Is PE a dead end?

A lot of people on this website praise the Target School --> EB/BB --> MF PE --> Tiger Fund greatness path. While you'll definitely accumulate a ton of money at every step of the process (if you succeed), the last step is by far the toughest. I've been browsing a bunch of LinkedIn profiles lately and it seems like a ton of super smart people fizzle out after their 2 year stint at MF PE. It goes, EB/BB --> MF PE --> mediocre random hedge fund --> fund shuts down/they quit --> unemployed/another mediocre hedge fund.

My suspicion is that a lot of these people are goal-oriented and academically intelligent, but they don't quite have the creativity to carve out their own career. They've always been the following the footsteps of someone in front of them until they get to PE, realize there's no upward mobility at the firm, then don't quite know what to do. Is MF PE a bit of a dead end? Why not be the 'big fish in a small pond' at a smaller less established fund? For those who went to MF PE route, would you change your career path if you could go back in time?

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Comments (38)

  • Intern in IB-M&A
Jun 26, 2021 - 5:07pm

If anything, that seems to be an issue with hedge funds? They're known for turnover/volatility, and lots of smart people get greedy, go work at a new hedge fund for the upside potential, then flame out and end up somewhere worse.

MFPE is a grind certainly, but progression is possible, and one can always lateral to a newer/smaller fund for faster promotion.

  • Associate 1 in PE - LBOs
Jun 27, 2021 - 12:49am

Most UMM / MF. Some are good. Just recently I saw someone say everyone who works at Genstar loves it on the forum (as a counterpoint)

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  • Analyst 1 in IB - Cov
Jun 28, 2021 - 3:18pm

A more str8 forward way to ask this post is this:

A bunch of people who are process monkeys follow process, process reaches its end, but they don't actually have a liking to the work and realized they are unhappy, and so they fall off

It should come as no surprise that if you went into finance and don't actually like investing, you probably won't do well

It's a lot more pervasive than you think, there's a lot of great smart people out there dedicated to the wrong thing cuz of some psychological issues they have eg they want people to think they're cool for working at Blackstone, afraid to take risks so settle for a cut out path etc

Finance is a crapshoot unless you are in it for a very specific reason, and tbh that reason above all has to be making money investing. If that's not what you're into then I think you should find another career that makes you happy

Who gives a fuck what others think. It always surprises me when people chase prestige over money in finance. At the end of the day, prestige isn't gonna by you time, your own life, and the liquid you need to do things the way you want, but money sure as fuck will…

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Jun 28, 2021 - 3:50pm

I would imagine that doing PE, especially at a megafund, gives you a whole host of exit options albeit most not necessarily with a higher pay grade. I have friends jump from PE to Sr Manager Corp Dev, strategic finance, strategy & ops, etc. and I can't imagine MF PE not to have better optionality here. 

Not to mention, you should have a pretty nice nest egg saved up after doing MF PE so your tolerance for risks end up being higher and you can even do startup stuff without worrying about blowing up your lifestyle (to an extent). 

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Jun 28, 2021 - 5:11pm

I think you are underestimating the option value that a megafund PE gig provides, both in PE and outside. Any MF PE associate should have a fairly straightforward time lateralling to a VP-track role in MM PE, with or without an MBA. Then there are other buyside roles like HF as you mentioned, growth equity, VC, and so on. Then you have corp dev, strategy, startups, etc.

PE is definitely not a dead end. Just be aware that you will likely be taking a paycut in anything you leave to, outside of top-tier HFs.

Jun 29, 2021 - 3:51am

Your  last line just pops the question : Hedge Funds V/S Private Equity . 

I know its one hell of a broad tern and an ambiguous question . But 20-30  years down the line which of the two has more stable and secure future and high schoolers like me can expect to work for .

Jun 29, 2021 - 10:14am

I don't even know what PE/HF will look like when you graduate college in ~5 years, let alone 20-30 years down the road. What I can say is that right now, PE is generally more "stable & secure" whereas HF is more volatile with potentially higher upside. 

  • Analyst 2 in IB - Cov
Jun 29, 2021 - 1:05am

Even if you're not at a MF, i feel like a a role in LMM/MM PE sets you up for really an unlimited variety of jobs from "easy-to-get" cushy FP&A and corp dev roles to operational roles to other investing roles

Jun 29, 2021 - 5:31am

Intern in IB - Gen

it seems like a ton of super smart people fizzle out after their 2 year stint at MF PE. It goes, EB/BB --> MF PE --> mediocre random hedge fund --> fund shuts down/they quit --> unemployed/another mediocre hedge fund.

What you are observing is that fact that there is practically no job security in a hedge fund. You get two years, and if you can't show that you are making money (i.e. your coin tosses landed the wrong way up) you are out. By contrast, PE is probably the lowest risk way to have a 20+ year career that will get you well into the $25-50 MM net worth bracket.

Jun 29, 2021 - 6:32am

Not "rare" but rarer. Let's say the worst happens and your fund blows up, eliminating all carry and prospects of carry. You still need a team to monitor the investments to salvage as much value as possible for the investors. There will be a management fee of 2% ticking on your AuM. You might decide that the investors are best served by letting the portcos "season". Zombie funds can be a 5-10 year annuity income stream for the GP, so you won't be out on the street even if you are bored out of your skull.

Jun 29, 2021 - 9:57am

WB97

Intern in IB - Gen

it seems like a ton of super smart people fizzle out after their 2 year stint at MF PE. It goes, EB/BB --> MF PE --> mediocre random hedge fund --> fund shuts down/they quit --> unemployed/another mediocre hedge fund.

What you are observing is that fact that there is practically no job security in a hedge fund. You get two years, and if you can't show that you are making money (i.e. your coin tosses landed the wrong way up) you are out. By contrast, PE is probably the lowest risk way to have a 20+ year career that will get you well into the $25-50 MM net worth bracket.

"...the lowest risk way to have a 20+ year career that will get you well into the $25-50 MM net worth bracket."

LOL. I'd like to see that math. How did you arrive at $25-50 bud? Did you start your own fund?

Jul 16, 2021 - 2:12am

I personally know several (Senior) Associates/Junior VP level people who absolutely hate their job. The golden handcuff comes sooner than you think in investment banking.

Also, almost all of them don't have much marketable skills. Don't talk about strategic thinking. It is an intangible asset that will only come tangible when you start your own business, which very few people on this forum succeed. 

  • Analyst 1 in IB-M&A
Nov 23, 2021 - 2:02pm

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