Anyone regret LMM/MM?

Analyst 2 in IB-M&A

I accepted a PE offer at a shop that I feel like is somewhat no-name, less than <$1Bn in AUm, partners aren't as flashy, etc. Based on my IB group/grades/school and other places I was interviewing I feel like I could've done "better" if I waited and kept interviewing for more UMM/larger name MM firms. Ever since I accepted the offer, I've been thinking about whether I've limited myself too early, cut myself off from ever going to HBS/GSB, not reaching my full earnings potential, etc. On the other side, I try to remind myself why I accepted the offer: my #1 choice in geography where there isn't a lot of other PE shops, somewhat manageable hours (at least better than the hell that is IB hours), not having to continue on the grind of recruiting, etc.

Has anyone been in this situation? How did it end up? Anyone regret going to a smaller shop?

Comments (37)

Most Helpful
May 28, 2020

I encourage you not to try to equate more AUM with "better." The LMM/MM is an entirely different world than the megafunds from multiple perspectives and your day-to-day experience will reflect that. If the offer met your criteria (geography + hours), then you probably made a good choice. You are not permanently locked out of larger funds in the future as you're still early in your career, although it will obviously be more challenging than if you worked at a large fund pre-MBA. The average senior (and even mid-level) professional in the MM make millions in carried interest and can live a very extravagant lifestyle without having to sacrifice all of your free time.

I have no regrets building a career in the LMM. Sure, there have been a few occasions where I've thought: "I really wish my firm would pay for first class for this flight," but that usually only occurs when I'm tired and feeling burned out! I'm convinced those sorts of thoughts apply to everyone, regardless of who they are and what industry they work in.

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May 29, 2020

By mid-level you mean VPs and Principals? These guys make, on average, millions in the MM space? (Not doubting you but just very surprised)

May 29, 2020
AutisticChimp:

By mid-level you mean VPs and Principals? These guys make, on average, millions in the MM space? (Not doubting you but just very surprised)

While atypical, I received a carry grant of a couple million my 3rd year in PE. As a VP, I received another couple million and then a subsequent multi-million carry grant. All of these from funds below $500M. Annual salary/bonus were obviously not nearly at that level but you can have millions in the bank and even more unrealized at a LMM firm before reaching Partner. While my experience was probably on the high end, every VP / Principal I know at other LMM funds have multi-million dollar carry allocations.

It always amazes me how people are so focused on the large funds on WSO. People are missing out on how attractive the pay can be even at the lower end of the fund size spectrum. Combine this with a very reasonable work/life balance and you're in a really good spot. I'm definitely biased but I wouldn't want to be grinding it out at a MF even if they doubled my paycheck.

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May 29, 2020

I feel like if you were THAT tired, you could afford to pay for it yourself and it wouldn't be a huge deal...

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May 30, 2020
DiscountedStashBlow:

I feel like if you were THAT tired, you could afford to pay for it yourself and it wouldn't be a huge deal...

It's more a fleeting thought something along the lines of: "Wouldn't it be nice if I were in first class" versus an actual desire to take a different career path.

As for paying for first class myself... you're right, that is an option and I've done it a few times before. However, and this is just a personal thing, whenever I fly first class I always feel bad when I land. I get off the plane and I think to myself: "Wow, I would much rather have $500 more in my pocket right now than having just spent the last 4 hours in a more comfortable seat." So it really isn't a matter of affordability more so that I feel like I'm wasting my money. But to your original point, I'm certainly not going to quit my job over the few times where I've had a long day and wish I had a more comfortable flight.

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  • Incoming Analyst in IB - Ind
Jun 2, 2020

Do LMM/MM firms usually go in August/September like UMM/MF or do they usually wait until later and hire off cycle?

Jun 2, 2020

Really depends on the firm and it has changed over time. Back in 2008, the LMM funds would sometimes recruit in the beginning of an analyst's second year after the analyst received his/her first year review and had enough experience that it could be tested in interviews. This gradually moved up, as did recruiting for the larger funds. I know a few LMM funds that recruit in the spring (February - May), and some that still wait until an analyst's second year.

Based on my now somewhat less informed experience, no LMM funds recruit at the same time as the large funds -- it is always delayed by a couple months at least.

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May 28, 2020

following. what are hours like in the LMM area? is it a substantial improvement from IB? how often is there work on the weekends?

May 28, 2020
Howard Hughes:

following. what are hours like in the LMM area? is it a substantial improvement from IB? how often is there work on the weekends?

At what level within the organisation? Here was my experience, clipped from my THEN and NOW: CompBanker thread.

CompBanker:

Lastly, in terms of hours per week, I'll break it down by years since graduation. This is a REALLY rough estimate as I could have a week or two that were substantially worse when a deal was closing:

Years 1|2: 90 - 100. My banking experience was brutal.
Years 3|4: 60 - 80: My first PE job was substantially better, but I worked extra hard to do well.
Years 5 |6: 40 - 50. I was insanely efficient in my role at this time. Some of my best years.
Years 7|8|9: 60 - 70. Took on a lot of responsibility and put in a lot of effort to prove my worth. Did not delegate enough.
Years 10+: 50 - 60. Learned to delegate. Have loads of flexibility over my schedule. Lot's of efficiency and the ability to push back on things I don't think are worthwhile.

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May 28, 2020

beautiful, thank you. you've always been one of the greatest contributors here

May 28, 2020

damn man, how are those hours correct? everyone where i worked including partner and up was 70+ hours a week regardless of what was happening (unless they were on vacay)

May 29, 2020

Not exactly LMM, but I'm from a non-traditional family office and am having a hard time getting hits from recruiters for LMM/MM PE funds. Hoping this is just a temporary hiring downturn due to COVID, but if I can't make the jump since i don't have a brand name shop, then yes I will be regretting

May 29, 2020

Did you start your career in banking?

May 29, 2020

unfortunately not, started with a big 4 in their val/modelling practice

May 29, 2020

You're thinking in a very linear/junior way... The potential for real equity/carry exposure is much more tangible and that's where you make real money. Thinking along the lines of salary is never a good idea lol

May 29, 2020

Absolutely goddamn right. I went to a top performing PE fund early in my career and didn't get carry. What a dumb move. Don't get starstruck with someone else's brand.

By the way, at a junior and mid-level you're often promised carry "once a a plan gets put in place" or "as soon as you get promoted to VP", etc. If there's no signed carry contract in front of you, it's all pillow talk and you're likely not going to be getting carry. Once you're in, why should they share the spoils? And I don't care how much you like and trust the guys. Money changes people, and big money changes people in big ways. "Everyone at the firm gets carry" doesn't mean a thing if it's such diminimus amount that 3 years of carry might literally be only enough to buy a sandwich.

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Jun 25, 2020
earthwalker7:

Absolutely goddamn right. I went to a top performing PE fund early in my career and didn't get carry. What a dumb move. Don't get starstruck with someone else's brand.

By the way, at a junior and mid-level you're often promised carry "once a a plan gets put in place" or "as soon as you get promoted to VP", etc. If there's no signed carry contract in front of you, it's all pillow talk and you're likely not going to be getting carry. Once you're in, why should they share the spoils? And I don't care how much you like and trust the guys. Money changes people, and big money changes people in big ways. "Everyone at the firm gets carry" doesn't mean a thing if it's such diminimus amount that 3 years of carry might literally be only enough to buy a sandwich.

This

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May 29, 2020

None of my friends in LMM / MM regret it because they wish they had gone to a more "prestigious" firm or one with a higher AUM. If anyone dislikes their choice, it's because of idiosyncratic factors like culture, hours, comp, etc.

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May 29, 2020

Coming from a non-traditional background, I didn't have much of a choice with regards to bigger funds vs smaller ones.

With that being said, I've enjoyed my time in the LMM/MM and knowing what I know now, I'm glad I didn't end up going to a larger fund.

I think there are pros/cons to both sides, neither are better/worse, it just depends on what you want out of a career and life.

The benefit to bigger funds is that if you have the appropriate background (MBB or Top Banking) you'll get paid the most you could as an Associate in the shortest amount of time, you'll get a great brand on your resume and will have a good chance to get into HSW. You'll work on big deals (even though the likelihood that they get completed is low) and you'll keep a lot of options open with regards to moving downmarket in PE. The lifestyle will be poor in terms of hours worked, but you're really only thinking about being there for 2 years given it's unlikely that you'll get a post-MBA role.

In the LMM/MM, you'll be working on no-name deals and in the short term, comp will be lower. It's also just less "glamorous" than bigger PE. @CompBanker"s comment about flying first class really hits home, haha. To contrast, I have friends at MFs that don't even fly commercial anymore, they're always on the PJ (private jet). There will most likely be a sourcing component and you'll also likely get more of an end to end deal experience. It's not uncommon for Associates to source, execute from end to end (including help on the legal side, obtaining debt, 3rd party workstreams, etc), and then work post deal with management to execute on the thesis. For me, that's exciting work and the experience I wanted, having some deals under my belt now, I have 100% confidence that I could fully acquire a small to medium size business, almost entirely by myself. I also have a general sense of how to operate a company and at some point, will likely try my hand at some sort of search fund model/ operator type of role.

The exits ops aren't as strong and it's more of a struggle to move upstream to a larger fund, but the benefit is that there's usually less pressure to leave after 2 years. Most funds don't want to constantly be recruiting and if you're a good employee and are showing aptitude, there's a decent chance you'll be able to stay longer. As compbanker mentioned, in the mid to long term, you can start realizing carry, which can be extremely lucrative, even at small funds. Sometimes funds will give carry to juniors, especially if the fund is small and $ comp is below market.

Lifestyle tends to be better than megafunds as well. Not perfect, but better.

I don't fault analysts for wanting to go to top firms. For high achievers, a megafund or UMM fund just represents the next step in a routine path of high achievement in finance. It's entirely de-risked and gives pretty clear next steps after the 2 year stint. At the same time, I'd encourage junior bankers to at least consider some smaller funds, especially if they're tired of the banker grind, don't have strong plans to go to business school, and are maybe striving for more balance.

OP, sounds like you a made a thoughtful choice based on geo and work life balance. Depending on your background, I don't think you've eliminated H/S as a choice and as far as earnings go, you probably have a better chance at life changing money at a good MM fund than by going to a Megafund for 2 years. But you'll figure it out and I wouldn't sweat it too much. Focus on learning the roles of being an investor in the MM and you'll decide if you want to push to a bigger fund or if you're happy with where you are.

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May 29, 2020

Absolutely agree. As an associate at a LMM fund, I get to touch every aspect of the deal (sourcing, forming thesis, valuation, diligence, legal, 3rd party debt) and portco work (regularly attend board meetings, have a voice on calls, etc.). This is of course keeping in mind where you are on the totem pole but the point being that the more reps you get, the quicker things click.

No requirement for b school and a path to VP/principal/partner is nice upside for slightly less cash comp that won't matter in the long term. Carry is TBD but ultimately that's what you should be playing for.

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  • Incoming Analyst in IB - Ind
May 29, 2020

Would you mind if I shot you a PM to ask a few questions regarding the LMM space?

May 29, 2020

your question is around whether you should've waited. funny enough, the PE shop i joined during my interview, one of the partners suggested I do this as well to land at a flashier shop (bit of reverse psychology there maybe, a very cool guy). anyway, buyers remorse is common.

right now, the right attitude is nose down and try to do as well as you can at the current place, evaluate how you enjoy the work/life balance, and in a year, you can target a jump to a larger, flashier shop that puts you in a better position for hbs/gsb applications. you have effectively punted the push for those schools down the road, that's all. i wouldn't sweat it - use this as an information gathering period to then make that decision as to how far you want to grind and grind.

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  • Intern in IB-M&A
Jun 25, 2020

How much of a benefit does the MBA have in the LMM?

May 29, 2020

Carry has to...you know...materialize with hurdle+ returns.

Carry also vests, you don't receive it all at once. Try working at a shop (most) with partners / principals with sharp elbows, and you'll burn out or get pushed out quick, then stuck in a 2/3rd tier market.

Trying to provide alternative perspectives. Speaking from personal exp as Ive been screwed.

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    • 1
May 30, 2020

Curious to hear more if you're able to share. What happened? Any red flags picked up on that you should have noted when interviewing?

    • 1
May 30, 2020
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