Regrets After Switching From IB to PE?

Intern in IB - Gen

Is PE really more lucrative than banking? Comp. for PE associates is lower than that of IBD associates at EB's. I imagine most non-MF PE VPs are making less than EB VPs as well. Plus, having to get an MBA after 2 years erases a significant portion of your savings from ~4 years of work. I understand carry is when the money truly starts to hit the bank, but factoring in the insane competition for spots, and time it takes, is it really worth it? I know there are other merits to PE (slightly better lifestyle, more "interesting" work), but I suspect that they're exaggerated on WSO.

So, I'm curious if anyone has regretted making the switch from IB to PE. How did PE miss your expectations? What are your plans now (return to IB, switch to CorpDev, etc.)?

Comments (107)

  • Prospect in IB - Gen
Jul 12, 2020

I know somebody who went from a top LevFin group then landed MF PE. He said he didn't like the level of competition, and he wanted to just "enjoy his life." He ended up getting engaged, going to b school (H/S/W) then went back to his old bank but got DCM (he said it was less stress than LevFin). He's married with kids now.

Only weird thing is that he said he could have gone to his old bank's DCM group without an MBA, but he just did the MBA just to go to H/S/W.

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  • Intern in IB - Gen
Jul 12, 2020

Would he still go to PE and pay $200k+ for the MBA if he could do it it again?

  • Prospect in IB - Gen
Jul 12, 2020

I didn't ask him that, so I'm not sure. Although I have a feeling he'd do the MBA again just to say "I went to H/S/W even though it actually hindered his career by costing him 200k and the income opportunity cost.

Some people treat these schools as ends in and of themselves and not as an opportunity for development.

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Jul 13, 2020

I don't understand why you can't just say what bank he went to?

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    • 22
Jul 14, 2020

He's telling a story about an acquaintance. I'm sure his acquaintance would like some level of anonymity.

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Jul 16, 2020

DCM?

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Jul 16, 2020

Debt Capital Markets

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Jul 17, 2020

Why is that weird? I think it makes a lot of sense. You significantly broaden your network, appeal and hire-ability if you did banking, capital markets, and have an MBA from one of those schools. In life, your thinking can't be short term or penny wise pound foolish. At some point you can't go back to get the degree (read: network) and at some point you WILL get fired/laid off/etc from Wall Street. The sooner you feel the stinging loss of being canned, the better because it makes you more resilient and understand life is not linear and the way you envision things isn't how life works. Having something as valuable as a top MBA can enhance your pay or opportunities at many points in your life that could very well repay the cost multiples of times over.

  • Intern in IB - Ind
Jul 17, 2020

No he wanted it for external validation. Not for any sort of professional benefit.

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Jul 13, 2020

Now that I have a much better understanding of Finance landscape, I'm constantly thinking about where I want to be or what I enjoy in terms of making Finance as my long-term career. So I think about going back to IB from time to time, not in the sense of money but whether I can do it for 20-30 years. IB seems like a pretty cushy role to be not worrying about taking wrong risks and staying in the loop with big companies and investors. And then I think about all the marketing pitches and realize I do not want to go back. It surely takes a certain personality to be a banker.

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Jul 17, 2020

If you're approaching senior banking roles as "cushy" you're not going to make it very long. Could it be a better lifestyle or less stress than a senior PE role? Maybe, but that's totally different than saying banking is cushy.

Jul 13, 2020

I think a lot of the fixation on IB Exit Opps is a function of a Type A personality. Always striving for something bigger or better and IB to PE is just another perceived rung in climbing up the latter. Frankly, I know a lot of people who left really cush jobs because they felt at the time like it was "leveling up" and they'd probably be better off today if they recognized that they had it made where they were. Talking about people going from good IB groups to shuffling around every 2 - 3 years at different lower tier PE shops. Still crushing it in the grand scheme of things but there's something to be said for building tenure within one of the major IB machines.

Frankly, I started in IB and couldn't wait to level down. Gladly took a pay cut in favor of the work/life balance of working for a REPE fund. Still make a handsome chunk of change AND still get home in time to have sex with my wife.

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Jul 13, 2020

REPE doesn't pay well?

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  • Analyst 3+ in RE - Comm
Jul 13, 2020

It does, just not as much as standard PE

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Jul 13, 2020

I have a REALLY strong comp package for my level of tenure (right place right time) but if I would have stuck with IB and made it to VP level by now at my old bank or one similar to it, I would probably be making ~100K more than I am now, if I had to guess.

Jul 13, 2020

huge variance in terms of comp in REPE. Some pay well, others pay more along the lines of real estate developers. Here's some figures I pulled together. This was to compare US vs. Hong Kong real estate comp, but the US figures are likely still relevant for you.

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Jul 13, 2020

Wait you guys are still having sex after marriage??

    • 13
Jul 13, 2020

The man is a God ... it is literally in his name.

    • 4
Jul 13, 2020

Theoretically I have time to have sex with her. Typically I just rub her feet and she falls asleep horizontally on the bed we share. This, however, comes with substantial upside as it gives me free reign of the remote control. At this point in time, with unchecked power, I am God.

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Funniest
Jul 13, 2020

I am just an undergrad but this is very much my plan at the moment, a couple of years IB then switch into REPE (which looks like a really cool gig) then go home and have sex with your wife.

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Jul 13, 2020
Steve Wibble:

then go home and have sex with your wife.

One of the funniest comments from an undergrad I've seen on the forum. Incoming Analysts coming in hot this year!

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Jul 14, 2020

They Had Us In The First Half, Not Gonna Lie

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Jul 14, 2020
Steve Wibble:

I am just an undergrad but this is very much my plan at the moment, a couple of years IB then switch into REPE (which looks like a really cool gig) then go home and have sex with your wife.

I don't think my wife's boyfriend will be too happy about that

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  • Intern in HF - Other
Jul 13, 2020

Congrats on the sex

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  • Associate 1 in IB-M&A
Jul 15, 2020

What's sex like?

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Jul 13, 2020

I absolutely regret moving from IB to PE from a comp perspective. There's a lot more variance on the PE side in terms of comp, and I've never been able to make what I was making in IB, relatively speaking.

    • 2
Jul 13, 2020

The economics of PE are starting to wane. Pressure to increase returns remains as it becomes more and more difficult. IB remains one of if not the best risk adjusted careers

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  • Associate 3 in IB - Gen
Jul 13, 2020

I don't make my living in banking being smarter than everyone. I make my living being a pretty good all-rounder. I understand financial concepts, can model decently, am pretty good with clients. The average PE guy is smarter than the average banker (assuming not a crap fund), so it's hard for me to foresee trying to compete more on intelligence while throwing some of my other natural skills that lend itself to banking out the window.

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  • Intern in IB-M&A
Jul 13, 2020

Imo I think being in rx for a career would be super fun if you can interact with governments and gain some international reputation. I think travelling to South America to work with Argentina's debt crisis would be fascinating to be involved with so many different aspects of finance and the relationships you would build.

  • Analyst 2 in IB-M&A
Jul 14, 2020

Lmao rx is a depressing place to be in

    • 1
Jul 13, 2020

I see to many kids in the industry jumping to PE but have no idea what they are getting them selves involved with. After so many years in the industry I still think there so much fat in IB and PE. I've interviewed so many kids and look they can get all offers not a big deal but only 0.1% of them will even become average/decent investors at best.

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Jul 16, 2020

This is a skill that can be learned, I would say don't put them down so early in their career. Most of the greats didn't know shit. Dalio chose his first stock because it was the cheapest and thought that would mean more ROI.

path less traveled

  • Prospect in IB - Gen
Jul 14, 2020

I'm an undergrad, but I want to potentially do 3 years instead of 2 so that I may defer PE recruiting a year to get a better feel for banking first.

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  • Analyst 3+ in PE - Other
Jul 14, 2020

I moved to a big name MM PE in Asia and I regret it.

First of all, I want to say most IBD exits are not real exits.

You are literally doing the same type of work (useless models with endless revisions, benchmarking, industry landscape, data mining) and dealing with the same type of people (ex-bankers). Be it corp dev, PE, HF, it is still the same group of people.

It is not in a sense of exit like: oh, I moved from consumer IBD to P&G brand manager and now I am managing multi-million marketing budget for SK II / operations manager at FAANG, etc. You would be very lucky even if you get to work in FP&A and deal with non-bankers (because they all prefer hiring ex-big 4 comrades instead of bankers).

If you are lucky, you get the same type of burnt out bankers in your PE/corp dev role as seniors. If not, you just get the same type of people and continue your working style. But now, you lose your BB prestige at a less well known shop.

Your senior hate IBD life himself, but that doesn't mean he hate imposing such life style on others. As long as you are working with people with lack of sense of job security, you will just continue your IB life but in another place.

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Jul 14, 2020

It seems like you come from a consumer IBD background or is now doing consumer focused PE in Asia. Grateful if you don't mind me sending you a dm? Many thanks

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Most Helpful
Jul 14, 2020

The comments above are so true - seems like WSO still holds the view that PE is the holy grail of finance but seeing my network of peers who have taken the PE route, it's very interesting how different reality is from the way WSO portrays things

Here's some observations I've seen (note that I'm just a small sample size at the end of the day):

  • All my peers who went to MF PE are currently miserable. I personally know and keep in touch with 6 of them and they are all either (1) applying for business school (2) looking to lateral to a MM PE funds (3) trying something more entrepreneurial. They make absolute BANK for what it's worth, but they are all soul-crushed, to the point where 2 of them actually told me they genuinely miss their times in banking (??).
  • My peers in the Lower Middle Market PE funds are more content (most of the people I know in buyside are in this segment). They all still work hard but they don't complain much about lifestyle issues (like my peers at MFs do), and some of them are on partner tracks without an MBA, so good for them. The big surprise to me here was their comp levels - they're tangibly below that in IB. Surprised me because I had initially thought that even LMM PE would pay somewhat in line with BB IBD but that's not the case - pay varies a lot more across the scale, and I would say holistically that there is a quite tangible discount to BB IBD (even more if you compare to EBs)
  • My peers who remained in banking seem relatively content. A2As particularly at BBs tend to work much less hours in general as (1) they've built up goodwill / rapport with the team at this point (2) have plenty of analysts under them to shove off grunt work (3) have become a lot more efficient at their roles, not just in terms of work product but having an internal network in the bank (i.e. if you're in M&A and you need quick debt pricing levels / high-level guidance on debt structuring, you just call your equivalent pal in LevFin to get a quick download instead of fiddling your thumbs pondering who to reach out to / your printer folks know you by name and are willing to put your print job on the top of the pile when you are time constrained etc). I personally don't think they're all IB MD material (most of them are probably self-aware of that as well) but they know they can get by with just good execution at least till Senior VP / early Director level.
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  • Analyst 2 in IB - Gen
Jul 14, 2020

Thanks, this is really insightful. Few questions:

Are you able to provide ballpark comp. ranges for your buddies at MF PE firms? It seems like they're all pre-MBA Associates based on your comment. Also, is it the nature of the work or long hours that are crushing them?

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  • Associate 1 in PE - LBOs
Jul 15, 2020

Vast majority will be in the $275-325k range for first year associates, with upside for certain funds beyond that

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Jul 15, 2020

What's the comp range of the Lower middle market guys in your example above?

Jul 17, 2020

Also more interested in knowing MM PE comps instead of MF PE comps

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  • Analyst 3+ in IB - Ind
Jul 16, 2020

Had a couple of questions - why do you think the associates at MF PE shops hate their life relative to IB associates. The way I see it, someone at a MF PE shop at an associate level will probs get into H/S/W and a post MBA pe gig which has longer term pay potential than IB? I understand MM PE is generally less in base+bonus but can be much higher when carry kicks in.

Also, is there an over-emphasis on how "interesting" the work is in PE?

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Jul 16, 2020

Currently in IB so cannot share personal experience but will attempt to do as the above.
Two seniors (ED/MD) in my team were on the buyside before returning to IB (some up to VP level some up to MD level), these are some of the common points that come up quite often:

-Not getting stuck on a deal, in IB you are paid to execute not to monitor, they didn't like having to deal with one investment over a 5+ year period

-Ability to work on a narrower set of sectors that they prefer and basically cover everyone or the majority of firms within that sectors rather than have a high level understanding of multiple sectors, yes in PE you may only cover Healthcare but do you understand perfectly the differences between medtech/HCIT/HC Services etc

-better cash comp/shorter vesting/less money at risk within funds

-running larger teams and path to executive roles managing PnL one day

-Not having to deal with Fundraising, as a senior you spend a lot of time on that and they seemed to hate it even with dedicated IR teams

-less travel/bullshit stuff for your PortCo, as an MD you pretty much do what you want so long you bring business

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Jul 14, 2020

Private equity returns are at record lows.

if returns are low isnt it affecting comp?

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Jul 14, 2020

Getting Carry is one thing, actually seeing a real distribution is another...I have peers even at MF who had carry go negative or never saw a non-tax distribution after 7+ years. Choose wisely, especially if you are in a specific vertical

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Jul 16, 2020

Too real and on the HF side too.

Jul 15, 2020

Hi - great question and one that I struggled through myself. I wrote the post below a while back - hopefully this is helpful:

https://www.wallstreetoasis.com/forums/there-and-b...

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Jul 16, 2020

Interesting stuff in here, I'm on the older end but clear that the PE recruiting process forces some hard decisions for analysts.

I'll say the risk adjusted return for comp is likely higher in banking (if you are at a good bank) given receiving carry almost anywhere is a crapshoot and takes a very long time. I disagree that banking is somehow lower stress, that may be true up to the VP level but at that point you begin to have pressure to sell and that can be very weighty too.

If you are a good performer it's not too hard to go back to banking if you find PE is not for you. It's worth taking the option early on and decide from there. Careers are not perfectly linear and 2-3 years is nothing in a 30+ year period.

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Jul 16, 2020

PE is not for everyone. With that said - here are some reasons why PE is the right job for the right person.

  1. Smarter people - You'll generally find smarter / sharper people in PE vs. IBD. Intelligence doesn't really matter that much in IBD. It absolutely does matter in PE (big picture thinking, detailed-oriented thinking, mathematical thinking). Note - it is not the only skill that matters - there are a lot that's needed for a successful PE professional.
  2. More valuable skill-set - I can honestly think of extremely few jobs (other than something like being a CEO) where you can build as broad and simultaneously valuable skill-set as someone can do in PE. In PE - you need to know a lot about a lot. Ability to do consultant-like industry thinking, business-specific financial and operational due-diligence, ability to analyze and think critically about QofE / financials, read / negotiate legal documents, sell portfolio companies, have high EQ and people skills, be able to manage up and down. This job - if you have the raw materials - will allow you to develop into a very strong all-around quarterback. It's Navy-Seal training for being a true investor - and it's a highly valuable and scarce skill-set. Last point on this - in banking, I think many VP/EDs realize that their skill-set isn't as valuable as the amount they are being compensated, and there is a fear of losing their jobs and not being able to find another one w/ similar compensation. If you have solid PE experience as a VP or above, there's not that same fear - people able to do everything you can do are so scarce, that you will almost certainly find a comparable job.
  3. More interesting job - Plain and simple, the job is just more interesting. You are truly putting hundreds of millions or billions of $$ to work - and generating tangible gains. There's the feeling that there's something truly on the line vs. knowing none of the work really matters anyway.
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Jul 16, 2020

Isnt PE just banking 2.0? Ive read elsewhere that you dont actually do operational improvements at portfolio companies, because thats where consultants come in. As a PE guy operational improvements means looking for add-on acquisitions for the portfolio companies.

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  • Analyst 3+ in PE - Other
Jul 16, 2020

I am at a PE and 1/2/3 are quite BS. Not false but extremely exaggerated and overrated imo.

It is literally banking 2.0 with more menial/annoying tasks to do because everyone wants to affirm their thoughts.

Most PE guys I know have shitty personal investing performance. Despite the amount of expert calls / research resources they can use (even when they want to secretly do some personal stuff), they cannot even beat investing in SPX.

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Jul 16, 2020

Okay this is going to be a 'hot-take' and I completely understand where the sentiment is coming from. The Associate job in PE is very tough because often there is a LOT to do, less resources, more responsibility, but still have no true 'voice in the room' to dictate anything. That changes at the VP+ level. Being an associate (very tough job - every VP+ in PE has been there) is just the cost of entry for the more interesting responsibilities later on...

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  • Intern in IB - Gen
Jul 16, 2020

Appreciate your points. Many of the pros you make can very easily be flipped into cons though right?

  1. If there's a significant difference in intelligence level between IB and PE folks: smarter people bring more competition, which makes promotions/rising the ranks tougher. Working around the clock fighting for a promotion as a 30+ VP with a family doesn't sound that great.
  2. This seems like a fair point.
  3. Highly debatable which industry is "more interesting". In theory being on the buy-side is more engaging but other posts have already pointed to the abundance of btch-work required from juniors in PE. Don't PE teams evaluate 100+ leads to only close 1 deal a year on average?
  4. Still haven't seen any actual comp numbers on here for PE VP's. Considering the cost of getting an MBA and the never-ending cycle of competition you commit yourself to, I feel like it'd have to be significantly higher for this to be a true "pro". How many post-MBA VP seats are there at MF's anyways?
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Jul 16, 2020
  1. For sure - work / life is generally though. Two thoughts here and there's no "right" answer. Are you the kind of person who cares about your finishing position in a race, or are you the type of person who derives intrinsic fulfillment from knowing you can run with the best? Let me be clear - this is a highly personal decision, no right answers.

The second point on this one would be as I mentioned - if you can make it past the associate level in PE, the job is (i) much more stable than banking (pretty much recession-resilient) and (ii) you can always find another great, great gig based on point #2.

  1. It can be sure be very lumpy - no question about it. However, everytime you do an auction process you get very, very deep into an industry and company - are you the type of person that intrinsically enjoys learning about different types of businesses?
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Jul 16, 2020

Delete

  • Intern in IB - Ind
Jul 25, 2020

Bro come on. How could you possibly know this as a prospect?

Jul 16, 2020

First it depends on firm. Some firms are very ops focused (Bain, Platinum, etc.) and others are not (LGP).

I would say broadly, of course no one at the PE firm from the investment team is implementing anything - BUT - you 100% have to know what operational improvement opportunities there are in the Company, and it is your job to send in the right Porfolio Ops / consultants / and most importantly, hire the right management team to get it done. It is then your job to make sure that EBITDA flows through to the bottom line.

What that translates into is not necessary actual, operational execution capabilities for th PE professional. But you become well versed with how commercial activities actually work (e.g., how logistics works, how raw material sourcing works, negotiating with vendors / customers, talent recruitment / re-organization, etc).

Without actually owning the company, it's nearly impossible for most people on the outside (including bankers) to truly understand how a business actually operates. When I was a banking, I certainly could give the "investment highlights" about how a great a business was - but I certainly couldn't go any deeper than pretty 'big picture' comments into the nuts and bolts of the operation.

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Jul 16, 2020

PE is gonna go they way of fundamental L/S Equity HFs... surprised more people don't see the writing on the wall.

  1. Does Private Equity generate Alpha? - Here is how Eugene Fama, 2013 Economics Nobel Prize winner, would respond:

"We [...] emphasize that if private equity managers have skill in choosing good investment projects and bringing them to fruition, the result is a return due to the human capital of the private equity managers. Labor economists would argue that this return goes to the human capital, that is, the managers. Talented private equity managers are the scarce resource here, not investors' capital. As a result, the fees of managers should be set so that private equity investors just get expected returns that compensate them for the high risks of the investments."

"Finally, because the returns to private equity investments have large idiosyncratic random components (in addition to high market sensitivity), a wide range of outcomes is likely purely by chance. It is then predictable that the lucky managers are anointed by investors and the media, and they are flooded with new money from investors, even when past performance is due to luck."

Source: https://famafrench.dimensional.com/questions-answe...

  1. Historical Performance - "Our analysis suggests that private equity does not seem to offer as attractive a net-of-fee return edge over public market counterparts as it did 15-20 years ago, from either a historical or forward-looking perspective. Institutional interest in private equity has increased despite its mediocre performance in the past decade versus corresponding public markets, and weak evidence on the existence of an illiquidity premium. Although this demand may reflect a (possibly misplaced) conviction in the illiquidity premium, it may also be due to the appeal of the smoothed returns of illiquid assets in general."

Sources: https://www.aqr.com/Insights/Research/White-Papers..., https://www.aqr.com/Insights/Perspectives/The-Illi...

  1. Performance Persistence - "The conventional wisdom for investors in private equity funds is to invest in partnerships that have performed well in the past. This is based on the belief that performance in private equity persists across funds of the same partnership [...] Post-2000 we find little evidence for persistence in buyout funds, except for the lower-end of the performance distribution"

Sources: https://www.calpers.ca.gov/docs/board-agendas/2015..., https://pdfs.semanticscholar.org/3c31/135608cf8cbc...

  1. Ex-Ante choice of top-performing PE Firms - If you are betting on pre-identifying good funds to join, then take a look at David Swensen over at Yale. He has been unable to meaningfully outperform the Cambridge Associates average PE return for the past 20 years. For reference, Yale's 20 year historical return on its leveraged buyout investments is 12.1%, while the 20-year PE industry average return, during the same period, according to Cambridge Associates is ~12.32% (this could be survivorship bias, but still quite embarassing if you ask me). If Swensen cannot outperform the PE index despite probably having access to "top decile managers", then why do you believe you can pick a PE firm that will generate gargantuan returns without it being a statistical artifact?

Yale Returns: https://static1.squarespace.com/static/55db7b87e4b...

  1. Is Private Equity Due Diligence Cognitively Feasible? - Here is an interesting paper than comments on attention and judgement. I am skeptical that the 100+ page CIM/IC materials can be cognitvely processed correctly.

"What do we notice and how does this affect what we learn and come to believe? I present a model of an agent who learns to make forecasts on the basis of readily available information, but is selective as to which information he attends: he chooses whether to attend as a function of current beliefs about whether such information is predictive. If the agent does not attend to some piece of information, it cannot be recalled at a later date. He uses Bayes' rule to update his beliefs given attended-to information, but does not attempt to fill in missing information. The model demonstrates how selective attention may lead the agent to persistently fail to recognize important empirical regularities, make biased forecasts, and hold incorrect beliefs about the statistical relationship between variables. In addition, it identifies factors that make such errors more likely or persistent. "

Source: http://www.dartmouth.edu/~jschwartzstein/papers/Se...

  1. Executive Pedigree - "Our findings suggest that the 'best and brightest' do not appear to have a statistically significant edge when it comes to managing public companies. An elite pedigree--the type of pedigree favored by head hunters and corporate boards--is not predictive of superior management. One of the central rationales for Michael Jensen's campaign (increasing CEO pay by tying it to share price performance) appears, in retrospect, to have little empirical support. These credentials, however, are significantly overrepresented in the CEO biography database. The elite credentials thus benefit the individual, but there is little evidence that these credentials benefit shareholders."

Source: https://verdadcap.com/archive/do-mbas-make-better-... , https://verdadcap.com/archive/is-ceo-performance-p...

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Jul 16, 2020

Love seeing people utilize academic research. Kind of an unrelated question, but I have been wanting to read finance research papers, but am unsure of the most efficient way to find them. How do you go about finding these research papers?

Jul 16, 2020

He just keeps posting the same 10 every now and then on WSO to tell people that "PE MAKES NO SENSE"

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Jul 16, 2020
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Jul 18, 2020

Read through conference programs. The papers are organized by subject (panel) and it's all current research that has been selected for being good/relevant. Wide range of topics and you can pick what's interesting.

Example:
https://editorialexpress.com/conference/AFA2020/pr...

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Jul 16, 2020

You're probably right but it will probably take another 30 years for the market to realize it. So easy to fudge IRRs

Jul 17, 2020

This is spot on, but one could argue any asset class experiences a similar phenomenon as it matures, no? It's just the market's evolutionary process and disappearance of alpha as it gets more efficient / draws more eyeballs.

I would definitely say MM PE is experiencing some form of a bubble with all the capital that has flowed in over the last 10 years. It's asset "hot potato" and I wouldn't want to be the guy paying 10x for cyclical businesses right now. It's absurd.

Markets move in cycles...all of them. This is the way.

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Jul 17, 2020

Never posted here before but wanted to weigh in. I moved from IB to a lower middle market fund and spent 3 years there. The fund had a great track record and no problem raising money. I generally had a great experience--closed 4 investments, sold a portco, and was promoted to Senior Associate.

I opted to move on to pursue other things. I think the perceptions about PE pay are true for the larger funds, but not true for firms managing less than a few billion dollars. I would have made more money if I stayed in banking, and I think the expectations and job-related stress were both much much higher in PE. My friends that stayed in banking are VPs now and crushing it. That said, I enjoy buying companies a lot more than selling them and would not want to be in a position of pitching sell-side work, so I stand by my decisions.

In PE, I was still working 60 to 80 hours a week. Our team was small, so I worked directly with partners and principals who had very high expectations, a strong feeling that "they had went through it so all Associates should", and no junior/analyst support. Regarding carry, it is important to realize that the carry pool is typically allocated mostly to the senior people and is typically only allocated when a new fund is raised. It does start to add up as you have carry dollars at work across multiple funds, but it would have been a long road for me to see that. I really felt that I would be fighting to earn my place there as long as I was employed, even when on partner track. I have other friends who joined larger funds (but not mega funds), and comparably their pay is much better, hours much better, and culture much better.

I think the buy-side is worthwhile to try: you learn how to evaluate an investment within the context of your firm's particular strategy, raise debt, execute due diligence the correct way, and as you start to move up, you learn more about managing the process and negotiating the documents to close a deal, among other things. I would encourage others to swing for the fences in terms of recruitment, try to get into a larger fund, and really choose a role based on culture (and track record/fund raising ability). About half of the Associates I know from various places decided to move on, and those that stayed seemed to 100% love the work and the team, or at least were careful to message it that way all the time. Sometimes I do look back and wonder if I should have stayed, but I think it is just the perceived prestige factor still having a grip on me.

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  • Analyst 3+ in IB - Ind
Jul 17, 2020

Interesting: so from your experience, analysts in IB should be targeting UMM and MFs?

Jul 17, 2020

I think analysts in IB who are interested in PE should accept an offer from the firm that is likely to be the strongest cultural fit for them, because that is probably the most important thing for long-term success (along with the fund's track record and fund raising ability). Assuming all your options are likely to be excellent cultural fits (and you are confident the people on the teams will like you long term and you will like them), I would choose the biggest fund and/or the firm with the best returns across multiple funds.

Of course, we did market the benefits of being at a smaller fund when we recruited interns and associates: I had more responsibility generally than my friends at larger funds, particularly around raising debt and coordinating due diligence. My friends at larger firms seemed to be mostly building models and investment memos, while I was playing a larger role in raising debt at least until the term sheet negotiation stage. I also played a larger role in due diligence: I was hiring advisors for certain work streams, and pretty closely managing the quality of earnings process along side a VP or principal. My VPs and principals were willing to offload higher level work streams to associates assuming the associate work was being completed. This is just one person's experience though, so perhaps other large firms let their associates do more. All things considered, I would have rather done more modeling and got paid more... I did like the debt process work the most though.

Last piece is that I don't think PE is the be-all end-all job, and staying in banking longer term is a great option if you like your team and are prepared to take on the biz dev side of it. I think the highest paid person in my friend group/analyst class is one of the guys that stayed in banking at an elite-ish MM firm and became a VP. Those who went to upper middle market PE are doing well but not as well as the kid that stayed in banking at a good firm. Buying companies is a lot of fun though and he hasn't done that yet.

One thing I didn't really appreciate earlier in my career is that if you are good at your job and interested in moving up (some people don't care about maximizing income beyond some level or moving up in their organizations), you can make a lot of money whether it is in banking, PE, finance at a big corporation, engineering/ops at a big company, or a non-profit. There are a million ways to make it and I may have lost some time fixating on PE as the only option even when I stopped enjoying it...

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  • Associate 2 in IB-M&A
Jul 17, 2020

TLDR :

This website is clearly an echo chamber. PE is not the be-all and end-all unlike every other thread on this topic.

As with anything, form your own conclusions based on primary research, not secondary research.

All jobs suck. Choose the one that sucks least based on your own motivations.

RBC might be better than whatever MM PE firm you're thinking of joining.

    • 3
Jul 19, 2020

I went from BB industry group to MM PE Fund. Pay is definitely lower than if you continued in BB, but it is a bump from the first few years of being an analyst. I'd say a MM PE fund will pay an associate similar to a BB 3rd year analyst / stub year associate, and a senior associate gets paid like a 1st year BB associate, and a VP is paid like a 2nd year BB associate.

MM PE Cash Comp
Associate: $200-275k
Senior Associate: $275-350k
VP $350-450k

While you give up comp, the quality of life is usually much better. There are less firedrills, you are in control of what you do with the deal, less things "pop up" and blow up your weekend last minute, and you get to develop investment thesis' and execute on them rather than working for other people. Plus, there's the potential for carry, which can we worth a few hundred grand to a few million, so if you had those things into comp it can be hire than banking, but of course there's no guarantee and you wont see carry for a few years.

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  • Intern in IB-M&A
Jul 19, 2020

Does your firm have a 2-in-2-out model? If so, what MBA programs do associates typically go into?

Jul 19, 2020

I'm at my second PE firm. The first was a 3 and out model, with most associates going to the top business schools (Harvard / Wharton / Kellogg) or leaving for another firm. I decided to leave because I didn't want to get an MBA. Was able to lateral to another firm that was slightly bigger but has since grown and does not require an MBA.

    • 1
Jul 19, 2020
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  • Analyst 3+ in IB - Ind
Jul 19, 2020