Q&A: Retired After a Career in Private Equity

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First post, and a burner account for obvious reasons. I discovered this website recently, and I am shocked at the amount of information and help young professionals can gain here. However, I noticed that there is little info from older members. I hope that I can offer some helpful and unique insight.

Here's a bit about me: I am in my 50s and semi-retired (high school econ and math teacher). My career was pretty similar to the "typical" IB --> PE path, with a few deviations. I did my three years at a bulge bracket bank. Following that, I went to get my MBA. I landed a spot in a PE fund (1-5B AUM) and rode that all the way to a partner position at that firm. When I was in my early 40s, I opened my own PE shop (250-500 AUM) with a a few of my coworkers. I stuck with that until I was in my 50s, and now I do what I love: teach high schoolers at the school I went to as a kid.

All questions are cool with me, and I'll try to answer them all quickly. I know this is very corny, but there are no stupid questions. I'm used to that, I teach high school . I hope you find this helpful!

Comments (142)

 
  • Prospect in IB - Gen
Jun 11, 2020 - 11:00pm

Broad question, but for someone interested in a career that follows markets and investing but maybe in a slightly more macro manner, is private equity still a relevant option, or is the industry too micro and deal/industry focused. Asking as someone with concerns about S&T/AM/HF world due to automation and greater amount of quanty skills/passion required which I don't have. thanks!

 
Jun 11, 2020 - 11:13pm

Prospect in IB - Gen:

Broad question, but for someone interested in a career that follows markets and investing but maybe in a slightly more macro manner, is private equity still a relevant option, or is the industry too micro and deal/industry focused. Asking as someone with concerns about S&T/AM/HF world due to automation and greater amount of quanty skills/passion required which I don't have. thanks!

I definitely think that the outlook for private equity is better than that for sales and trading. However, if you are much more interested in macro / markets, I do advise you go for S&T/HF/AM. My biggest tip is to find a niche. That way, in the case of automation, you will be in a spot where you have deep knowledge in a specific field. As far as finding a niche, most of the time, it happens naturally. However, when given the opportunity, if it makes financial sense, and you think you'll enjoy it, make the jump.
However, knowing the markets will certainly help you in private equity. It is still largely based upon chosing a company that is undervalued. The difference is that in S&T/HF/AM, you hope the value goes up. In private equity, it's up to you to make it appreciate.

 
  • Prospect in Consulting
Jun 11, 2020 - 11:20pm

General advice to an incoming PE associate? I'm pretty exhausted by the process to get to this point and I'm hoping (but not hopeful) that staying at the fund won't feel like another 2 year rat race. It's a consultant-friendly shop if that helps.

And is it safe to say that you made enough millions that you chose to do whatever it is you wanted to do afterwards, which was high school teaching in this case?

 
Most Helpful
Jun 11, 2020 - 11:40pm

Prospect in Consulting:

General advice to an incoming PE associate? I'm pretty exhausted by the process to get to this point and I'm hoping (but not hopeful) that staying at the fund won't feel like another 2 year rat race. It's a consultant-friendly shop if that helps.

And is it safe to say that you made enough millions that you chose to do whatever it is you wanted to do afterwards, which was high school teaching in this case?

Remember this: your career is a marathon, and you're still in the beginning of the race. In a marathon, if you run too hard in the beginning, you won't have enough left to finish strong. Your career is the same. Try this new gig out. You might love it and be thrilled that you made the hop. If you are feeling really burnt out after a year or so, consider your options. You can go back to banking, stick it out until business school, go into corporate, ect. The great thing about private equity is that you can go almost anywhere after it. I encourage you to stick it out, if possible, though. I'm sure you'll look back on it with a laugh.
As far as actually doing the job, I'm assuming you are coming from banking. It's a very similar skill set, so you should be well off to begin with. The hardest thing is to adopt an investor's mindset, but luckily, you don't need that too much as an associate.

The best part about making a lot of money is that it gives the freedom to pursue what you love earlier than the average guy. By the time I reach the normal retirement age of 65, I'll have done so much and experienced so much that I'll feel justified in living a life of relaxation. I definitely worked my ass off and sacrificed so much, but I look back on it with few regrets. Money can buy happiness if you have the foundations to happiness like relationships and a sense of purpose. If you don't have those, you can work on them while working your job, but if you need to take a few steps back, don't be afraid. Picture yourself with a luxurious mansion, all alone. Not a happy scene, I'd guess. Money buys happiness when you can share it to make others happy.

 
  • Prospect in Consulting
Jun 12, 2020 - 2:14am

Really appreciate your thoughts. I'm actually currently a consultant, though my internship was in banking. Fortunately I've been investing my own money for several years and do know unequivocally at this point that I love it and want to spend my career as an investor.

I suppose my trepidation mainly comes from this seemingly steep funnel where only 1 (or max 2) associates in a class get promoted. That just makes me uncomfortable, as if the rat race never seems to end. Obviously I'm not looking to become complacent but I'm also not trying to continue down this sociopathic recruiting "race" forever. I guess I'm hoping that many people self select out (to HF/corp/etc) after their associate years, such that the numbers tell a misleading story. Is that accurate from your experience, or are most people pushed out? Really just want to know what to expect so that I can mentally prepare myself.

 
Jun 15, 2020 - 12:51pm

Burner-0101:

Prospect in Consulting:

General advice to an incoming PE associate? I'm pretty exhausted by the process to get to this point and I'm hoping (but not hopeful) that staying at the fund won't feel like another 2 year rat race. It's a consultant-friendly shop if that helps.

And is it safe to say that you made enough millions that you chose to do whatever it is you wanted to do afterwards, which was high school teaching in this case?

Picture yourself with a luxurious mansion, all alone.
sounds fucking awesome tbh
 
Jun 11, 2020 - 11:51pm

arctan:

Any advice on how consultants can break into PE? What would it take for you to hire a consultant over say a banker when you were running a fund?

I'll be honest, my knowledge is limited in terms of how consultants' abilities transfer to PE. However, the founding VP at the firm I started began his career in consulting, and he's become super successful in PE. I'll say this: I'd prefer to give an interview to a banker for an associate role, but once I'm interviewing you, I couldn't care less what your background is. This is my personal philosophy around hiring, and it's worked extremely well in terms of finding talent.

 
Jun 12, 2020 - 12:08am

What do you think about some of the smaller boutiques that have been getting large deals from a PE recruiting perspective? Have you heard of some of them (Dyal, M Klein, DBO, etc)? How would you consider an analyst coming from one of them?

Array
 
Jun 12, 2020 - 12:14am

atlanta678:

What do you think about some of the smaller boutiques that have been getting large deals from a PE recruiting perspective? Have you heard of some of them (Dyal, M Klein, DBO, etc)? How would you consider an analyst coming from one of them?

I think it's fascinating how the PE landscape is changing constantly. It'll be interesting to see what these smaller firms become, bit I'll be honest, I'm glad I'm out of the business, because status quo is king for a successful PE shop.
As far as recruiting goes, I'd still prefer a person from upstream for a mid level employee, but it wouldn't be too much of a ding. Also, it would be a huge benefit if they worked on a huge, name brand deal. If I was hiring a senior employee, I would love to have one of the boutique guys, since the MF investment strategy is so different from a smaller shop like mine.

 
Jun 12, 2020 - 12:15am

Just to clarify, these are boutique banks sorry. The founders were rainmakers from BBs (Head of IB at citi, ms, etc). Have been getting massive deals like DowDupont, BristolMyers, etc. Super lean teams with small analyst programs accepting kids from HYPW. Wondering if as someone in PE you'd be more, less, equally interested in interviewing someone for an associate role

Array
 
Jun 12, 2020 - 12:35am

Oldyeller2018:

Thanks for taking the time to do this. I am interested in PE debt and am interested in doing a sting in Restructuring Investment Banking post MBA. Is there any literature your recommend?

I'll admit that I prefer to read about topics unrelated to my work, so I'm of no help on this one.

Free SB to anyone with a good answer .

 
Jun 12, 2020 - 7:57pm

Distressed Debt Analysis - Moyer
Mergers, Acquisitions, and Other Restructuring Activities - DePamphilis
The Art of Distressed M&A: Buying, Selling, and Financing Troubled and Insolvent Companies - Nesvold

Few players recall big pots they have won, strange as it seems, but every player can remember with remarkable accuracy the outstanding tough beats of his career.
 
Jun 12, 2020 - 12:50pm

Business School in Other:

Net worth?

I did say any question was ok, so I guess this is my fault lol. I'm not sure why it matters, nor do I know the exact number, but I estimate it's in the mid 8 figures. Again, I don't know nor do I care. I think annual income is a more important metric, since net worth is so variable based on my spending habits.

 
Jun 12, 2020 - 2:54pm

Burner-0101:

Business School in Other:

Net worth?

Again, I don't know nor do I care.


I've heard this expression from other wealthy people, as if getting wealthy was some how an accident. Is this a new way of thinking in comparison to your younger years now that you probably have many other priorities on your mind instead - kids, family, relationships, etc.?
 
  • Prospect in ER
Jun 12, 2020 - 12:59am

Similar to the net worth question above - what was your comp like as partner in the first PE firm? Why did you decide to start your own? Did you earn more by yourself? What kind of standard of living are you able to maintain now in your semi-retirement?

 
Jun 12, 2020 - 1:09pm

Prospect in <span><a href=/finance-dictionary/equity-research-overview rel=nofollow>ER</a></span>:

Similar to the net worth question above - what was your comp like as partner in the first PE firm? Why did you decide to start your own? Did you earn more by yourself? What kind of standard of living are you able to maintain now in your semi-retirement?

I could have sworn I answered this question, but my reply disappeared.

Comp is very lumpy in PE, but my first PE from I probably averages 3-5 MM per year.

As far as why I started my own firm, it was a combination of better upside comp, no boss, and having no regrets. I earned significantly more at the firm I started.

Now that I'm semi-retired, I am finally spending the money I earned for all those years. I have a very high quality of life, and I feel justified in spending my money due to how hard I worked for it. However, what makes me the happiest is spoiling my wife and students.

 
Jun 12, 2020 - 1:06am

Thanks very much for doing this.

I'd love to hear if you have any career or personal advice for someone who is beginning the "late" stage of their career. I hope that I'm not being too abstract, but I feel like the past 15+ years was to just get to me to starting line of a race that I am only now about to embark on.

How should I be thinking about the next 10-15 years? How did you approach this stage of your career and personal life? I'd love to try to put myself on a path where I can maximize my success in my career and happiness in my personal life with my family.

 
Jun 12, 2020 - 1:23pm

First off, congrats on making it to where you are. The best part about being the guy bringing in money is that your hours are what you make them. If you are generating good returns, your boss generally won't care if you leave early for your son's baseball game or if you go on vacation with your spouse.
In terms of your career, just stay focused. The longer you're in this role, the better you'll get at it, the less you'll have to work, ect ect. It's a great cycle. I'm not sure about hedge funds, but in banking and private equity, you generally have two or three years to get yourself settled in your role. After that you are expected to make it rain. If and when you get yourself settled, just let it flow. Generate returns, watch the cash flow in, profit, repeat. Again, congrats, the hardest part (imo) is behind you.

 
Jun 12, 2020 - 2:39am

Having spoken to a number of analysts in IB and associates in PE, I tend to hear a lot of burnout and desire to leave their transaction-oriented field for greener pastures. What do you think was the biggest factor in your ability to succeed and continue down such a demanding field and what do you think is the most important trait to be a successful PE investor? Thank you in advance!

Array
 
Jun 12, 2020 - 1:36pm

Burnout is definitely real. I am passionate about private equity and banking and I still felt burnt out at times. Something that I feel is very important is to have something you love to do outside of work. For me it was distance running. I'd train every single day whether it was a twenty mile run for a marathon or a track workout for a 5k. That consistency kept me grounded when work got crazy.
In terms of what makes a good investor, I'll be honest: I have no idea. Everyone is different. Some people are super smooth and can raise funds in their sleep. Others are geniuses who always chose the best investments to the envy of others. As you work you way up, you'll learn more about the industry, and you'll develop a strategy that work. Also, watch the guys at the top who are absolute superstars. Watch how they do it, then pick and chose the traits you want from them.

 
  • Analyst 1 in IB-M&A
Jun 12, 2020 - 3:12am

Hi -- My question is did you always want to be a partner?

I'm currently an associate at a PE fund and I like the job but I don't think I'm the best investor but I believe I'm a quick learner who is well-rounded but I don't know if most people in PE need to be OUTSTANDING and live and die PE to stay in it.

Would love to get your input!

 
Jun 12, 2020 - 1:40pm

Yes, being a partner was always a job that I sought after. One important thing is that you can learn to be a good investor. Of course, some people are naturally better at it, but as you work, you'll learn how the best guys do it. Now, if you aren't interested in PE, that's a different story.
Once you're at the top, yes, you have to be really good at what you do. But it's a journey; I wasn't born with the skills to be a partner. It took effort and drive.

 
Jun 18, 2020 - 7:08pm

Thanks for doing this!

Currently, I'm working on the sell-side, with no intention of jumping to PE. However, my intention is to purchase a LMM business one day and expand from there.

Do you have any tips on learning to be a good investor?

As well, what was your approach to unlocking value within an investment? Did you find that you were able to unlock value in your investments because of your expertise in an industry or was it a function of research (learning the industry) and resources (i.e. could deploy capital for tech to optimize a firm). If all three, which one would you say had the biggest impact?

Any book recommendations which would help someone learn to become a good investor?

Thanks!

 
Jun 12, 2020 - 5:53am

How did you go about communicating to your colleagues when you decided to step away? How did they react?

I was getting pretty close to hitting my walkaway / retirement number at my last firm, but as someone who is very young, I'm sure it would have shocked them and not been looked upon favorably. Everyone just seems to have a built in assumption that I'm going to work until I'm 50+. Interestingly enough, my "retirement" plan is to teach in a math/business related subject, although at a university level and not a high school one.

My plans have since changed as I'm loving my new role (and willingly took a compensation hit), but I know the day will come where I need to have that same conversation.

CompBanker

 
Jun 12, 2020 - 1:47pm

I'm guessing that you mean how they reacted when I retired, not when I started my own firm.
My coworkers were not shocked, since I had exceeded my "number" years ago, and I was just hanging on because I could. If you've hit your number, it shouldn't matter if it is looked down upon by your colleagues, since you're leaving the workforce. If the day comes though, and they are angry / shocked, express to them that you have goals outside of work and that you are perfectly satisfied with how much you've made. It's your life, don't avoid living because of others.

 
Jun 12, 2020 - 10:09am

Thanks for doing this and giving back. There are a lot of good advice here for junior members here looking to make the switch to PE but I also was interested in your experience coming back from MBA as I'm currently a junior VP and it seems like the path after this point is less documented and straightforward.

  • What's the single biggest advice for continuing to move up?
  • How much value did you place in your MBA for your success at the mid-senior level (network, presentation abilities, analytical thinking)?
  • How did you approach fundraising for your own fund? What watch-out advice would you give?
  • How did you manage the perceptual transition with peers and the psychological transition within oneself to move from the monkey churning out work vs. one managing others?

Appreciate the advice in advance!

 
Jun 12, 2020 - 2:13pm

1) My biggest tip in terms of getting promoted it to try to learn something in every situation. Look at who has made it to here you want to be and see what they do that you don't. Adapt and improve constantly.

2) My MBA gave me a solid network and branding which follow you your entire career. In terms of what I actually learned, nothing was more helpful than actually working in PE. An MBA can't top that.

3) I'm not the best fundraiser, and I had a coworker in my firm that was an absolute wizard when it came to that, so I let him control most of that. However, my best advice is to treat it almost like networking for IB. You might get 20 people who are "interested" in investing, but only about one or two will actually go for it.

4) When transitioning from monkey to rainmaker, a lot of what I said in #1 still applies. I don't really know how I did it, it kind of just happened. The good thing is that it's a gradual progression. Each step up you get a little bit more like a manager and less like a monkey, so you'll eventually find yourself as the boss without even knowing how it happened.

 
Funniest
Jun 12, 2020 - 2:52pm

Lol, we did have a private jet back at my first fund, and some crazy shit happened on it. One that immediately comes to mind is when I was a newly promoted partner on a trip with some of the founders, so I was desperate to impress. We were heading to a major meeting with a portfolio company. We brought along a few of the junior guys, including an associate who had been there for a year and a half and worked primarily for me. His performance was neither here nor there; I wouldn't have remembered him if it wasn't for this.

So we're in the airport getting ready to board in about a half an hour. I decided to get some work done on my laptop, and this associate decides to do the same. I tell him that I'm going to use the restroom since we're about to board. Then he tells me that he'll carry my bag on board if they board and I'm not back. A little weird, but a nice enough gesture. I give him the okay.

I get out of the restroom a few minutes later, and everyone is gone, and so is my bag. I run to the plane and hop on. A few minutes after later we took off, and I turn to the associate to thank him and get my bag back. This is where shit hits the fan.

He looks around, realizes that he doesn't have it, and begins to tremble. I kid you not, the kid was shaking like we were in the middle of an earthquake. He tells me that he went to the bathroom as well, and that he must have left it there. Now, here I am, sitting on the plane a half an hour into the flight, with no laptop and no clothes but the casual clothes I have on. And now the idiot starts to cry. Loudly. Sobbing into his hands and swaying back and forth. Now the plane goes silent and all the big partners turn to me. One of the founders breaks the silence by asking, "What the hell did you do to him?" I, now stuck between anger, fear, and embarrassment, explain the whole story. They all think it's the funniest shit until I tell than that I don't have a suit, laptop, or any of my materials.

Now it goes silent again, and the associate runs to the bathroom and begins retching and throwing up. I feel awful for him, because imagined myself in that situation, but it doesn't excuse the fact that he embarrassed me in front of the founders. He stays in there for the entire flight, and when he gets out he looks like he has seen the devil. We tell him that he fucked up big time, but we're not going to fire him.

A day passes and this kid still won't speak to us. Then we tell him to get a flight home and to take some time off. Regardless, I got a suit from a nearby store, tried to recall what I needed for the meeting and the senior guys didn't put any blame on me. Everything goes great, and we're on our flight home a few days later when two of the partners bring the incident up again. Soon, everyone is crying with laughter because of how stupid the entire situation was. One of my fondest memories looking back, but it was awful in the moment.

 
Jun 12, 2020 - 10:17am

Can you walk us through the founding of your firm, how long it took to raise the fund, how you did it, etc...

There's really not much out there written by founders of PE funds. Even books by some of the big names aren't that informative/don't dive into it the way you can find material on booting up say...a SaaS company.

 
Jun 12, 2020 - 4:00pm

My friend who had started his own firm years ago told me that it was borderline torture trying to bring everything together while fundraising. I decided to hire someone to do the annoying, organizational work so that I could focus on fundraising. As a result, I don't know much about the behind the scenes work like you mentioned. I could go dig up some of the old files and info, so I'll get back to you on that.

In terms of fundraising, I was able to raise sufficient funds ($200,000,000 was my benchmark) after about 8 months. I did provide about $20,000,000 myself, and a few of the guys at my old firm with f-you money gave about $130,000,000 combined. Beyond that, I raised about $110,000,000 in the 8 months from random investors.

My founding MD was awesome at fundraising, so he helped massively with that. Needless to say, he's now the head honcho at my firm, and he's done great things with it.

I know I didn't go super in depth, so do you have any specific questions about this?

 
Jun 22, 2020 - 11:09am

How big is the PE firm you founded today? Just trying to get a sense of what a $200-300MM inaugural launch can get to. Depending on the answer, what were the factors that helped you get to where it is now or keep it range bound, whatever the answer is.

Why did you think you'd be able to successfully launch a fund of that size? The $1-5BN PE shop you were at would have been ~25 years ago when you started, so I'm guessing its a well known name in the PE world, how much of a factor did that have in credentializing you?

I always wonder why more PE partners don't spin/launch their own fund.

Array
 
  • Analyst 1 in S&T - Other
Jun 12, 2020 - 10:43am

Throughout your probably busy career, did you always maintain some form of connection to your love of teaching high school? i.e. if it exists, can you talk about your extracurricular involvement while running a large fund.

 
Jun 12, 2020 - 4:03pm

No, I never really had the urge to teach until I retired. I had been doing nothing for a year and i felt very lost, since I worked so hard, and I wasn't as happy as I thought I'd be. As a result, I'd started off just coaching the track and cross country teams at my school. Later I was offered position as an economics teacher, and the math part of it also fell into place. I'm very glad I'm doing it, athough I never would have thought that's where I'd be.

 
  • Analyst 1 in IB-M&A
Jun 12, 2020 - 11:11am

Do you mind sharing your carried interest numbers (your % of the whole carry pool) throughout the years? Would you say 1% for a VP and 2% for Principal is fair for a ~2B fund? How does carry at Partner levels work? Lastly, when / how long does it take for you to get your whole carry from a fund to hit your bank account? 10+ years with distributions happening not happening until the end?

There's little information on carry in PE and this would be really helpful.

 
Jun 12, 2020 - 3:02pm

Exactly. I can't give you the data points for the entire industry, nor do I remember mine exactly. I have no idea what it was at the UMM fund I was at, but I remember that when I started my own fund, I got about 50% as the founding partner, and I gave my founding MD and VP 15% and 7%, respectively. I saved about 28% for when I hired more employees. This, however, was for my fund worth about 250MM. The last fund I raised was about 800MM, and I only got about 35% of that.

 
Jun 12, 2020 - 12:08pm

Congrats on a great career. Must be a very rewarding feeling to have worked hard and now have the ability to do something you love the rest of your life.

"My name's Ralph Cox, and I'm from where ever's not gonna get me hit"
 
Jun 12, 2020 - 12:26pm

Any basic advice for a high schooler looking to enter Investment Banking? I'm a senior headed to Northeastern next year and based off a lot of what I've read on this website it is gonna be a difficult task coming from a non target. I'm trying to increase my technical skills over quarantine and such and have heard the same advice about networking being the only saving grace at a non target.

 
  • Associate 1 in PE - LBOs
Jun 12, 2020 - 2:46pm

Having gone through the full path that many on here are hoping to follow and seeing where the PE industry is today, relative to when you started, would you tell your kids (if you have any) or students that this is still a worthwhile path to consider pursuing?

While it's obviously a very lucrative career path if you can stick around, it seems the industry has gotten much more saturated and obtaining a partner-level role has become incredibly competitive, so I'm curious if you still think all the trade offs (higher stress, limited work life balance through the junior to mid-level) are still worthwhile. Related to that, if you had to do things over again and pick a path other than PE, what would it be?

 
Jun 12, 2020 - 4:28pm

In my firm, we aimed for companies in the $50-100 MM range. As we got larger, so did that number.
In terms of the less sexy stuff in PE, there is too much to go into for one post. DM me if you'd like.
As for the management, I would usually put someone from my fund into the seat, or I would chose someone I had interacted with in the past, like a C-suite executive from a portfolio company years back.

 
Jun 12, 2020 - 3:19pm

Thanks for taking the time to do this Q&A. In your experience why does PE struggle to hire minorities? Not just women but people of color? Most PE fund team pages are almost 100% white male. What has been your experience at the funds you worked and as the person hiring at your own fund? Thank you.

 
Jun 12, 2020 - 4:36pm

From what I've found, there is just a massive sample size of while men in private equity. If i am hiring twenty associates, and I have 100 white males and 10 women/URMs and I ended up hiring 18 white males and only 2 women/URMs, that isn't an issue with the recruiting process, it's just that I have less of the others to chose from.

I do think that the lack of women / URMs vying for PE is something we should seek to change. But the issue lies in the interest, not the recruiting.

As far as my own firm, I have no clue what the demographics of the associates / vice presidents were; there were just too many of them to remember. However, I have encountered very few female / URM MDs or partners,. I think that the push for equality in the last 20 years should change that. My guess is that women/URMs will be fairly represented by 2030. We shall see, though.

 
  • Intern in IB - Ind
Jun 12, 2020 - 3:52pm

Burner-0101:

First post, and a burner account for obvious reasons. I discovered this website recently, and I am shocked at the amount of information and help young professionals can gain here. However, I noticed that there is little info from older members. I hope that I can offer some helpful and unique insight.

Here's a bit about me: I am in my 50s and semi-retired (high school econ and math teacher). My career was pretty similar to the "typical" IB --> PE path, with a few deviations. I did my three years at a bulge bracket bank. Following that, I went to get my MBA. I landed a spot in a PE fund (1-5B AUM) and rode that all the way to a partner position at that firm. When I was in my early 40s, I opened my own PE shop (250-500 AUM) with a a few of my coworkers. I stuck with that until I was in my 50s, and now I do what I love: teach high schoolers at the school I went to as a kid.

All questions are cool with me, and I'll try to answer them all quickly. I know this is very corny, but there are no stupid questions. I'm used to that, I teach high school . I hope you find this helpful!

this is literally exactly what i want to do - only, I would want to teach german and maths after a career in finance.

What tips would you give your younger self starting out in ib, knowing what you know now? Also, would there be anything you would do differently?

 
  • Prospect in Other
Jun 12, 2020 - 4:41pm

Interning at a UMM PE firm this summer. In one of the comments, you mentioned how a role in PE sets you up for almost anything, but I'm not sure if this factored in a formal IB analyst program beforehand. Would you still say that starting off in PE right after college still sets you up just as well? What are some areas/fields within finance or business development that you felt were closed off to you in PE?

 
Jun 12, 2020 - 6:23pm

I never got involved with the whole fund of fund thing since I was confident in my own ability to generate returns. As a result, I have limited knowledge in that field. However, from what I see, it is going to become much more widespread in the next 10 or so years. I also don't think it's going to change the landscape of PE much, since you need standard PE funds for fund of funds to exist in the first place. Also, FOF don't allow you to have as much control over the returns you have which is why it isn't as attractive as conventional PE.

Like I said above, I have limited knowledge on this side of PE, but from what I have seen, the primary market is are more volatile than secondary market. However, I'm not a fan of the regulations set upon the primary market. I definitely prefer LBO investing since I'm in full control of the direction my portfolio goes.

 
Jun 12, 2020 - 6:26pm

The more senior I got, the more time I could spend with my family. I also made it very clear to my wife that she was my number one priority, and I was working so hard so I could retire early and we could spend the rest of our lives together. I think I got lucky with my wife, because we haven't struggled too much or been worried about everything falling apart. That's just my scenario, but saying "pick a good one" is bad advice lol. Just make sure you allocate time for family, and don't get married to your job.

 
  • Analyst 2 in IB-M&A
Jun 12, 2020 - 6:47pm

Thanks for posting! Very informative and unique.

I'd love to get your thoughts on a fork in the road I'm currently facing that relates to PE recruiting. I may have the option of going to a small fund ($100mm first fund) that's run by a mentor and former coworker. This person is responsible for having built me up as analyst in terms of giving me as much runway as I wanted as an analyst to develop my skill set, ranging from priming my modeling skills as a pup to giving me plenty of opportunities to lead calls with sell side clients at the IB we worked at. We were (and still are) very good friends outside of work as well, with my fiancé and I hanging out with his wife and him with regularity. I truly believe that if I were to go be associate hire #1 at his firm that I could voice my desire to get involved in deals at various points and levels that I likely couldn't elsewhere, and I don't consider it unlikely that I could pave my own path to a formal partnership 2-3 new funds in.

However, this is a new fund, and I should have the opportunity to explore stints at larger / more established funds, so I'm curious to get your take on whether pursuing this smaller but familiar team is better vs. taking an associate role at a larger fund for my first PE seat. If it changes your consideration at all, I'm unsure how well my recruitment efforts into unfamiliar PE funds will fare, as my academic background is not the strongest and may eliminate me at a lot of stronger places to begin with, leaving me to search for PE roles through independent networking efforts at funds IB experience and PE internships could do to mitigate a very weak academic track record.

Many thanks again!

 
  • Analyst 2 in IB - Gen
Jun 12, 2020 - 9:03pm

What happened to those Associates / VPs / Principals who couldn't make Partner? Did they jump to other PE firms, moving downmarket?

I feel like everyone knows "the path" but am a bit nervous what happens when you fail at any step along that path. I've seen a few ex-BB MDs at my current regional, and it feels like they have some sort of "regret" (for lack of a better word) at not having make it big at where they were. (Obviously of course some of them may have done it for better WLB, etc. )

 
Jun 13, 2020 - 1:39am

Based on your own experience and what you have seen from your partner level colleagues, what is the key to a successful marriage when you have a demanding career? You said you got lucky with your wife, but is there certain traits you have seen prevalent in marriages that last and those that don't?

Do you know any partners at the MF level? If so, do they generally seem happier or more miserable than partners at MM firms? Do MF partners make more money than their MM counterparts or is the main difference just deal size?

 
Jun 13, 2020 - 1:49am

Thank you for someone like yourself to talk to us. :)

"It's okay, I'll see you on the other side"
 
  • Analyst 3+ in IB - Ind
Jun 13, 2020 - 1:53am

First of all, thank you so much for taking the time to talk to us. This is such an informative thread and it is great to see people with your accomplishments playing it forward:

1) In such a competitive environment, how were you able to differentiate yourself in PE fundraising? Was it an industry niche?

2) During the fundraising process, were the majority of the "other" investors you mentioned (not you and your old founding partners) personal connections or institutional investors?

3) What were characteristics of the best people who you worked with at your career? Would be great if you could split this (associate, VP, Director, Partner) etc.

Thanks once again for yor time

 
Jun 13, 2020 - 8:07am

Any tips for a mechanical engineer student (1year left) trying to break into IB (not S&T) in London without finance background?
I'm not the stereotypical engineering nerd, and nor I have quant skills. I'm very outgoing and overall get along with any person easily.
I'm just genuinely attracted by IB, specially the M&A side of it.

Current plan for the summer is to learn as much as possible about Corporate Finance, Valuation, modelling and Excel magic.
No summer internship landed prior to the pandemic, so my takeaway is that I have to grind on interview prep too...

any tips really appreciated, thanks!

 
  • Anonymous Monkey's picture
  • Anonymous Monkey
  • Rank: Chimp
Jun 13, 2020 - 12:33pm

Sorry not trying to be a dick here but is the OP verified by WSO? I feel that many of his answers are too generic. But this thread is on the front page so I may be wrong?

 
  • Anonymous Monkey's picture
  • Anonymous Monkey
  • Rank: Chimp
Jun 13, 2020 - 4:07pm

Could be many reasons. Someone is bored AF. Someone wants to test their ability to BS people effectively while not knowing anything more than a little inch.about the industry; someone wants to use this opportunity to bring up a current societal / prestige related issue, ignite yet another debate on it and watch WSO engage in a bloodbath while he himself is insulated because he's an industry veteran whose now made it; or maye someone who did not get into PE is now trying to divert attention to society-focused jobs as a worthy goal all of us should pursue; and is deep down feeling happy because he convinced himself Teach for America is the way to a fulfilling life. just speculating.

 
Jun 13, 2020 - 2:47pm

Hey, thanks for doing this. I just finished up high school, and my career goals are to get into IB/Consulting and then eventually PE. I'll be attending UMich, but not in Ross, and studying Economics/CS. What advice would you have for me as I start college? What do you think would be the right time to get an MBA?

 
Jun 13, 2020 - 3:46pm

Thanks for doing this. Your responses have been super insightful. Few additional questions:
- Throughout your career, how often did you, or people you know, encounter situations in which there was a real moral or ethical dilemma? What route did people typically choose in those situations?
- To the extent relevant to your situation, do you feel like you missed out on family life given work commitments or were you able to find a proper solution?
- At the school you teach at, do the other teachers look at you in a certain way given your previous successful career?

Thanks

 
Jun 13, 2020 - 5:30pm

As someone who wants to break into PE and eventually start my own firm what is the key to succeeding once you actually get the job obviously hard work and determination but what are the true intangibles one needs?

 
Jun 13, 2020 - 9:39pm

Thanks for doing this AMA and giving back to the community. I think it speaks volumes that you choose to be a teacher after being able to do anything you want financially.

  • You said your co-worker is a wizard at fundraising. What made him so? Seems you're not too shabby at fundraising as well. My experience (and feel free to contradict) is that while one can be a great fundraiser, or a crappy one, fundraising is reliant mostly the strength of the product (team, track record, edge), and product-market fit. A fundraiser can execute poorly or well, but even the most brilliant fundraiser can't sell a mediocre product. That said, what process did your colleague use? What made him so darn effective/wizardly?

  • what was it that you felt helped make you successful in building your PE career? As someone in the field myself (historically in Asia growth capital, currently on the beach) it's been a pretty challenging journey. Keen to hear what one can do differently to be more successful.

  • Had you considered other involvement in business post retirement? It's always interesting to see what someone does as their "Act II". One of my mentors had a similar experience with his attempted retirement (after selling his second listed tech company). He tried to retire but that idea lasted 6 months before he got back in the game. But it's not clear that in most cases that the PE experience prepares one to manage a business. I am in a hospital project together with a very senior PE investor (30+ years experience) but the hospitals aren't doing well because he does not know how to run a business, much less in a complex sector like hospitals.

 
Jun 14, 2020 - 9:14pm

Thanks for being available for Q&A!

I've been curious for a while how PE partnerships are structured in terms of compensation. Do partners (real GP % owning partners) own a % of the GP and accrue a % of the carry every year? What are the vesting terms for ownership and how does that usually work out? Does a PE fund put a fixed % of the management fee aside for paying employees or themselves?

 
Jun 16, 2020 - 8:25pm

A bit of a personal question here. Feel free to be as vague (or specific) as necessary.

With your personal wealth, how have you invested? Before some wise ass mentions "diversification," I'm particularly interested in any exposure to real estate (international?), search fund or income-generating investments in your portfolio.

Are more attractive opportunities available to someone with your net worth? Considered the use of a family office? How do you ensure that the principal doesn't deteriorate over time?

 
Jun 16, 2020 - 10:42pm

Really appreciate you giving some time to help us all out. What are your thoughts about starting your own fund after a couple years (5-7) in PE? Think I'm pretty set on doing that after I make the jump to PE from IB BB but also wondering if you think it's getting easier or harder to start your own fund from a younger age given more capital inflow to PE funds.

 
Jun 16, 2020 - 10:46pm

Wanted to ask what your thoughts on the value of an MBA is. Currently at an ivy league school and have managed to find success without a formal business education. Don't really plan on pursuing an MBA because I would rather be in the workforce becoming a better investor, but also open since I am still young.

 
Jun 17, 2020 - 9:16am

I am in my late 30's and have had the following career path:
pre-MBA: 2yr IB analyst, 5 years at two different PE secondaries funds
;MBA from top 15 school;
post-MBA: 5yrs corporate development M&A at a large company

I am very passionate about PE direct investing and only want to pursue this as a career. what's your advice on how best to get a job given I'm not age appropriate for the standard entry points (pre-MBA or post-MBA associate or even VP)? Am I hopeless?

 
Jun 19, 2020 - 12:04pm

Happy to offer my view.

So I'll preface by saying that I've also worked in both PE secondaries and PE directs (internship in business school) and I prefer directs purely based on my own personal investing interest. I enjoy digging deep into businesses, understanding business models, interacting with people, and generally being involved in growing and managing a business during the investment period. This can only happen in direct investing as in secondaries you are simply buying an interest (either in a fund or company) and holding to maturity. If dynamics change after purchase (i.e. pandemics, recessions, etc.) there is literally nothing you can do when investing in a secondary since you have zero control and are the will of how good (or bad) the managing GP is. This is something I don't like in terms of investing - have zero ability to impact the investment. So to me I wasn't very excited working in secondaries as a long-term prospect. It was for sure very financially lucrative and I'm sure I would have done quite well I stayed for the long game but I'd be dead on the inside because I just didn't enjoy doing it. Whenever I'd be on a call or meeting with a GP discussing their initial investment thesis, or how things were trending with their portfolio company, or upcoming changes, I would get more and more interested in wanting to be on that side of the table.

In terms of work - I'd say secondaries is quite misunderstood. My general belief is it is perceived as "easy" or non analytical, which is quite comical and couldn't be more incorrect. I'd say I built far more complicated models while working in secondaries vs. doing direct investing. In secondaries you have to quickly learn to understand business models as you analyze various different types of businesses operating in every industry; some can be quite complicated and you need to really understand them since your purchase price depends on your expectations of underlying performance. You won't be building 3 statement models in secondaries (for one you wouldn't have the time) but you will definitely need to be a good modeler in IB in order to succeed in secondaries.

Overall, I'd say it was a great start to my career because I was able to learn quite a bit and even develop a decent network. However, I'd say the con to it is that instead of becoming an "expert of industry" (i.e. working at a consumer or industrial direct focused fund) I've been pegged as a "jack of all trades" type, which generally (and unfortunately) is not appreciated as much as it should be. My recommendation would be if you go into secondaries after IB into a 2yr program really spend the first 6 months or so seeing if you like it and can make a career out of it. If so, work had and stay on the Partner track and you're set. If you don't like it, no loss. You've gained great experience and at the end of the 2 years you can either go to business school or move into another role since the entry point is still valid (pre-MBA associate at PE direct or long hedgefund).

Hope this helps.

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