Private equity straight out of undergrad, Pros & cons?

Title says it all. Was curious about what people's experiences are with going to the buyside straight out of undergrad. I'm currently considering jumping ship without even waiting for the end of my first year. Would appreciate any insights from folks who have took this path or who have friends/other employees in their funds who did it.

Comments (27)

 
Most Helpful
Jan 13, 2021 - 8:11am

Source: Did an extended internship at a fairly reputable PE shop after UG (now looking for an IBD job).

One con I definitely saw, you don't have the experience of IB. Yes this seems simple but it becomes very glaringly obvious when 'simple' tasks take you 2-3x time to do as the guys who did their time in consulting/IB. You haven't had to process comments on a deck endlessly so you don't know what to look for to make sure your first draft is up to scratch. You haven't built 300 models at 2 am so you won't figure out that a negative was a positive in your model and it doesn't balance. Things like that. You will learn eventually but you will underperform (relatively) for quite a while. 

Also another con - your comp would probably be lower or the same as an IB analyst. Why would they pay you more with less experience? 

Pros:  (slightly) less bitchwork, less facetime etc 

 

All that being said, there is such variety between PE shops that it's difficult to make generalisations. 

 
  • Analyst 1 in IB - Ind
Jan 13, 2021 - 12:30pm

thanks for the great insights +1 SB. A question I had in mind was lets say you join the fund straight out of undergrad and work for 1-2 years, a) will you get promoted to Associate (Assuming you work well), b) will your comp balance with what the Associates coming from Banking are making or will the fund underpay you bc your existing base was already lower when you were an analyst in the firm?

 
Jan 13, 2021 - 3:54pm

Depends on the shop, but a lot of places have a path to Associate. From a comp perspective, you will probably still be below an IB associate but that's the case pretty broadly unless you're going to a megafund. Until you start getting some equity-like economics in the fund, comp will be at or slightly less than what you would be making with the same title at a bank.

 
  • Analyst 1 in IB - Ind
Jan 13, 2021 - 7:25pm

Sorry to ask this but I was curious. So you had an extended internship at a reputable PE shop after graduation but now you're unemployed and looking for an IBD job?? Curious to understand the reasoning behind this situation, is it because you're only focusing on a certain geography with not much openings atm? don't you feel stressed that although you had a good experience you couldn't land anything? I'm in a similar situation that's why I'm asking

 
Jan 14, 2021 - 4:16am

I probably wasn't very clear but my story is a bit of a mess at this point. I graduated from a non-target and had a IBD gig lined up through insane amounts of networking starting ~March 20. That was probably the worst time to start and the bank (off cycle at a BB) pulled the offer. I networked hard and managed to find an internship as a temporary measure later in 2020 and then extended the internship till the end of 2020. I am now back to being unemployed, looking for IBD jobs and considering doing a MSF at a target. 

 

To add to all that complexity, I'm not in the US and the geography where I live doesn't really have as clear cut a recruiting timeline as the US banks do. 

 
  • Analyst 1 in IB-M&A
Jan 13, 2021 - 5:20pm

what about being an analyst at a MF - is it better to go to banking before going to MF / are there big downsides to joining these funds as an analyst?

 
  • Intern in IB - Ind
Jan 13, 2021 - 5:26pm

also interested in analysts programs at KKR/BX and other MFs. A while back I read a great thread on comparing those analyst programs to doing your 2 years in IB but can't find it now. Assuming you want to end up in private equity and like investing, would you vie for one of those MF analyst spots or stay with a really strong and reputable IB product group (my situation) before moving over to PE? Thanks

 
  • Analyst 1 in PE - LBOs
Jan 13, 2021 - 6:21pm

Currently a first-year analyst at a decently-known MM PE fund and I hate it. Terrible learning experience, no mentorship, and I don't get to touch any of the interesting work since the Associates absorb most of the modeling/analysis. Trying to lateral into a HF or top EB role now. Happy to PM if anyone wants more details.

 
  • Analyst 1 in IB - Ind
Jan 13, 2021 - 7:22pm

Sorry to hear that, onboarding during WFH sucks especially if your team does not connect with you. Good luck with your next move

 
  • Analyst 1 in PE - LBOs
Jan 14, 2021 - 11:45am

Yup exactly - best case scenario it's qualitative stuff like competitive landscape, industry overviews, etc.

 
  • Analyst 1 in IB - Gen
Jan 17, 2021 - 9:01pm

Where are you located? I'm weighing up a low-mid BB IBD gig vs MM PE right now for An1 and the lack of firm specific info is driving me crazy

 
  • Analyst 1 in PE - LBOs
Jan 18, 2021 - 1:21am

West coast, not a big analyst program so don't wanna say more than that. Again if you de-anonymize your posts, happy to pm if you wanna chat about it.

I have plenty of friends at other PE analyst programs and they're generally having a better experience than me, but I feel like the MM nature of my firm is really what is hurting my experience, whereas analysts at UMM/MFs with more established programs are faring better. Super firm-dependent here, much less so than IB imo. Like I haven't even touched a fucking model in 6 months here while my buddies at other buyside firms are getting insane technical reps. It really varies for sure 

 
Jan 14, 2021 - 7:22am

It's pretty a nice entry point if you can get it. You get to skip 2 years.

Some potential things that you might be "giving up" to consider though:
- The network you would have built in IB role
- The more structured, technical training program as PE much more of an apprenticeship model
- While its not fun, the ability to know you can work really hard (though you don't have much a say on the matter)
- Having a well recognised IB brand if you decide PE is not for you.

 
  • Analyst 2 in PE - Other
Jan 14, 2021 - 9:35am

I started in infra PE out of college after IB internship

Pros:

  • great hours (50-60h/week average with 3-4 weeks in the year at 70-80)
  • exposure on live deals, no grunt/pitch work 
  • Less focus on cosmetic (how beautiful your model/presentation looks) more focus on content
  • Collaborative work with smaller teams (direct work with VP/principal on a deal) gives you more resonsability if you do well and great advice from succesful people in the industry
  • I'm based in Europe so no 2yrs and out --> regular reviews with management giving me career perspective within the fund + potential carry at associate level

 

Cons:

  • no formal training
  • lots of expectations from day 1 = more impostor syndrom and long ramp up period / learning curve
  • Promotion to associate is not fixed (can take 4 years for some people, 2.5yrs for others...)
  • No fun/collegial atmosphere in the office (compared to IB internship), people tend to leave directly after work. Senior people get along together because they have been working in the fund for many years, but find it difficult to build relationships with the analyst/associate pool
  • Rarely get to work with other analysts as deal teams are slow
  • Difficult to move in other FO finance role as my fund is very industry focused, I don't see myself going in IB and all the funds have very low turnover

 

 
Jan 14, 2021 - 12:26pm

I started in private credit as an analyst and I concur with most of what the above poster said. I interned in IB so I have some XP in both sides - buyside doesn't have the pitchdecks, the endless cosmetic alterations / comments, and having to review every page of a 50+ page deck to make sure the fonts and colors are consistent. 

On the other hand, lack of grunt / cosmetic work means everything you do is "real" work in terms of investments and money. There's less of a training period where you're mostly formatting PowerPoints and copying PDFs into Excel while learning the job - you're expected to contribute to the real analysis in the first month of joining. This is both a pro and a con, depending on what type of person you are. 

Ambiguity on A2A is also pretty common from what I've seen - buyside firms really like to bring in external candidates for pre-MBA associate roles and most analysts at my firm typically lateral to PE or other credit funds after 2-3 years.

 
Jan 15, 2021 - 6:33am

Just to repeat on what most of the people said,

  1. Less gruntwork/pitchbooks (i've done 2 pitchbook in my 1+ years in PE/PC)
  2. Less modelling (most of my models are operating models, with some A/D analysis and DCF, did 1 LBO but deal fell through before we can finish it)
  3. Slower pace of work, but you have to spend a lot of time reading and absorbing knowledge regarding a transaction/industry in regards to Legal issues, tax, and so on
  4. Better mentor-ship, worse learning exp. (Your learning exp depends heavily on how your seniors treat you)
  5. Much better pay if you enter at the right time (right at harvest/exits)
  6. Hours are about the same, we just uses them differently (excel/ppt monkeys v.s. reading dozens of documents)
 
Jan 15, 2021 - 12:19pm

Think the pros are obvious but the cons are:

1) Often times will not be formally trained - PE funds like the IB training programs cause it beats into you some foundational workflow habits that I have found very useful compared to the guys in my shop who came out of UG. For example, skipping the part of your life where you work for demanding, irrational clients late into the night with the expectation of 100% accuracy at all times no matter what and starting out as the client, then standards might naturally be a bit lower. Goes back to the whole "why is there a missing comma in the footnotes" idea, does it matter? Maybe not in that specific case, but I'd rather someone who spend 2-3 years being yelled at for small mistakes like that rather than someone who doesnt think it's a big deal and hasnt even really worked in PPT (besides IC decks). Lot of stuff like that builds a strong foundation for just basic corporate skills, even working with clients teaches you how to present yourself in front of them and how to communicate with them.

2) If you've never written a CIM or understand how the sell-side process works in real life, you might miss some of the tricks others will be aware of and will know to dig deeper into. 

3) If your first job was to work 70-100 hours a week, then for the rest of your life you are probably more able to handle an experience like that since you've done it before. But if your first job was just 60, then the 70-100 every so often might be brutal.

4) Your network might be smaller, if you join an IB with a 100 person class and are decently social, you'll have a huge network a few years later after everyone laterals/goes to PE/wherever

I think the training thing is the biggest thing, our shop hires out of UG for some reason or people from other backgrounds and the work ethic/self-expectations are wildly different than the ones who came out of an IB experience. When you spend a few years following a spoken rule to generally answer all emails within 15 minutes, your internal expectations are higher than someone who doesnt respond in as timely a matter because "it's not a huge deal, I'll get to it when I get to it"

The general expectations for accuracy and strong work ethic/workflow habits IMO are a lot higher in IB since theres constant deliverables, clients, being paid vs paying, etc., and so you learn a lot from that. 

 
  • Analyst 1 in PE - LBOs
Jan 16, 2021 - 4:44pm

I think depending on the PE firm, lots of these concepts still apply. Sure, the standards are a bit lower because none of the work is client-facing, but at my MM PE firm most of the team comes from banking, so things like logo alignment and proofreading footnotes have still been engrained. I also still have an expectation to respond to emails really quickly, and the hours are only slightly better than banking. Only difference is that my seniors won't yell and humiliate me for making a tiny mistake because their asses aren't really on the line to impress a client. Motives are much more aligned in PE, and we all generally want good deals to close and bad deals to be killed - anything that doesn't impact this isn't a topic really worth yelling at an Analyst about.

The network point is very valid though - for people unsure if they want to be in finance for longer than a year or two, this reason by itself would be a huge factor to choose IB over PE.

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