MM pe vs MF

Is it true that MM pe is really that much better of a lifestyle and gives more responsibility? From everything I've read, It seems like MM is a better role than at a MF, am I missing something?

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Comments (28)

May 16, 2020 - 12:09am

Better role? I doubt it. But you might manage different funds like VC, Growth Capital, Buyout, and etc at the same time. Some MM PE has better life style, yes. My working hours at mm pe were 30-100 depending on ongoing projects. Mostly 40-60 though.

Most Helpful
May 16, 2020 - 2:44am

I'll talk from the perspective of someone who chose MMPE over top IB->whatever PE after out of UG.

I'm going to a good PE fund that still takes some people from great post IB but usually not the best. It still retains a bit of the corporate model, and the comp isn't as great, but there is definitely a chance for upward mobility.

In my opinion, I maybe should have just done 2 years IB, 2 years UMM or MFPE and recruited into a shop like I'm at because your IBPE comp will likely be higher the first 4 years out of school. But MMPE is more likely to give carry, have more responsibilities (be on board of companies as an associate/Sr assoc, have your voice heard during investment committees) and won't get "kicked out" after 2-4 years.

With IBPE you continue branding yourself and can always go to MMPE and your 2nd/3rd tier options are much better. But getting into funds like mine are going to be hard for those kinds of people too- at the end of the day there are only so many spots, and we will retain talent from within more likely. l think between the two choosing what you're interested in if you know what you're interested in is key over compensation because you will be incredibly wealthy if the filter is having stuck in the industry. You keep adding bullets to the resume as a MF associate but are compensated well and not really expected to stay, especially when competing with A2A promotes or those who were in your spot then went to bschool and are going for VP.

It might be a grind, but I love the active investing side and don't mind the due diligence because our company is big enough to have back office and sourcing support but not huge enough to where we are simply turning into a hedge-fund like vehicle where the aim is consistent 15% IRR versus 20-25% as a MM fund. That also comes with more carry/coinvest as an associate or junior associate. We have enough money to continue hiring/not worry about not being paid our bonuses, though wary to make rash decisions of course. I would argue 'capacity' is higher for what you're talking about but it may or may not be true at any given point in time.

However, don't get drawn into thinking MMPE is a great place to be- there are trade offs with a less corporate model as you seem to be assuming (which it might still be corporate depending on who's running the fund). You might even work more, and just because you're in PE doesn't mean every investment is a 'turnaround' or '0-hero' story. I think that you connect with your investments more because the type of businesses are much more varied (small enough time be family/entrepreneurial but also big enough to buy from other PE companies) and carry is that much more important as a factor of comp. I would caution romanticizing the grass on the other side, and if I had to choose PE analyst at MM fund or top IB->UMM/MFPE I'd split it 50-50. I'm still struggling with the decision a bit. The IBMFPE role is pretty awesome and you build tons of connections- but if you really want to do PE as a career, who cares what the differences really are?

I took MMPE because it won't matter in the long run- if I'm good enough to actually stay in the industry, I'm always going to be one of the smarter people around and will be proud of myself for that. If things don't work out though I think I may be fucked. I love taking risk however this may not be the point in my career to have done so. Anyway, this post is as much for me as it is for you in terms of reflection during this quarantine time. Best wishes, I tangentially answered your question but wanted to add my perspective because I felt like sharing. If you like the buy side MMPE may be better for lifestyle and 'letting loose' because there is much more variance than the simple corporate model that exists in MFPE. However, it takes someone who has done both to really pontificate more than those are on one side of the coin. My main gist is that whatever you're seeing is 100% firm and strategy specific (even as a specific fund within a firm) and who really knows what the differences are, and if they are there will it be big enough to seriously recruit for one thing over the other?

  • Intern in IB - Cov
May 16, 2020 - 11:30am

I think I may be able to add some value from another perspective. I was also recruiting with MM/UMM PE firms, but ultimately decided to go the BB direction. Keep in mind, I want to be in the MM/UMM PE space for the long-term.

I decided to go the IB route for two reasons:
1. The BB Brand. Basically....more diverse opportunities. From IB, the doors are open to any exit in the business world (and arguably beyond). I can continue down the traditional PE/HF, or if I see that Wall Street isn't for me, I can go to Corporate Development, Strategy, or even Consulting. You don't have the same flexibility once you start your career in PE.
2. The PE Exits. From a BB, the door to MF is open. It's still very hard, but it's achievable. You have opportunities at funds of any size. Once you're in MM PE, then it's very hard to recruit up. It's much easier to start big and come down as desired ( BB -> MF PE -> MM PE).

I think having a wider set of opportunities is always best in the beginning stages of your career. There's so much about the finance world that you don't even know yet. My career goal has always been PE since I was a sophomore in high school, but once I'm in the industry, my views could change. I wasn't ready to commit/settle for MM PE. The hours are better in MM PE, but not all the time and it really depends on the fund. Audax Group (UMM) probably has the worst hours I've ever heard of, on par with the sweatiest IB/MFs.

For anyone struggling with this decision during recruiting, try to cast your net wide. Recruit for IB/MM PE/UMM PE/MF PE. Work hard to land the offers. I can guarantee that your decision will be much easier once you have the offers in hand. If I only had a MM IB offer vs. a MM PE offer, I would probably go MM PE. If I had a MF PE offer and my BB offer, I would likely go MF PE. Lastly, don't forget the importance of culture and fit. Your work environment will play a crucial role in your performance and ability to succeed.

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Funniest
May 16, 2020 - 6:18pm
Intern in IB - Ind:

...My career goal has always been PE since I was a sophomore in high school, but once I'm in the industry, my views could change.

What the fuck lol?

"Markets can stay irrational longer than you can stay solvent."

  • 13
May 16, 2020 - 5:35am

MF PE reality - work on a lot more larger "opportunities" which generally won't pan out in reality, and execute fewer transactions than your MM / LMM counterparts. Become model bitch for a long time when you're not working on gruesome diligence workstreams.

I sound bitter and am certainly thankful but honestly I would have gone to MM / LMM PE based on my experience. Holistic experience is much more valuable to me.

  • 7
May 18, 2020 - 8:39am

oh yeah forgot to mention in my post Jesus Christ the number of deals closed at MMPE are insane, which is why they can work just as much at IB / MFPE.

multiple deals a year FOR SURE and not unlikely to personally close 1-2 deals a year per analyst which is pretty insane (sometimes even more).

  • Associate 1 in PE - LBOs
May 18, 2020 - 12:29pm

Yup agreed - I have friends who have closed up to 5 deals at MMs in their two years, and on the other side of the spectrum, friends at my MF who closed no deals in their two years. I'm finishing my first year and have not yet closed one - get pretty far but often run into some issue near the end.

  • Associate 2 in PE - Other
May 16, 2020 - 2:19pm

Long-term comp outlook at growing MM PE franchises in my opinion likely has a higher comp ceiling than at megafunds.

MF's have an insane amount of mouths to feed, in addition to public shareholders. Lots more bureaucracy and at most of these places, PE buyouts isn't even the highest grossing business of the firm anymore (its largely credit).

I'd look for MM funds with teams who have spunout of large, strong franchises on either Fund 2 or Fund 3. Entirely cash comp, and ability to rocket through the ranks if you are good. You also get to grow with the fund, ofc need to diligence founders and their fundraising skills, but you might start at as an associate a 1b fund, and make principal at a 3b fund.

Look at the comp for the non-founder comp for heads of private equity at publicly traded megafunds (its usually publicly reported in the comp disclosures of the 10k). These guys are the "superstars" of the MFs.

Then do the carry math for a strong partner who gets 5% of the carry pool from a 3b fund that 2.25xs its fund. The numbers aren't that much different depending on cash comp and especially since the fundraising cycle is often pretty fast for growing PE Funds. Also depending on the firm, partners often are able to receive management company stakes which become relatively valuable when a Dyal or Petershill comes in.

Carry is also largely dollarized at megafunds, while its given as a percent of the pool at MM franchises, which results in as funds grow, carry growth increasing proportionally to the growth of the fund size.

  • Intern in IB - Cov
May 16, 2020 - 2:43pm

Great insight! I'm interested to know more about what you mean when you say that MM funds give the "ability to rocket through he ranks if you are good". What sorts of timelines have you seen? Is b-school a requirement at these MM funds? Do you have any target fund sizes that you would recommend or some players in the industry? Incoming at a BB looking to gather a list of MM funds to target for goal setting purposes.

  • Associate 2 in PE - Other
May 16, 2020 - 3:11pm
Intern in IB - Ind:

Great insight! I'm interested to know more about what you mean when you say that MM funds give the "ability to rocket through he ranks if you are good". What sorts of timelines have you seen? Is b-school a requirement at these MM funds? Do you have any target fund sizes that you would recommend or some players in the industry? Incoming at a BB looking to gather a list of MM funds to target for goal setting purposes.

At my UMM shop, we have partners who made partner in 7 years from analyst. The timeline is probably around 12-15 now for similar performing guys. More people means less opportunity to lead prcoesses, etc.

A shop in it's first few years might just have an associate -> principal -> MD track. As it grows and institutionalizes it might add senior associate and VP as steps.

Other opportunities are for example if you are on the ground floor and the guy who brought in a few industrial deals, you can make "head of industrials"at a super young age. As the fund gets bigger, there's not any reason to demote you even if someone laterals in with 20 years of industrials experience.

Stonepeak and Clearlake have some examples of early thirties guys who are group heads of UMM funds.

I'd look for fund launches in 2016-2018 with founders from good shops raising second funds. Usually better if it's not a whole team spinning out as those are more of an extension of the prior firm.

  • Associate 1 in PE - LBOs
May 16, 2020 - 3:56pm

Most of this is spot on - would also note that even at the MF / UMM levels, there are real differences in the culture based on who owns the GP - I've heard cultures and internal promotions are better at the internally owned GPs (think WCAS, Bain, WP, CD&R) vs the large public names (BX, TPG, CG). This is based on a small sample size of friends at the firms NY / SF offices so curious as to other views on this too.

  • Analyst 1 in Consulting
May 22, 2021 - 7:23pm

Hey A2 -- how would go about evaluating the attractiveness of an up and coming MM fund on Fund 2 / Fund 3? I'm currently considering an offer from one and very curious about the trade-offs between jumping ship now to join them now vs waiting for on-cycle later this fall (I love the founder, strong team, growing very fast headcount raise which founder uses as evidence for his fund 3-5 ambitions, great culture).

Can you also elaborate on the comp math? I'm at MBB now and have clear line of sight (assuming performance) to a $3-7M/year job as an MDP and I'm curious about how that would compare to MM PE. My in-going assumption is that the overall range is elevated, i.e. fund could go bust and you're left out to dry OR you knock it out of the park on a couple funds and get past $10M. But how far past $10? And, though very tough to say, how "realistic" is that? While I do think I'll find the work more interesting in PE, I'd be lying if I said I wasn't also optimizing for long-term economics.

  • Analyst 1 in IB-M&A
May 16, 2020 - 5:54pm

So is there any benefit to going to an MF at the associate level if you want to stay in the industry besides the short term comp boost and prestige?

Are the learning opportunities better? Will you be able to be more successful if/when you move downstream once you are pushed out?

  • Analyst 2 in IB-M&A
May 16, 2020 - 5:58pm

I think you're exactly right. A post MBA VP at a MF (TPG/Bain) told me that he thinks the advantage of a MF is that it's a lot easier to move to smaller funds at the senior level from MF, and obviously the reverse happens very rarely

  • Analyst 1 in IB-M&A
May 16, 2020 - 6:12pm

What would the rationale be for a MM or LMM hiring someone who got pushed out of an MF? To me it seems that someone at an MF who spent 5-15 years at their fund would have a skillset that is not perfectly transferable to MM or LMM. Given how expensive the hire would be, it just seems odd that "trading-down" at a senior level would be even possible.

  • Associate 2 in PE - Other
May 16, 2020 - 6:29pm

My MM/UMM PE shop takes quite a few megafund refugees. They largely come in at the same level they were at the megafund accounting for differences in title.

That being said, going to MF PE from banking groups does provide some substantial advantages:
1. Network is largely stronger, even if you do stay in PE, especially if you make it to the VP level. All those VPs moving from MFs that do move down, gives you a wider network. You always want good contacts at other firms who may either buy your portcos or sell you their portcos. We have bought quite a few assets that our laterals used to own at their old shops. I skipped banking and didn't go to schools that didn't have heavy finance placement and went directly into my fund, and I am already seeing how the lack of network is going to be an extremely limiting factor if I advance. Mitigant is if you go to a growing firm, you may be talking to other firms as the deal lead much earlier so you personally might get the call rather than someone a level or two above you.

  1. Non-PE exit options are likely stronger. There aren't alot of middle market PE associates moving to tiger cubs. For non high-finance industries, lots of hiring managers may recognize Blackstone, but might not recognize Marlin Equity Partners or some other strong mid-market firm.

  2. Comp doesn't start being super competitive with top MF PE at MM PE (if you are good) until the VP+ ranks. Associates and senior associates will largely make more at MF PE. Of course there are exceptions, but cash comp at junior levels in MF PE can be absurd. There can be a tightening of the comp range when carry starts hitting, just because you can get a larger amount of the pie, accounting for differences in pie size.

If you aren't in PE for the long-run, it probably makes sense to go to bigger firms.

  • Analyst 1 in IB-M&A
May 23, 2021 - 5:13pm

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  • Analyst 1 in IB - Cov
May 24, 2021 - 12:55pm

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