Lower MM PE

Howdy Monkeys,

Feel like I don't see much chatter about lower MM PE given most people focus on MF/MM on this site.
Obviously there's some trade off in comp by going towards the LMMPE route but is anyone able to provide info to how much of a difference there really is?
I think it's worth a discussion given the relative ease by comparison to land a spot among these smaller players than at the MFs.

So if anyones able to give their experience in how comp looks, whether there's some comparative improvement in WLB, thoughts on whether a flatter org structure makes for a more meaningful experience (in being heard/listened to), or anything else I'd love to hear it.

Comments (54)

  • Associate 1 in PE - LBOs
Dec 10, 2021 - 8:07pm

Associate at a LMM PE in a LCOL city here. $110k base and $40K bonus. WLB and culture is pretty amazing at about 50 hours a week outside of deal sprints which can vary. Feel like my opinion matters and is genuinely listened to. Ton on career development opportunities and direct path to VP promote looks fairly possible

Dec 10, 2021 - 8:20pm

See I don't understand this. You're working 50 hrs a week when that's already above average compared to regular corporate America, and you still have to deal with stress of live deal sprints. Add on top of that the comp doesn't scale as well yet you have to play a pretty serious corporate game all along.I feel like you're in a position where you're still getting the downside of finance but not the upside.

Edit: Noticed I was getting a bunch of downvotes. I guess this is just tough for me to reconcile when alternative career paths could have been SWE or going to a hedge fund, etc. I see how LMM PE can work as a senior but as a Junior it's not great since you can't even guarantee the 50/hr a week thing.

  • Associate 1 in PE - LBOs
Dec 10, 2021 - 8:36pm

50 hours a week is not the average in PE I promise you. There is a big difference in lifestyle going from 50 to 70+ lifestyle. Haven't had a lot of time at the firm but even during a live deal it never got to more than 70. There is no "corporate slog", the shop is small and I feel like a valued member of the team and my I know my work is making an impact and moving the ball forward.

The trade-off in comp is what I have to sacrifice for the benefits mentioned previously.

Dec 11, 2021 - 11:02am

50 hours/week in PE is fucking amazing, especially at a firm where you still feel value and are being comped 6 figures. I was happy when I had hours like that in Corp Dev for substantially worse pay. The money still scales as well, carried interest even in smaller LMM funds can easily spin off a couple million for a well positioned VP+ with a handful of good deals under their belt. 

Array

  • VP in IB-M&A
Jan 6, 2022 - 10:40pm

You have no idea what you're talking about. If you think the average person in corporate America earns 150-160k all-in then you're delusional. That amount of money for only a 50 hour work week is fantastic.

Jan 16, 2022 - 10:05pm

The bigger thing to consider is that this guy is still in PE, with upward mobility and line-of-sight to VP. That in itself is worth a lot as it keeps you in the industry and well-positioned. Comp will improve over time, especially once you get in on the carry (assuming the fund does well). No one gets rich as an Associate just off the salary+bonus.

  • 1
Dec 10, 2021 - 9:31pm

Yeah that all sounds solid especially given the LCOL. What're your thoughts on your paths going forward? I'm sure it depends on the shop, but do you feel like you've got a viable long term play staying with that firm and making partner (or equivalent)? Or do you more/less see the smaller spot as just another stop along the way to a longer term role later on?

  • Associate 1 in PE - LBOs
Dec 11, 2021 - 10:20am

I would say its a 75% chance I would be able to stay on here and make VP directly without the need for MBA. It depends on where the firm is in a few years, because its a small shop things are less structured which can either be good or bad. In the meantime I will have to see if I still want to stick to PE long term. I like the work and think it may be a solid option but that can always change as i develop personally and professionally. If i was to be forced out, i would probably think of MBA or some sort of stratety/corp dev role. There would be tons of options available though so its hard to tell

  • Associate 3 in PE - LBOs
Dec 10, 2021 - 8:24pm

$750mm fund in major city outside NYC / LA

Associate 1: $95k +75% 

Associate 2: $100k +75% 

Associate 3: $110k + 75%

Senior Associate: $130k + 100%

I think comp has bumped up slightly for new associates this past year, probably can assume Associate 2/3 for Associate 1's now. I probably average 70-80 hours a week and more if there's multiple add-ons or a platform under LOI

  • Analyst 2 in PE - LBOs
Dec 10, 2021 - 10:23pm

So making less than an IB Analyst even though you're doing just as much work? If not more than some groups? WTF

  • Associate 1 in PE - LBOs
Dec 11, 2021 - 12:50pm

The pay shouldnt come as a surprise, its way more often than not to take a pay cut when going from IB to PE

Dec 11, 2021 - 8:03pm

I wouldn't say any of that was below an IB analyst at the time. Keep in mind banks just raised their salaries by over $20k, which is crazy and smaller PE firms are playing catch up. For what it's worth, nobody is coming from top EBs here. Several BBs and solid MMs for most associates. Still a step down from what an associate would make at those places, but that's to be expected in lower MM outside of NYC. The comp I cited also doesn't include miscellaneous exit bonuses, or leveraged co-invest opportunities (and our funds returns are top notch).

As for work life, I may be averaging 70 hours but have incredibly more autonomy over those hours. No bullshit last minute weekend pitches or waiting up until 1am for MD comments. You have much better visibility of your work load and deliverable timelines, and can plan accordingly.

For the work itself, it's a vastly different job from banking. I'm admittedly not as plugged into the capital markets anymore, but have much more executive-facing responsibilities when it comes to working with our management teams or meeting founders of new potential investment opportunities. Our companies require much more hands-on management early on compared to MM/UMM investments, but that's often the reason firms choose to partner with us.

Upward mobility - it's really firm dependent. Mine had a strict 2/3 year out but I worked hard and was able to convince them for a promote through opportunity. Am I underpaid here? Probably a little, but I think it's comparable to similar firms in my geographic region. If I do move, I'll try to get a VP nod first so I'm certain I won't need to do business school. I've heard way too many horror stories of people with great experience either not getting into the b schools they wanted, or having to settle for worse funds than they came from.

  • Prospect in IB-M&A
Dec 18, 2021 - 12:22pm

I get that you wouldn't make the choice of going to LMM instead of IB because of the pay cut, but it's surprising that you can't "fathom" why anyone would make the choice to

(1) make 20 percent less for the opportunity to work 30-40% less

(2) work in a position they find more interesting (investing vs. deal execution)

(3) make less now, with the opprotunity to make more later in the form of PE carry. Surely, you're familiar with the concept of "carry," which gives some LMM PE people the opportunity to offset their (potential) lower salary now for ownership interest in companies that their firm buys. 

Again, understandable that you wouldn't make this choice, but your comments make it sound like you can't understand why anyone would make this choice, which sounds strange. Are you not in the industry? 

  • Principal in PE - LBOs
Dec 11, 2021 - 1:34am

I posted this in the other thread but you should be very careful when picking LMM funds. There are some places with wonderful cultures where you get a great operating and investing experience along with a ton of responsibility and growth potential but there are also funds that will pay you less than a 2nd year IBD analyst for 90% the hours and 200% the stress while dealing with even more boring / mundane work and the same sycophantic asshole managers. 

Most Helpful
Dec 12, 2021 - 4:02pm

I'm a big proponent of LMM PE, probably due to having had a great experience. I'm at a ~$500M fund not in NYC. I expect to stay for the long haul. I'll hit on a few different topics to give people a flavor.

Compensation (since I know you intern hardos only give a shit about that):

Year 1: ~$220K all-in

Year 2: ~$240K all-in

Year 3: ~$300K all-in

Year 4: ~$330K all-in

Additionally, benefits plan is the best I've seen. co-invest and carry $s in the last few years.

Compensation scaling:

When you think of this industry, carry is where we make our money. So the question if you want to stay in this industry should really be where do you have the potential to enter the carry pool, and what will that carry pool look like. In the LMM, the big benefit is you get a larger pool of a smaller pie. We invest $500M with about 8-12 people in the carry pool, and have consistently driven strong returns. If you do the math, as a general partner you are looking at over $5-20M per fund. At the mid-level you are looking at maybe $1-5M per fund. Maybe not the same as megafund trajectory, but that is a really solid without losing your soul.

Culture:

Good people who share an investing philosophy. Everyone knows each other, their significant others, etc. We only hire people that will fit into that culture, and people that don't pull their weight definitely feel it since they are letting down their deal teams. This manifests to WLB flexibility. I still sprint hard even at the mid-level now, but the flexibility is key. Our policy on how much you work is just to get your work done. Take vacations, work from home if you need to, etc. but you are on a 3 person deal team so if you aren't getting your work done there's nowhere to hide.

In terms of hours, range anywhere between 45 on the low end to 80+ on live deal sprints. No expectation on hitting some minimum of hour. Also flexibility to take a handful of vacations at my discretion (I have postponed one before due to a live deal sprint, but not because I was asked to). However (I'll hit on this in the next section), having your opinion be valued and getting ownership and credit for doing the deal makes sprints actually feel a lot better since you feel the ownership of shepherding your deal to the finish line.

Responsibilities:

Lot of interaction with management teams. With 3 ppl on the deal team and a portfolio to cover, there's just too much responsibility to go around for people to get babied. Everyone is expected to pull their weight and so you get as much responsibility as you can take. The upside here is that you have a real voice and opinion that holds weight, since you have to independently own parts of each deal and portco. The downside is there's sometimes random BS you have to deal with.

Tldr: there is a really attractive path in the MMPE world to succeeding and making as much, sometimes more than by trying the MFPE path. Ultimately, comes down to what you value and most importantly, the types of deals and people you want to work with. But, do your due diligence since not all opportunities will look the same.

  • Prospect in IB - Cov
Dec 13, 2021 - 5:34pm

Can you please touch on how recruiting differs for LMM PE compared to UMM/Megafund? Is it more networking bases like banking or are there still headhunters that reach out to you ?

Dec 14, 2021 - 9:54am

It's a mixed bag. My firm recruits through headhunters, and a number of established MM players do as well. These are often the ones that have a longer history and/or are in more competitive markets and talent pools. Other more regional funds and/or newer funds sometimes do it based on network. Process has a few rounds, case study and superday.

  • Prospect in IB-M&A
Dec 18, 2021 - 12:54pm

Great post, very informative. Was just hoping to get some color on a couple follow-up question regarding your due diligence, specifcially: how did you do your due diligence regarding the kind of culture the firm had, as well as nailing down what your carry would be? Seems like it would suck being at a small PE firm where there's absolutely no positive culture (meaning people just do their work, go home, no real socializing among the group). Also, I imagine it's normal to ask the firm during interview process what their carry policy is regarding associates -- also, I imagine whatever they tell you about carry is something you'd want put in your employment agreement... is this correct? Or do some firms resist putting something like carry in writing?

Thanks for the insight. 

  • Intern in PE - Other
Dec 14, 2021 - 10:27am

I used to intern in a LMM PE Fund managing a little less than $1 billion.It was a complete sweatshop with dog shit compensation. Pretty sure most of the junior people are miserable. The junior people do have "carry" but not sure how much they get but given what I heard they pay analysts (85k + 50% Bonus in HCOL) it's probably shit. Everyone there is working banking hours or more.

Deal flow was kind of nuts not gonna lie. I worked like 50 hours on average on top of going to school FT where as my coworkers did 80-90 regularly.

Maybe the firm I chose was just ass but I did learn a good amount.

  • Analyst 1 in IB - Cov
Dec 17, 2021 - 7:54pm

Currently 1st year at BB, but accepted offer at LMM shop starting in 2023 that is working out of a $500mm fund, very low cost city, with $120k base, $80k bonus, small bit of carry, and levered co-investing. When I interned there in college, associates averaged 50hrs/week.

  • Analyst 1 in IB - Cov
Dec 17, 2021 - 8:09pm

Congrats on the offer, Is it a sector specific fund or generalist? Also How did you get an offer already, I'm also a first year and wasn't aware of any funds already giving out offers?

  • Analyst 1 in IB - Cov
Dec 18, 2021 - 11:15am

It's a generalist fund. And in terms of my offer, the LMM shop does interviews all the way in August because I think they know they can grab good candidates going to good banks who are risk-averse and open to staying in the state. I wouldn't consider its timeline at all normal. It also helped that I interned there and had strong conviction that this is somewhere I'd want to be. I will add, for your reference, 3 of my 1st year friends at my bank and one other have also received offers, and not LMM funds like mine swinging early, but two actual UMM funds and one MF, so offers are definitely flowing in some places.

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