Q&A: UMM PE VP

In the spirit of giving back and thanks to fcf_yields idea, thought I would do a Q&A from a slightly younger investment professional perspective. I'm a relatively junior VP at an established UMM fund ($10bn+ fund size), sector focused. This site has given me a lot of help over the years, going all the way back to college when i did not know what banking was, so would like to pay some of that forward. 

My background: target undergrad, GS, MF PE, UMM PE. I also applied to and was rejected from HBS/GSB, which i am happy to talk about (as a reject...) as I know a lot of people have questions around that and how it relates to career progression. 

Let me know what would be helpful to discuss and i will do my best to give you my views/perspectives. 

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Comments (101)

  • Associate 1 in PE - LBOs
Apr 1, 2021 - 12:16pm

Thanks for doing this!
 

Current MF PE associate with a similar background, could you please talk through your thought process for business school (pros / cons)? Also now that you have had a chance to see outcomes for peers that actually went to HBS / GSB v. those like you who skipped and recruited for partner track roles, how has your view on getting an MBA changed, if at all?

  • VP in PE - LBOs
Apr 1, 2021 - 3:19pm

I didn't (and still don't) have a good reason to pursue business school other than 1.) taking a 2 year vacation and 2.) checking off the next box on my list. Clearly not great reasons to do so, and maybe that was part of the reason my application didn't stand out (more on that in another answer). It also really forced me to decide much sooner what i wanted to do - pursue something more entrepreneurial, go work in the public markets, stay in PE etc. Decided to do the latter after a lot of thinking. I'm a few years post that point, and i can safely say that it has made no difference in my career trajectory vs colleagues who ended up going to school. If anything, it's actually been a big advantage. i have two more years of real life work experience, a couple more deals on my resume, and a lot more track record. It also has led to me having a lot more industry relationships and management touchpoints - which, when you are sector focused, compounds over time as you build your credibility within the industry.

Not going definitely precluded me interviewing with some shops (think places like Berkshire, who treat the MBA as an immovable requirement), but by and large, the majority of firms today don't care about business school, which is a pretty big difference vs five or ten years ago.

All that, if i had to do it over again, i would still apply only because it sounds like a fun time. I'm jealous i didn't get to go on trips every two weeks / goof off. But it has made no difference in my professional career. based on your background, if you want to stay in PE, there is very little professional reason to go in my view (still plenty of other reasons)

  • Associate 1 in PE - LBOs
Apr 1, 2021 - 4:40pm

All makes sense and super helpful, pretty much in-line with what I expected the case to be. Thanks!

I'm personally trying to justify to myself the crazy cost + 2 year work experience set back associated with pursuing business school as I would really love the 2 year vacation given it seems like the last opportunity to do extensive travel before setting out on a more permanent career path than the 2+2 track. I'd also value the opportunity to make more friends that are likely to be in a similar life situation (staying in NYC, upper middle class) as most of my college friends went different ways and it's not all that easy to make friends while working since at most you only see them ~1-2x per week (compared to a college environment where you'll be able to hang out much more frequently). At a make or break point now as I'll have to take the GMAT to apply, but sounds like it's worth at least tossing in the app and worst case I don't get in

  • VP in PE - LBOs
Apr 1, 2021 - 3:40pm

Good question. Few items stick out in my head:

a. Step up to do simple things that are more in the first year VP camp. think coming up with DD plans, shelling out IC materials, leading DD calls with mgmt teams / bankers etc. Those are things that make my job easier, and whenever i have associates do things like that, or even do small parts of them, it's a huge plus

b. be proactive - do all of those simple things before i ask for them, as much as is reasonable / possible. it's so helpful when an associate already knows what we should be doing as we kick into gear for a dd process, get ready for an IC committee, etc. Waiting to be told what to do on everything is a sign of a still developing associate

c. don't make simple and/or repeated mistakes on technical stuff. it's so helpful working with associates who are meticulous about their work (models, one off analyses, ppt slides etc) and don't make careless mistakes, which happens more often than you think. it's not a big deal, everyone makes mistakes (vps principals partners no exception) but i think if its a repeated pattern over a year plus, not a great sign

d. speak up more. pick your spots for sure, but don't be afraid to make points in internal case discussions with the team, in management presentations, etc. Knowing how to find that balance is hard but you should develop your voice over time to the point where you become a go to opinion on every single deal, even if you are not the final voice. you want to be at the point where the principal/vp actively wants your opinion on every major commercial underwrite / strategy item 

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  • Associate 1 in PE - LBOs
Apr 1, 2021 - 12:36pm

Thanks for doing the Q&A.

I'm a MM PE associate, my background is target undergrad --> MM PE analyst --> MM PE associate (different fund). I'm trying to think through whether I should apply for business school. Ideally, I'd like to target HSW but my current fund has low brand recognition and definitely does not have a historical pipeline to HSW.

Can I get your views on whether it's worth it for me to apply for MBA, should I invest the time and energy? Do I even have a chance at HBS, GSB, Wharton when I'm stacked up against dozens of MF and UMM associates with more prestigious backgrounds? Do MBA adcomms care a lot about PE firm prestige, how much will my firm's lack of name brand hurt me in the admissions process?

Some caveats – my current shop doesn't have a 2-and-out program, and I can stay long-term if I perform well. I also have a significant amount of carry (for an associate) in the latest fund. I don't have a clear goal of what I would like to do post-MBA, so potentially losing my carry if I get an MBA just to potentially go back into PE again is not ideal.

  • VP in PE - LBOs
Apr 1, 2021 - 3:45pm

goes without saying this is a personal decision, but in my opinion, if you like PE / your fund and have a path to staying, i don't see a reason to go to business school. hard for me to gauge how likely you are to get in (especially since i didn't!) without knowing your stats / race / gender, but in general it's not an easy path. adcoms care a ton about prestige, very unlikely especially at H/S that you will get in without at least one brand name on your resume. 

again - i am just an average individual with no real expertise in admissions beyond my own experience and anecdotal observations of peers/friends, so take that for what you will. 

  • Associate 1 in PE - LBOs
Apr 11, 2021 - 8:37am

Just a follow up here - given that you were open to business school but also didn't mind staying through, how did you approach having that conversation with mentors at your current workplace (especially when it comes down to recommendations)? Is it the same as letting a team know you're thinking about recruiting or did you have enough MBAs at your firm that applying was a supported process? Any impact on your career trajectory after admission letters came in, and you remained at your firm?

  • Analyst 1 in IB - Restr
Apr 1, 2021 - 12:38pm

Appreciate you doing this. I've had a pretty rough banking experience hours wise and so was wondering at UMM PE what your hours have been like both as an associate and now as a junior VP? How often would you say you're pushing in deal sprint mode throughout the year? 

  • VP in PE - LBOs
Apr 1, 2021 - 3:49pm

I was at MF PE as an associate, i would say hours were a bit worse on average there vs the associates at my current fund. in general, for busy / good UMM / MF shops as an associate, you'll see 65-75 hours as the norm (50% of the time), 80+ during deal sprints (30% of the time), and sub 60 during good times (you can do math). my hours as a VP are better both in terms of normal times (i probably work 20-30% less than my associates in terms of pure hours) and good times, but just as bad during deal sprints. gross generalizations, but hopefully gives you an idea.

  • VP in PE - LBOs
Apr 1, 2021 - 3:54pm

VP to principal is hard but not impossible, mostly based on how good you are at ensuring good dd is done, running a tight process, staying on top of portco management, presenting well to ICs / internal discussions / mgmt teams to some degree. by no means a foregone conclusion, but in my opinion the easier promotion on a relative basis. 

principal to partner is really hard. it's predicated much more on your ability to bring in and execute new business (whether that's new deals, new verticals, new geographies, etc.). it's a difficult skillset to build and it takes time, and sometimes it is out of your control if the firm decides to deprioritize that industry or they hire someone above you.

i'd say for those who want it, VP to principal probably happens 50-60% of the time. principal to partner is much harder, maybe sub-20% of the time. It involves giving meaningful authority and carry to an individual and head guys don't do that lightly 

  • Analyst 1 in PE - LBOs
Apr 1, 2021 - 1:41pm

Thanks for doing this. Given your strong pedigree, what factors do you think led to HBS/GSB rejections? GPA, GMAT, etc.?

  • VP in PE - LBOs
Apr 1, 2021 - 3:57pm

I doubt it was my stats, i graduated summa from an HYP and had a 770 gmat. work experience sort of speaks for itself between GS and MF PE. probably some combo of typical PE resume + white / asian male. there was no good reason for them to reject me on paper, but also no good reason for them to accept me - my essays were good, but it was clear there's no passion for b school and no real reason for me to attend. business school admissions for people that look like me (literally and figuratively) have been a crapshoot recently (multiple male friends at my MF and other MFs also didn't get into H/S), just the way the world works. can't complain too much honestly, if that's the worst thing that happens to me in my professional career i'll have been incredibly lucky  

  • Analyst 1 in PE - LBOs
Apr 1, 2021 - 4:17pm

Wow. Crazy to think someone with that profile is getting rejected. Thanks again for your answer.

Apr 1, 2021 - 6:19pm

the schools intake cannot be homogenous. he's part of a pool of similar people. 

schools are taking a lot more people from unconventional backgrounds these days.

mba's aren't only for finance people. need a good mix.

  • Analyst 1 in IB-M&A
Apr 1, 2021 - 9:19pm

I keep hearing this sentiment that Harvard/Stanford is getting harder for finance people, but the PE/VC portion of incoming class at HBS has consistently been at 15/16% for the last 4 or so years, so what gives? Are they just taking way more females instead or those that have PE experiences abroad? 

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  • VP in PE - LBOs
Apr 2, 2021 - 12:45am

take with a grain of salt given i have a biased perspective, but i think the answer yes. 10 years ago the intake was higher from PE + the intake of males was higher. there are still quite a few guys that look like me that get in, but way more females / minority candidates. i would guess in any given year, there's probably 50 guys that have a profile similar to mine (maybe columbia instead of hyp, maybe MS instead of GS, so on). the acceptance rate of that group used to be (again purely anecdotal) 80%+, and i get the sense it's gone down to below 25%. Keep in mind the rich / connected kids are still getting in - if your dad is x executive at PE fund or y founder of hedge fund, i don't think the acceptance rate of that cohort has gone down. It's mostly the collection of high achieving on paper but otherwise unexceptional male kids (myself included) that have been impacted. this is again just based on my experience, i have a lot of friends from school / banking that have similar backgrounds and a lot of us have followed similar career paths.

it's somewhat annoying, but honestly, people of color/women face way more crap in their lives on a daily basis. if the one redistributive policy that impacts me is not getting a fancy hbs/gsb degree, hard to complain too much about that. 

  • Analyst 1 in IB-M&A
Apr 1, 2021 - 9:22pm

From your experience, are there still PE funds that tend to place exceptionally well (close to 100% of their associates) to HBS or is that no longer the case? Thinking only Berkshire still holds that power for HBS? How true is it that TPG/Carlyle/Bain Cap might outperform other MFs for HBS placement, or have you seen associates from these places rejected too?

  • Intern in IB-M&A
Apr 1, 2021 - 5:22pm

I have a few questions: 

1)  Was it your choice to move from MF to UMM ? If yes, why ? If no, why would you have preferred to stay at MF ?

2) Was it worth it to start in MF PE to then switch to UMM PE ? Does it give you more "credibility" than an associate that started straight in UMM PE

3) You won 2 years by skipping the MBA but is an MBA not useful in the long-run ? For example, when reaching Partner, does the HBS/GSB brand not help for fund raising or winning deals ? 

4) Would you recommend the MF PE associate experience ? Is the learning experience worth the longer hours ? 

Thank you for your time ! 

  • VP in PE - LBOs
Apr 1, 2021 - 6:31pm

1. Yep. always envisioned leaving MF PE after two years (though i had originally anticipated having a 2 year bschool break in between). those organizations are so incredibly saturated, that there's very little scope for incremental responsibility / promotion / pay beyond the set path. you don't become a real decision maker (or have influence over real decision makers) for many, many years. It's not like i'm making calls on what to invest in at my firm, to be clear, but the path is much more near-term and i've been able to carve out a specific niche for myself which i did not see a near-term equivalent to at my old fund. 

2. Depends on what you classify as worth. from a learning / content / access to deals perspective, not in the slightest. anyone who says x MF is better / smarter than their smaller counterparts (whether UMM / MM) is just wrong. There are so many true MMs / UMMs that are incredibly good and filled with some of the brightest people in the industry: clearlake, GTCR, berkshire, thoma (though i guess they're not really a MM anymore)...you get the idea. It was worth it to me because i get some silly sense of self worth out of having x MF on my resume. Is that worth it? Not really, but i'm happy i did it and i had a good experience and learned a lot. I would absolutely not recommend using MF PE as the measure of success. it in no way is purely an indication of your abilities (skill is a necessary but not sufficient condition, so much luck involved) and not working at one has basically zero impact on your ability to succeed in the industry.

3. I can only give you my view, which is no. A few of the partners / principals at my old shop didn't have MBAs and the same dynamic exists here. haven't seen it impede their career in any way, and i think as more and more of the PE world shifts to b school as optional or unnecessary, that will continue to be the case. there is certainly the argument that it helps your network, which is of course undeniable, but i think it does so in connecting you to people outside of the PE/HF world. between college, GS, and my old fund, i doubt there's many people with somewhat similar backgrounds that i don't either know directly or am one degree separated from, so i don't think there's a huge gap in terms of finance network. But look, that's a very limited / biased view, i'm probably too young to make any sort of definitive claim on that front. 

4. to be honest, my hours weren't any better or worse than a lot of my friends who worked at similarly intense / good MM and UMM shops (spoiler: i did not work at apollo). i don't think there is any difference in lifestyle and learning experience between someone who works at carlyle/bx/tpg and someone who works at cd&r/cinven/thoma etc. all great shops, all have intense associate programs, all will give you the pedigree / tools to succeed. way more important who your mentors and teachers are, what kind of deals you work on, how much you absorb. 

Apr 1, 2021 - 6:05pm

Thanks for taking the time to do this, just have a few questions!

1: What helped you personally or what did you hear that others did that helped them survive the large amount of hours that you're expected to plug in at GS or MF/UMM PE?

2: In relation to your answer above about going VP -> Principal & Principal -> Partner, if you don't manage to make the upwards climb is it a matter of staying in your current position and waiting for another opportunity to present itself or do you get booted out or lateral?

  • VP in PE - LBOs
Apr 1, 2021 - 6:38pm

no problem. 

1. i unfortunately don't have a great answer to this. i think some of it is attributable to personality: i am quite competitive, and i viewed each step as a challenge to see if i could thrive. probably not the healthiest attitude, but it helped me get through. a huge part of it was the people i worked with and for. i have been incredibly lucky to have made great friends at both GS and my old fund, and had 1-2 mentors at each place that i remain close with to this day. the former group to help you stay sane and commiserate with, the latter to guide you and teach you, and to show you what roles and responsibilities your are aspiring to a few years down the road. zero chance i would have made it here without the combination of those people. probably a trite / obvious thing to say, but people will make or break this career for you. always optimize for that as much as you can. 

2. sort of depends by firm. some places let you hang around for a while before asking you to leave or recruit, other places make it very clear you need to start looking for roles. almost everywhere i have run into though are supportive in connecting you to other places, vouching for you on reference calls etc. as long as you weren't a total moron. 

Apr 4, 2021 - 8:48am

Thank you!

In response to talking about mentors, how did you specifically go about finding your mentors or was it a relationship that just evolved into mentor/mentee-ship over time?

Apr 28, 2021 - 8:02pm

1) I have a similar background to the original poster (Ivy, IBD, UMM PE, off to HBS). I think much of it is internal drive (i.e. not backing down from a challenge/proving it to yourself that you can hack it), along with the professional responsibility (e.g. where else will the CFO of a $Xbn call your personal cell at 25), compensation, skill-building (which incurs a safety net).

If you take it day by day and survive, the value proposition of giving up 4 years of your life to set yourself up for later is pretty high. Is it painful? Yes. Do you burn out from time to time? Definitely. Reflecting on my experience 4 years later, I am glad I did it. 

Most people who did the 2+2 path gave up a lot personally, but gained a lot professionally. Take it day by day and you'll know if you can hack it or now. It's really personal. 

2) To your second point, I see a lot of career anxiety/politicking as I look up, and this is just the name of the game at any corporate-esque role. The great thing about PE is that you gain a tremendous amount of professional experience. As a VP, you can be sitting on Boards starting in your late 20s. You're also constantly in contact with the CFO, CEO, VP of FP&A, so you develop a skillset of what's important. If you get booted, you're likely to join another firm (which should be doable if you have good experience) or go into industry (e.g. CFO or strategic finance). People who make it to VP in PE are smart and skilled enough to do almost any corporate job (granted you'll take a paycut).

Bottom line, I wouldn't worry about it. This whole anxiety over a "path" is foolish. You can't plan it all out, so again just take it day by day. 

Apr 1, 2021 - 6:28pm

+1 SB for a productive thread. Thanks for doing this. I have quite a few questions:

  • What's your long-term plan? Are you thinking about sticking it out at your current fund for as long as possible (maybe too early to tell)? Do you have any aspirations of launching your own fund?
  • Do you have any regrets related to your professional career?
  • I know you touched on some tips on the promote from associate to VP (very helpful) and maybe this is a tangentially related question...what is the best piece of advice that you have received from a mentor?
  • Could you touch on the rough carry pool breakdown by position (VP, principal, partner) at a high level (i.e., how many bps one could expect to receive)?

Thank you!

Array

  • 3
  • VP in PE - LBOs
Apr 2, 2021 - 1:26am

1. Not entirely sure about long term plan. medium term is very much to stick it out here and see how it goes. I enjoy the work, i really like my team, and my life is pretty manageable ~50-70% of the time, deal sprints excepted. I think at some point (maybe 5 years from now) there will be a real decision point for me in terms of whether i want to stay-and if my fund will want me to stay-and then I'll have to make a choice. But mostly autopilot till then, continue getting better at sourcing / executing / presenting and hopefully meet some fun management teams along the way. i don't really have an aspiration to launch my own fund. It sounds horribly time intensive, pressure filled, and requires taking pretty massive personal capital risk (LPs want first time GPs to pony up a huge part of their personal liquid NW). Sure the upside is i could make hundreds of millions of dollars, but i'm (hopefully) going to make tens of millions at my current trajectory and i have no use for the delta. It would be nice to be the CIO but i really don't think the tradeoffs have personal appeal for me

2. not really. i think i do sometimes wonder if i would have had more fun joining a startup at some point in the last few years, but i think that's purely a 'grass is always greener' kind of thing. i'm generally pretty happy with how things have turned out. 

3. hm that's a good one. If purely professional related advice: i think it's always think about how to make the job above you redundant. Nothing makes the person you work for happier (unless they're psychopaths, in which case leave) than being able to dump their work off on you and focus on doing the next level of job. vps want to do principal work, principals want to do partner work, and so on. It won't come immediately and doing that often feels uncomfortable, but it's really productive and rewarding in the long run. Always think about tackling one extra responsibility during a project that you haven't done before and that is somewhat out of your range of typical duties. ie if you're a second year associate, volunteer to help lead some of the financing workstream. if you're a vp, volunteer to take a first pass review / comments on the merger agreement / llc agreement. even if you don't get it perfectly right, some good work is always helpful, and it'll allow you to level up more naturally over time. 

4. i hesitate to answer this because it's so widely variable and i'm still pretty junior all things considered, so your guess is as good as mine. that being said, i've seen VPs at big funds (say $5bn+) typically get 20-50bps. on a $ target basis, anywhere from low to mid millions of dollars per fund. I don't have great insight into principals, my guess is 50-100bps, or $8-10mm+). No idea on partners, it varies widely. Heidrick and struggles probably your best bet 

Apr 14, 2021 - 5:43pm

think about how to make the job above you redundant

This is the best advice you can give to anyone in any career. Everyone who reads it should write it on a post-it and stick it to their monitor. 

  • Associate 1 in PE - LBOs
Aug 16, 2021 - 6:21pm

On 4) - do you see this range being roughly similar across MM/UMM/MF funds or do you see there being large gaps (e.g. between $2bn+ and $10bn+ funds)?

  • VP in PE - LBOs
Apr 2, 2021 - 1:27am

Very rarely to be honest. the couple i have seen have come from really good banks/groups. mostly GS and good boutiques (ie evercore). i will say i havent interacted with a ton of true LMM shops (2bn and less) so there may very well be more there. but quite rare at MM / UMM

  • Intern in S&T - Other
Apr 1, 2021 - 8:39pm

Firstly, thank you again, your answers have been really thorough and coherent and have provided great perspective.

Have you ever seen someone make the transition from trading at a top credit desk to PE? Whether going through IB first or making the jump directly? Thanks

  • VP in PE - LBOs
Apr 2, 2021 - 1:29am

No problem, glad it's helpful. i haven't seen that, though never say never. i have seen a few examples of people doing something random for the first 1-2 years, recruiting for a standard banking role, and than going to PE. very tough without the banking position unless you're willing to look for non-standard / niche firms or in non major cities

  • Analyst 1 in IB - Cov
Apr 1, 2021 - 9:26pm

Thanks so much for such an insightful thread. Really appreciate someone as busy and qualified as you taking the time. Some questions: 

1) As someone on the buyside, can you tell the difference between good bankers or not? For personal reasons, I am thinking of staying in IBD but worry that there is not really much differentiation 

2) Your answer about path to PE partner was fantastic. When you say developing industry relationships, how does one go about doing that? Is it just calling management teams as potential targets or trying to build relationships over time through transactions etc? 

3) As more PE processes become banker-driven according to fcf_yield's thread, how does a PE partner add value? Previously, it was through sourcing proprietary deals - is it more about industry expertise now and knowing what is a good / bad investment? 

4) just gonna go ahead and ask it - rough comp range lol? 

Thanks once again for your time. Really appreciate it! 

  • VP in PE - LBOs
Apr 2, 2021 - 1:44am

1. i can definitely tell the difference between good bankers and not. i would say the best bankers i have worked with think like investors / managers. that's really been the biggest differentiator for me. there are bankers who take the time to discuss broader investment themes / industry trends, send me interesting research color or new opportunities, and those are the guys i like and trust. nothing wrong with being the banker who calls only if there's a CIM out, but those are a dime a dozen. work on building a niche-pick a product or a subvertical, and really become an expert in it. then take the time to slowly build up your relationships with sponsors who are active in those areas, even if it's just to talk about more general stuff from time to time. Those are the best bankers over time and there is absolutely a need for people like that on the sellside in my opinion

2. It's really hard, no clear answer. i'd say it's a combination of: getting to know teams through conversations whenever there's a deal process happening, meeting them at industry conferences, dropping them a note once in a while when you see they're in the news for something cool or a new product launch etc. It takes a ton of time and repetition. sometimes you also build great rapport during a deal sprint, and even if things don't work out, if you impress them with your knowledge / approach, there's a lasting relationship that you can build on over the years. again, no clear answer, it's one of the things i have found hardest to do, not least because we are all typically much younger than the management teams we interact with

3. it's a fair question, but frankly i'm not sure there's a real difference in PE partners roles whether more processes are banker driven or not. their primary goal is always to deploy capital at attractive risk adjusted returns. obviously if you have a bunch more competition and do things through auctions that role becomes much harder to achieve differentiated returns, but fundamentally, the 'value add' of a partner is figuring out good deals and getting those deals done. while it's always nice to sell to LPs "look we do so many proprietary deals" at the end of the day, if you do 10 auctions but your returns are 25%, no one is going to give a shit (and no one will give props to the shop that does 5 proprietary deals with management teams but messes up half of them because they didn't go through a wide-process vet). so i think the answer to your question is - partners roles/goals haven't changed, but it's getting increasingly harder to do them well because of the volume of competition

4. haha sure. as i said above, heidrick and struggles is probably a much better holistic view, but i take home somewhere in the high hundreds of thousands cash comp and have 30-50bps of carry in the fund

Apr 1, 2021 - 10:17pm

Thanks for the Q&A. At what level can someone in PE transition into C-suite of a portfolio company? Would you ever consider that option if it presented itself? Why or why not?

  • VP in PE - LBOs
Apr 2, 2021 - 1:32am

for sure, have seen it happen quite a bit. i have seen several vps through partners at funds go into c suite roles. I don't think i would at this point, i really enjoy investing and i like the variety. that probably means i am jack of all trades, master of none, but it's much more fun for me to do that than imagine going to the same company role every day. but that's purely personal preference. lots of cool opportunities out there for PE types at c suite or c suite adjacent roles

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

Thanks for doing this. Whats your thoughts on staying in IBD vs going to PE? I feel like IBD is facing a talent shortage with everyone moving to PE which creates an opportunity to move up the ranks quicker in IBD? Was just curious about your thoughts on this 

Apr 2, 2021 - 9:57am

What things did you consider when choosing what PE vertical to focus on? In my case, I am interested in private debt and special situations. From networking, people have told me that your world view should be considered when making your decision.

  • VP in PE - LBOs
Apr 2, 2021 - 1:25pm

I ended up being the same sectors for analyst / associate programs, so not a ton of latitude to choose. luckily I liked the space so no issues. I would say sector matters - it's more fun working in an industry you're interested in versus just looking at decrepit midstream companies (just jokes!) 

  • Analyst 1 in IB - Cov
Apr 2, 2021 - 10:18am

Looking back at your cohorts both in gs, your mf, and the associates at your current fund, can you describe some outcomes you see from pe associates i.e. direct promo, lateral, portco, corpdev, and which you're seeing as the most prevalent in the past few years especially as b school admissions for your peer set has likely dropped.

  • VP in PE - LBOs
Apr 2, 2021 - 1:27pm

I'd say 10-20% went to business school, 30% to HF, 40% stayed in PE, remainder did a combo of other things (corp dev, startup etc)

  • Associate 2 in PE - LBOs
Apr 2, 2021 - 1:31pm

I'm really eaten up about whether or not to go to a HF or b-school. All I know is that I hate deal sprints so PE is out of the question. Can you opine a little about why you decided not to pursue public markets?

  • VP in PE - LBOs
Apr 3, 2021 - 3:23pm

A few reasons in no particular order: 

1. It is a secularly challenged industry. Net flows have been coming out of the industry for the better part of the last decade (last year excepted, and i still don't believe that's a permanent shift) and if you're going to be in it, you need to be at one of the top x shops to make the risk / reward worth it in my opinion. if you're thinking about long short names or activist, x for me is maybe 10 places, predominantly the tiger cubs

2. I really enjoy working with management teams. it's one of the favorite parts of my job - getting to be part of the decision making process and learn on a weekly or monthly basis from a bunch of folks who are generally much older, much more experienced, and much more successful than me. just don't have that in HF world, it is a much more solitary / desk job

3. I hate that you are beholden to the whims of inefficient public markets. You can have a bulletproof thesis and be right about every aspect of the investment, but timing is completely out of your hands. Markets can take years to realize the value of your pitch and you have effectively zero control over that. in PE - you control exit, you control messaging, all it takes is one interested party to make a monetization happen

4. this one is a bit more personal, but i think you add very little to the world as a hedge fund analyst. yeah sure you make some money for LPs, but it's a zero sum game. i'd like to think in an ideal world, pe tends to be pareto efficient for everyone if growth happens: the employees, the customers, the shareholders, the management. don't get me wrong, i am under no illusion that what i do is anything close to hugely value additive - but it's nice to see real goods / value come out of our investments and not just a reallocation of capital.

I wish i had the hours and cash comp of my HF friends. no doubt about that. but i think risk adjusted and thinking about the day to day of interactions, i find PE to be more compelling. Completely personal choice, no right or wrong answer  

  • Associate 2 in PE - LBOs
Apr 3, 2021 - 9:29pm

This answer has been more helpful than the last 4-5 months of searching for good advice / mentorship. You've given me a lot of clarity on this topic - thanks a lot. 

  • Intern in PE - LBOs
Apr 2, 2021 - 6:03pm

Hey, I really appreciate the AMA. I'm curious about what you think about MF programs compared to IB. Do you see value in doing the 2 years in IB or see it as a waste of time?

  • VP in PE - LBOs
Apr 3, 2021 - 3:27pm

I think personal preference. i found two years to be incredibly helpful in banking coming from an HYP with zero prior finance experience or coursework. it also teaches you how to be a professional, how to interact with folks much older than you, how to do detail oriented work and check it, etc etc - lot less hand holding in PE, even at the now institutionalized analyst programs. I think there is not a ton of downside doing banking first other than the pain of those two years, but if you are coming from wharton / stern / ross etc and have had multiple summers at banks (which i did not), then by all means fine to go the pe route.

  • Analyst 1 in IB-M&A
Apr 2, 2021 - 10:13pm

Do you have any thoughts on other investment vehicles in the private market such as GE/VC?

  • Analyst 1 in IB - Cov
Apr 2, 2021 - 11:39pm

How long does it usually take to realize carry? E.g. if a UMM / MF start deploying a new fund tomorrow, how long would it take to receive carry payments? I have heard 7-9 years?

  • VP in PE - LBOs
Apr 3, 2021 - 3:31pm

It's just a function of when you start selling assets out of that fund. so if we buy asset x today, and then sell it in five years, that's when you'll start seeing carry. those payments are never going to be 100% of what you are owed - funds have various amounts of holdbacks, you have to ensure the fund is in the carry (ie above that fund's hurdle unless you're special like warburg). but you'll see major chunks of carry start to pay out once those investments are monetized. safe rule is to assume a fund deploys its capital in 4-5 years, and monetizations happen over the subsequent 4-5 years.  

Apr 3, 2021 - 9:51am

Recognize I'm a bit late here, but just wanted to thank you for doing this thread and as a few questions if you still have the time!

1. You mentioned coming to a decision point after your Associate stint on whether you wanted to do something else (startup, HF, GE, etc.) - can you talk through how you made that decision. Personally I really love investing but the hours in UMM PE (especially around live deal time) are brutal so it has me thinking about doing HF or GE long term. How did you decide to stay in PE and how much did WLB factor in? 

2. When moving from Associate at MF to VP at UMM did you have to do a stint as a Senior Associate, or go straight to A -> VP?

3. Any up-and-coming firms you'd recommend younger folks look at if they want to ride a high-performing fund to the senior ranks?

Array
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  • VP in PE - LBOs
Apr 3, 2021 - 3:39pm

1. talked about this a bit above, so wont rehash the professional reasons. from a WLB perspective - im at a fund where senior principals and above generally have a pretty decent life, and that is because you have a ton of good leverage below you (associates/vps/junior principals). the personal decision i made was signing up for another few years of busy but not outrageous work hours as a mid level professional in order to hopefully ascend to that spot. HF life at really good funds is phenomenal, but it is far more prone to volatility and you have far less leverage. risk adjusted and over the long term (putting aside the fact that i don't like the day to day of reading 10ks and not getting to interact with management teams as much), PE just seemed like the better option. no right answer

2. had a stint as a senior associate. very few firms don't have some version of this

3. anecdotal but funds i have been intrigued by to varying degrees (some more new and up and coming than others): clearlake, cove hill, veritas, gi, siris, gamut, recognize. just remember past performance is not indicative of future results etc etc  

  • VP in PE - LBOs
Apr 3, 2021 - 3:42pm

the BB. putting aside the actual merits of the experience, PE associate recruiting is risk averse and the former path is much more well trodden

  • Analyst 2 in IB - Gen
Apr 3, 2021 - 4:30pm

Thanks for doing this. Extremely helpful.

Any advice for when the right time is to have the promotion conversation at MF if you know that's what you want instead of b-school? If you're at a fund that has a history of promoting is but still don't give 100% of associates offers to stay, is this something that they're transparent about? Curious about how you worked around this. Also, if you know they push you out, when do associates start looking and interviewing at other shops? Assuming it's less structured than the IB to PE recruiting process at that stage.

Thank you.

  • Associate 1 in PE - LBOs
Apr 4, 2021 - 4:29am

Wow, am quite surprised by the MBA outcomes, perhaps more-so with HBS. Were you dinged without interview at both? 

  • Analyst 2 in IB - Gen
Apr 4, 2021 - 8:15pm

Hi, Thanks for taking the time 

Some questions: 

1) You had a great answer on what you look for in good associates. Would you mind answering what you look for in good associate candidates in interviews and what we as IBD analysts can be doing to develop those skills? Currently a second year who sat out last cycle and is studying technicals, practicing LBO modelling etc. 

2) When you were in your associate stint at the MF, how many % of your associate class got the direct promote and how early did you start looking for lateral opportunities? 

3) Just random lol but do you have any thoughts on industrials as a buyout sector. Currently at an industrials coverage group at a BB and really like the space but often worry since the high IRR industries seem to be Tech / HC 

Thank you

  • Analyst 1 in IB - Cov
Apr 6, 2021 - 3:57am

Thanks for doing this interesting Q&A.

Was wondering how you view skipping IB years and going straight to PE (LMM fund in Europe) after graduation, mostly concerning learning experience and exit ops.

  • Intern in IB-M&A
Apr 6, 2021 - 5:59pm

Thanks for the AMA! Could you talk about why you initially decided to go into banking/finance, and what keeps you motivated today? Given your background, I'm sure you had a ton of options out of undergrad, so I'm curious about how you thought about that decision. 

Apr 7, 2021 - 12:06pm

VP in PE - LBOs

In the spirit of giving back and thanks to fcf_yields idea, thought I would do a Q&A from a slightly younger investment professional perspective. I'm a relatively junior VP at an established UMM fund ($10bn+ fund size), sector focused. This site has given me a lot of help over the years, going all the way back to college when i did not know what banking was, so would like to pay some of that forward. 

My background: target undergrad, GS, MF PE, UMM PE. I also applied to and was rejected from HBS/GSB, which i am happy to talk about (as a reject...) as I know a lot of people have questions around that and how it relates to career progression. 

Let me know what would be helpful to discuss and i will do my best to give you my views/perspectives. 

Do you mind pm'ing me for some career advice?

Apr 7, 2021 - 8:23pm

Hey, thanks for doing this. I'm an undergrad with a current M&A internship with a regional boutique right now. In the summer I'll be at a larger bank with a big balance sheet, but I'll be doing leveraged loan portfolio management in their IBD. If my end goal is to move to a MM fund, do you think it'd be best for me to try to network my way into an M&A or a LevFin role? By that point, I'll have had experience in M&A and at least some experience analyzing debt profiles.  

Apr 9, 2021 - 3:00pm

Really appreciate the responses above. A couple of questions on recruiting at the junior VP level for UMM / MF. It's been several years since I last recruited and it was at a much more junior level. Am currently at a UMM fund myself but we don't really hire VPs laterally.

1. Which headhunters are most helpful at this level (junior VP) for UMM / MF? Suppose it's CPI and HSP but curious to know your experience

2. For interviews, do firms still do case studies at this level, or is it mostly about past deal experience?

  • Analyst 2 in IB - Cov
Apr 15, 2021 - 3:30pm

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  • Associate 1 in PE - LBOs
Apr 16, 2021 - 4:44pm

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May 4, 2021 - 2:22am

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  • Intern in IB - Gen
Oct 31, 2021 - 12:26pm

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