portco or for your partners, there's less weekend work (where in banking this is largely due to client driven deadlines or MDs trying to appease clients by turning things quickly). The work is also much less process oriented and more analytical / fact finding in nature.

In terms of the size cutoff, I do think there's a point where the size of the firm does matter because you're not really that differentiated and you're one of a hundreds of sub-$500M funds focusing on industrials. On the flip side, I also made it a point not to recruit for >$5bn funds because I knew the WLB would be worse there. IMO, there's a sweet spot from $1bn - $5bn where you're still participating in legitimate processes for legitimate companies, work life balance is decent, you're not taking that much of a pay cut, and you're adding a lot of value and have a voice as an associate.

  • Analyst 1 in IB-M&A
Aug 22, 2021 - 12:53pm

Thanks for the comments, been awesome.

in your current show, what are your hours like?

Aug 27, 2021 - 3:56am

Yeah and I'm not really sure if there's an argument to be made here. I accepted that the title and nature of the job would be different but as someone who went through a MF PE associate cycle I know that the WLB is similar if not worse than banking.

Sure if you segment funds with the parameters you're referring to then yes maybe you've got enough evidence to support what you're talking about. But if you're just saying that there lies a sweet spot between 1-5bil fund size where everything is cheery and whatever, then make sure you stay secure in that seat. Because I appreciate what you're saying but it's irrational to think that an anecdotal experience like yours is worth treating like gospel.

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  • Associate 2 in PE - LBOs
Aug 27, 2021 - 4:17am

Absolutely, and maybe I should have caveated that this is just my experience. To add, I have close friends who are in similar sized funds in the same non-NYC city that have awful WLBs.

But I do think that if you're trying to solve for a) better than banking WLB (the true unknown variable here, though there seems to be a sense that MFs work very hard, and for UMM and below funds, it varies) and b) not too much of a paycut (this we know is definitely correlated with fund size, so the LMM funds are probably priced out), the place where you'd find the best score across those two variables is probably in the MM (again, depends on which you value more, WLB or pay).

As I'm writing that, there's a lot of "depends" and "unknowns" in there but I refuse to believe that its just a crapshoot and theres no correlation

  • Associate 1 in PE - LBOs
Aug 22, 2021 - 1:29pm

I think on average it's been about 50-60 hours. I've been able to find time to work out each day and get enough sleep. Barely any weekend work (sometimes there might be a little that you do just to get a head start on the week). During live deals closer to 80-90 hours a week as you're sprinting towards closing.

Aug 26, 2021 - 6:39pm

For context, I'm a 2nd year analyst at a MM bank.

Is it really that big of a deal to stay one year as an associate in banking and then make the jump to being a private equity associate? I understand the jump to PE if you truly hate that nature of investment banking, but what's the issue with staying for an additional year to gain more experience plus capture that jump in pay for a year? I understand the argument of not necessarily learning a ton more in banking between being a 2nd year analyst and being an associate in banking, but I would like to think that you would obtain some sort of value from working on additional deals and taking a larger role on those deals as an associate.

Many of the comments on this thread mention that you shouldn't stay in banking solely due to higher pay since it doesn't matter in the long run if you go to PE (provided that you choose the right firm to provide you that financial opportunity). I would like to assume that this same logic applies to staying one more year in banking before making the jump to PE. Is one more year in banking really that big of a deal over the timespan of a 30+ year career?

I am extremely interested in private equity and think that is something I want to do in the long run, but it feels a lot more risky in terms of finding the correct firm. I don't really have an interest in jumping to the buyside for reasons such as feeling overworked in banking or hate banking. The job isn't overwhelming to me and I'm getting great deal exposure. In my opinion, there are so many more variables to consider in PE as opposed to choosing the right bank. When choosing an investment bank, there is a very clear picture about what comp is, the nature of the work, and the path to move up the bank (mainly MM banks and BB banks). I feel like private equity is a lot different. There isn't a very clear idea of pay, nature of the work, ability to move up, etc. Talking about LMM and MM PE firms here. 

I would love other peoples insights on this, but I feel like staying in banking as an associate would allow me to gain additional responsibilities, confidence to do the job well, pay....AND mainly more time to navigate the PE scene to find the right firm for me. It's hard enough to break into PE as it is, but I feel like there should be more of an emphasis on finding the right firm to go to.

Apologies for the grammatical errors, but I'd be interested to hear others thoughts around this.    

  • Analyst 2 in IB - Cov
Aug 26, 2021 - 7:39pm

would also like to hear thoughts on this as I'm really considering the costs/benefits of staying past my 2nd year as an An3/ASO 0

Aug 26, 2021 - 7:42pm

Thinking about it in the context of the changing dynamic (you can make associate 2 years instead of 3), my viewpoint may no longer be as relevant. It is 1,000x harder to recruit to PE as an associate vs an analyst for a multitude of reasons. One of the big ones is, we have to immediately retrain you to begin thinking like an investor and break a lot of the bad habits you pick up in IB. IB is a great training ground for basic skills and allows you to observe the transaction process early on. Beyond that, it's not helpful. Just look at the myriad of senior bankers who have tried their hand at PE and generated horrible returns, the Robert Smith's of the world are rare. I'm not saying you shouldn't do it. I made the move as a 3rd year associate. What I, and others, are trying to warn you is that it increases the difficulty exponentially to the point your chances of success actually become quite low. I know it seems like the money matters, but in the context of your overall career it is meaningless. Ultimately you have to make the choice, but I'm not going to sugar coat it and make you feel warm and fuzzy about creating obstacles for yourself. 

Aug 26, 2021 - 8:02pm

I appreciate the response and for the insight.

Maybe that strict structure of doing 2 years in banking and then going to PE applies to UMM and MF, but I can't imagine that applies to LMM and MM firms. I somewhat disagree that your chances of going from an associate in banking to an associate in PE get "1,000x" harder. I fully understand your rational behind needing to be retrained to "think like an investor", but a lot of that can be taught/learned on the job. Plus, you aren't taking some enormous role in the decision making tree as say a VP/Principal/Partner...so I truly don't think it would be that much different in training an analyst that did 2 years in banking vs someone who did 2 years. You can't convince me that a second year analyst getting a job as a PE associate knows all of the intricacies of investing and understanding how a company generates revenues, etc...If anything, a PE firm would need to do MORE training, because I'm sure many analysts weren't really thinking of things like that as a banker...they were just trying to get the job done and move onto the next project. An associates role at a PE firm (at a very..very high level) is analyzing teasers, CIMs, building LBO models, analyzing and providing an analysis for PortCos/current investments, diligence, etc.....you can't tell me this type of work is very much different from banking. It's essentially 2 sides of the same coin. I think someone can easily be taught how to pick out the important parts of a teaser/CIM that are important for investing purposes.

If anything makes it "harder" to go from an associate in IB to PE....is your story for why you stayed. I think you just need to have a good reason for, "why you didn't leave?" Did you stay in IB because of a lack of deal flow and you felt underprepared? Did you stay in banking because you recruited for PE and didn't land an offer? Did you stay in PE because you missed the window of recruiting as an analyst?

I think those responses would 100% make it more difficult to jump to PE, but I don't think you would be at a disadvantage if you could explain that you enjoyed the team you were working with, that you were getting great deal exposure and simply wanted to stay one more year to get more experience and more responsibility.

I'm not arguing with you that it makes it a little more difficult, but definitely not to the extreme that you and a few others make it sound.   

  • Associate 2 in PE - LBOs
Aug 27, 2021 - 12:31pm

Great comment - for context, I actually got promoted to Associate before leaving to PE shortly after, with my rationale being exactly what you're thinking about. For me, PE firm fit was very very important (people, location, industry focus). I also think that being an Associate for a few months and taking on more responsibility (process oversight, being more vocal in team meetings, etc.) helped me a lot as I started in PE

So basically, I agree with you, suggest you take your time finding the right fund. However, there does come a point (2nd/3rd year associate) where that jump to PE just doesn't make quite as much sense (you typically won't get credit for the years you put in as an associate in PE).

  • Analyst 1 in IB - Gen
Aug 31, 2021 - 9:56pm

When do you know if you are eligible for a promotion to Associate? I'm happy where I am, but want to have a backup in case I do not have the opportunity to stay or change my mind.

  • Analyst 2 in IB - Cov
Sep 4, 2021 - 5:23pm

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  • Analyst 1 in IB-M&A
Sep 7, 2021 - 8:23am

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