What's the difference in quality of talent at a megafund vs. MM PE vs. smaller PE shops, at the junior entry level?
I'm not sure if talent at the junior level is pretty consistent throughout the PE landscape because getting into a fund is more the luck of the draw or whether there are material differentiators in new associates at a megafund. It seems megafunds have a certain pedigree of people they like to hire, but are they really better?
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Just more pedigreed.
Interested in this as well
not necessarily better. generally just came from better schools and networked into top groups. that would be like saying that all analysts in GS TMT / MS M&A / GS FIG are superstars when in reality those groups have an equal proportion of great analysts to shitty analysts as any other group. keep in mind that performance reviews at most banks haven't happened so shitty analysts will have good interviews and might come across well during interviews and get offers at megafunds
Not entirely sure I follow on the banking to PE comparison. In banking you meet a fair amount of complete fucktards who are booksmart/nerdy enough to get into and excel at a top school and so they got into banking. In PE, (atleast in my experience) everyone is at a much higher caliber, you don't really get any fucktard whatsoever and most people are pretty fucking impressive.
I'd love to say the smartest and most impressive people end up at the MFs by virtue of them paying the most/having the most appeal etc, but I really have no basis to make that statement since I haven't worked at a MF and MM shop. I think you'll find most of the people opining on WSO haven't sat in both seats and are just revealing their own bias based on where they work(ed) or where they're trying to land a gig at.
That's a pretty subjective question anyway... what are you actually trying to get at?
just going off my personal experience. I spent my time as an analyst in one of the top 3 groups that i mentioned in my original post and the people who went to MFs werent any more or less impressive or stronger on the desk than others; just interviewed well and came across well on paper (went to good schools and had good GPAs). only my personal anecdote and by no means representation of broader trends given I didnt spend time across different groups
Asia is probably different (in that let's face it, who you know is the most important thing), but even at the big funds here you meet tons of not impressive drones, and I'll quote @"Marcus_Halberstram" that are "...a fair amount of complete fucktards who are booksmart/nerdy enough to get into and excel at a top school and so they got into banking." Then again most of these people don't progress too far unless they are well connected so...
only replace banking with "PE" (or PE which came after a stint in banking/bain/McKinsey). I've definitely met plenty of senior people who are not at all impressive. They might have pedigree and be smart, but they sure ain't making much money or aren't good investors (this is not to say that I am a good investor...). Let's face it, making money is what matters.
I've worked in sponsors coverage and have/have had lots of friends at both MM and MF PE. I am much older than most on this site so I have some perspective on how careers track. There isn't really a talent or intelligence difference between MF and MM.
I view the guys that took the MF route as either randomly ending there (most of them later left for HF) or 'Strivers". The guys that went to MFs that seemed random have invariably ended up in HFs over the years. I have no idea why that is the case, but I think they tended to take the guaranteed/high end path before they decided what they really wanted to do, either pre or post-MBA. The Strivers are the guys in your analyst class that just kill themselves and go way above/beyond everyone else around them; they are in the office even when they don't have to be. They work for the sake of working, and these are the people that seem to last at the MF level, which is basically glorified banking anyways (unless you move way up the charts, which is hard to do with so many people). The Strivers tend not to be HYP guys, but they are the top kids from second tier schools, who have more to prove - pretty much valedictorian types from Michigan//Texas/UVA/Berkeley/etc. The higher prestige kids are the more randomly ending up at MF types and then ultimately pursue a different path.
The flip side to this, which I've written about before, is that the most successful PE guys I know are in MM funds. If you are at the right place/right time, there is so much more opportunity for upward mobility. I also feel that it's hard to be happy at a MF - just like it's hard to be happy long-term at a BB bank.
P.S. I have never worked in PE so I have no skin in the MM vs MF game...just observations I've made from lots and lots of data points. Working in sponsors taught me that I have no interest in PE as a career path.
Not agreeing or disagreeing with anything here, but the one caveat missing from this is that your experience is from banking sponsor clients, where you have a very limited basis for assessing these guys (especially at the junior level).
Most of my perspective is actually from good friends who have worked at a wide range of MF/MM funds at junior and increasingly senior levels and learning from their experiences.
I work at a MM fund and work closely with post-MBAs who were at MFs for their associate stint (this seems to be relatively common and makes sense considering how dramatically the pyramid narrows between pre- and post-MBA levels). One in particular has discussed this exact question with me.
His and my comments on this question are, approximately:
MFs clearly have more pedigreed people (we were both from a consulting background, and he observed that he had never encountered a non-MBB consultant at a MF and the vast majority of consultants were from major offices - NYC, Boston, SF) - I don't think this one is a surprise to anyone.
The distribution of people at MFs tends to have a higher floor; there are virtually no associates who simply cannot keep up with the pace of a deal, understand investing concepts, or interact functionally with advisers, management teams, etc. This is significantly different from my own MM experience (not actually at my firm, but at 3 firms with which we have done co-investments as well as other firms where I know people), where I'd guess ~5-10% of associates are clearly behind / not getting staffed on high probability deals / etc.
In terms of people who have truly incredible intellectual horsepower or investing talent, they are so rare that it is hard to make a comparison. His sense is that the distribution of those is not particularly concentrated at MFs. I think this view is potentially supported by the fact that most solid MM funds seem to have a bias for internal promotes (even if the associate spends 2 years in bschool) - it is clearly not the case that the marginal (or even average) MF associate can find post-MBA roles by displacing MM associates on demand.
Anecdotally, I recently interviewed with a MF - two of my five interviewers mentioned that they feel like MM funds can give associates who are up for it a more well-rounded experience (specifically comparing their associate program now to the funds from which they are interviewing lateral candidates, none of which are MFs). That being said, there is almost certainly significant sample bias on this one - since my background is from a well-regarded MM fund, it stands to reason that I would be more likely to interview at places that value the experience.
Hope this is helpful and I would be curious to hear others' reactions. This went on much longer than I planned.
Just curious to hear from you on how much consulting helps for MM PE and whether it would be better to skip consulting / join a MM PE fund out of undergrad if possible. Thanks and SB+
Did the MF interviewers seem to value the more well-rounded experience at MM funds or just acknowledge it?
Assumed by talent you meant bishes...misleading thread title
Woozy - if you know you want to go into PE, I'd imagine going directly or doing a stint as a banking analyst is a more helpful path. There are discussions elsewhere on the merits of going through IBD, but I'm not familiar with either path.
Khayembii - they said they valued it and that mentioned the funds from which they have hired laterals in the past, all of which were middle market. It's impossible for me to know how much it factors into consideration, though; even if it was a deciding factor where I interviewed, I would guess that the market as a whole still favors most MF over most MM shops. Getting lost here is that each fund's associate program has a reputation for development, which will likely factor in more strongly.
Thanks for the response. SB+
I've had a friends go through the MM and MF routes and are now around that post-MBA level. I think that there isn't really a big difference in raw intellect. Out of the gate there are a lot of factors at play such as meshing well with the interviewers, how polished one is, luck, group, etc.
Over a long career I see a gap developing. Not due to being a better investor per say but more so just the compound return of intellectual capital growth of playing in the big leagues. MF transactions are more complicated for a variety of reasons (global, more segments, more moving parts, etc.). I think that repping out more of these transactions over time and being surrounded by partners that have been doing them leads to greater compound knowledge over time. So i think its really more a matter of being in that environment than it is the people that creates the separation, though it exists.
This. If you're doing small deals at a boutique shop, the likelihood you have come across the intricacies that a lot of large deals contain is, realistically, slim. I would have more faith hiring someone from a BB/EB over MM and other boutiques. No one is smarter than anyone else, but they've just been exposed to more (due to transaction sizes, deal flow, and working with sharp senior personnel).
Overall, just evaluate the hiring process for MF/MM shops. MF shops are run 6-8 months after banking analysts start. If you're done with training in August, how much real experience can you get by the time the recruiting for MFs comes around. I recall walking an analyst through an lbo model before they were to interview with the top MFs, and they did not understand the fundamentals of how it worked, but understood it at a high, conceptual level. This analyst ended up at a MF and has been very successful, but at the time did not have the skills to be hired by some MM shops. MM shops (generalization) are more need based, and prefer analysts with tangible experience that is related to their investment strategy. The analysts I worked with that ended up at MF had stellar resumes, strong GPAs and ECs from brand name (Ivy League caliber) institutions. The analysts who were from non-targets, still had a chance, but faced an uphill challenge (on average; different firms have different preferences).
I agree that the complexities of doing larger deals can be beneficial. However, it depends on what you truly value in an investment professional and the how you are evaluating someone's experience/knowledge. The MM/MF investment models can be fundamentally different and the experience gained at MF funds is different than experience from a MM shop. This also goes back to the core difference between MM (however you want to define it) and MF.
The common perception is that you have more involvement on a deal in MM shops, where deal teams are 3-4 professionals, with one Associate. This gives you greater exposure, and post-transaction, you can actively be involved with the Company. Obviously, this varies by firm. I have spoken with a number of friends who have worked at MFs, and they claim they do not have an active involvement with the growth/development of the Company and a good amount of their time is spent on more financial engineering and coordinating calls amongst 7-8 person deal teams with counsel, management, and other constituents. They did however gain experience that most MM professionals do not have had exposure to, but it comes down to how valuable that experience is. It should be noted, most of my friends are looking to leave and enter into the HF world, while a good portion of my friends in MM are considering staying.
In MM shops, there are some strategies that are much different than what some MFs focus on: (i) corporatizing a family run, entrepreunerial business (corporate governance arbitrage), (ii) platform acquisition with roll-up/bolt-on (multiple arbitrage), (iii) entering new markets and/or adding complimentary products/services, and others. Obviously, you can make an argument that MFs operate with similar strategies, but the exposure at the MM level is different.
Both experiences are extremely valuable, but the experience is more valuable should you continue to work in same role/deal size. The number of shops MM shops is significantly greater than MF shops, and it is common for professionals to move down in deal size, in order to gain upward mobility. I agree that name/brand/prestige holds good value, but MM firms with strong reputations hold a good amount of weight as well.
Keep in mind this is a high level generalization. I could point out my own experiences, which can at times be contrarian to the views expressed above, but for discussion purposes, this is the way I see it.
SB - very thoughtful answer echoing a lot of thoughts I had as well. Deal complexity and size are not necessarily portable across types of funds, making the MF / MM experiences very different. Increasing deal size in many ways can reduce the complexity of the associate role for a few reasons as well, by requiring a larger team and more specialization and reducing the sponsor's involvement in corporate entity structure, for example.
When my interviewers alluded to the more well-rounded experience at MM funds, I think they were specifically thinking about your point of associates being more involved. This is definitely a common perception - based on some friends at MM shops, it is not always the case, which is why I think asking about the experience at a fund's associate program is important before taking a job.
What a nonsensical discussion. Everyone's on here pounding their chest to wherever they happen to be sitting claiming that's the better place to be.
Most of your points are huge stretches, but I understand why you're (attempting) to make them. Starting with:
(1) Most MF associates are leaving for a HF, as if that suggests MFMFs (almost always) don't provide an opportunity to stay on. So they're faced with going to a lesser MM shop and taking a pay and pedigree (lets not pretend that this doesn't matter) cut or going to a HF where they'll have to do neither.
(2) You're always the sole associate on a deal team at a MF or MM shop alike. You're basing your 7-8 person deal team off of pure conjecture. I've only seen one MF deal team > 4 people and it was for a cross-boarder multi-billion dollar LBO.
In terms of deal experience/exposure. I'll agree with you to some extent. If we're talking about the MF vs. MM experience (vs. the quality of the junior talent there, the debate of which is a meaningless intellectual masturbation).... the biggest difference in the experience b/w MF and MM experience is based on:
(1) Work flow: you work ALOT more at a MF. This is a good thing if you're looking at how much experience you soak in within 2 years but its absolutely horrendous lifestyle-wise. You may get 40 potential investment and 2 closed investments under your belt in two years. At a MM fund maybe that number is 25 and 1. (These numbers are purely made up) That's one of the reasons why most HFs recruit heavily from the MF pool and not anywhere else really. There are Princeton -> Goldman guys at Onex and Jordan Company too, but you're not going to see any of them at Greenlight because they place a premium on the MF experience (and pedigree). The flip side is, as the guy alluded to the experience is slightly different. There are a lot of roles you could take on at a MF if you had the time, but you don't so you're missing out on a slice of meetings etc where you're non-essential. At the MM shop on the other hand, you're not as strapped for bandwidth so you can join in even when you're presence is non-essential. That experience and knowledge osmosis is very valuable, IMO, mainly because it provides additional insights into how the more senior people at your firm think about investing.
(2) Deal size: You'll work on much larger deals at a MF. Often times they will be much more complex transactions with multiple business units, a global footprint and a variety of minutiae and situational nuances which you can draw on as you continue on through your career. You'll also be dealing with much more sophisticated and institutionalized target/portfolio companies. This means when you need something you call the CFO and ask him for it and he has his squad of direct reports pull together whatever the hell it is you need. This goes for all other areas as well. Larger organizations also pay more and attract higher quality executives, so you'll be working with more impressive, higher quality and better known executives. Flipside is at a MM shop the CFO's team may be marginally useful, so you will (for better or for worse) doing more of their finance work when something comes up that you guys care about. This sucks cuz its bitch work but it also makes the CFO more reliant on you and provides an opportunity to form a stronger relationship. Also, in the pecking order of the world, the CFO of $400m plastic extrusion company values the 25 year old PE guy more than the CFO of HCA does. In fact, the CFO of HCA probably won't even remember you a few years from now because he's a bigger fish and has more of an ego. You're just another face.
(3) Resources: MFs are just much larger organizations. You'll be less involved in fund raising, LP reporting, etc. You'll also have more resources at your disposal between ops teams, IT teams and capital markets teams. In addition to that, the 2% management fee on $60 billion AUM goes a very long way. MFs also hire a huge number of non-investment (and non-support) professionals that come from the very top of the world... recently retired Fortune 500 c-level executives, former presidential cabinet member, etc. There's a sprinkling of these guys at most MM shops too as senior advisors or whatever, but at MFs they're everywhere, their offices are next to yours etc. Its a very different dynamic and you can't put a price tag on the value of working with and building relationships with these people and ingratiating yourself into their world (even peripherally). I don't really have a flipside to that for MM. Perhaps just that you'll get a richer experience by having to do all the work yourself rather than farming it out to your cap mkts and ops team. And maybe you won't have the same bench or # of people under the roof, but the people you do work with you'll have a closer relationship with.
Other than those three (not insignificant) factors, its all a wash.
Made up but representative, hopefully. Your comment made me feel a lot better about my 1.5 years here and only having one deal close under my belt.
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