Importance of an MBA for PE and Hedge Funds
Hi, I am new to Wall Street Oasis, but have a very important question that I do not feel has been drilled at enough here (despite what some may think).
I want to know what the importance of an MBA is for someone looking to go into private equity and hedge funds. I am currently working to complete my degree at Dartmouth and am a sophomore. I am thinking that it is a good time to put my educational career to a close after I graduate. I feel that my undergraduate degree will be enough to carry me and that an MBA is nice, but not in any way necessary.
My best judgment is that no sincere PE or hedge fund will say "well, this is a kid without an MBA, but he came from an undergrad target... let's knock him off the list". A lot of well known investors only went with the undergraduate degree and I do NOT feel that this is tremendously the exception rather than the rule. The point is that I do not want to have to worry about grades so as to ensure that I get a Harvard MBA if it frankly does not matter for me. There is a lot of idleness in college life worrying about grades if the time could be spent worrying about business.
I am looking for answers from those currently in PE or hedge funds: if you have an MBA, do you feel like you could have gotten to where you are without one? For those without an MBA, do you feel like you should have gotten one/ should get one?
I think the truth is that it depends on the person more than the pieces of paper they hold. For some, a top MBA will be critical, for others it is not necessary. Part of it is timing and luck in getting the right opportunities as well. In other words, I think you should keep an open mind and do what you need to do to succeed when the time comes.
I work at a top L/S hedge fund as an analyst and don't have an MBA, or even an economics / finance degree. I did complete the CFA exams because I wanted to have a piece of paper that says I know something about finance (even though the CFA is mostly useless in the real world -- sometimes perception is reality).
The firm I work for doesn't hire MBAs because the PM feels that b-school only teaches people how to deliver levered beta, not to produce alpha. I'm sure opinions vary, so this is only one data point, but this firm prefers to hire people around the age of 25 or so and then train them from scratch in the firm's own proprietary method (which kicks ass).
My impression is that the larger the firm, the more likely you are to need an MBA. I also think that PE is more clubby than HFs (although I have never worked in PE so that is only an impression), and an MBA and the network it brings might be more relevant there. In the HF world, it's all about what you can actually produce, so if you are good, you will never need to get an MBA.
We recently interviewed some top 5 MBAs because we were looking for someone with specific language skills and weren't having luck through head hunters. My general impression is that people from Booth / Wharton / Stanford weren't that hot in terms of skill set coming out of b-school. We didn't interview anyone from Columbia or Harvard, but I assume those are the same. We ended up giving an internship to a guy from of those schools who used to work in PE, but he didn't get a full-time offer.
Just to clarify, I'm not trying to trash anyone from those schools, as they are all great institutions (and definitely better than where I went to school).
Hope that helps a little.
An MBA is much more of a prerequisite at a PE shop than a HF. Also, the HF world is very, very broad, spanning many different strategies, so there are bound to be some that value an MBA education more than others. For example, I don't think MS PDT or DE Shaw or other quant stat arb/algorithmic trading funds would give two shits about whether an applicant has an MBA (other than maybe for operations/marketing roles).
Ravenous, do you mind elaborating a bit about what skills that you were looking for you found lacking in the MBAs you interviewed? Did they have any finance or quant-related background?
We are a fundamentally based shop. We do have some quant stuff in place in terms of trading algos to maximize performance, as well as full-time VBA coder to keep our spreadsheets and screens up and running, but mostly it's all standard blocking and tackling. The MBA candidates we were looking at were for analyst roles, and all had prior front office finance (banking, PE, research, top HFs, etc.) or consulting experience. It seemed that they were all good in Excel and PowerPoint but lacked actual analytical skills when it came to understanding businesses.
We gave each candidate an analytical test consisting of three companies that we had already researched in depth, and asked them tell us good business why/why not, would this stock make a good long, what are the important questions and how would you find the answers? None of the companies were absurd brain busters, but the average score was around one out of three. I think one guy got two right. It was pretty disappointing -- I don't know what these people are learning in business school and their prior work experience, but apparently not how to analyze businesses.
It seemed like the candidates probably knew stuff like basic accounting and how to run a DCF, but knew very little about what drove stock prices and how to spot value. My impression was that most of them had gotten jobs at blue chip firms coming out of top undergrads, and then had spent most of their time formatting documents and BSing in Excel. We ended up hiring a guy with no MBA from a tier 2 school since he was the only person who knew what he was talking about (experience in audit and PE with an accounting degree).
If I were to give advice, I would say that prospective candidates should focus on understanding business models and the leverage math implicit in valuation -- the quantitative framework that makes one stock a value versus another.
Thanks for these responses, but I am looking for slightly more "big picture" no-nonsense answers. I will be honest: I really do not want to get an MBA, because I would rather make money and not stress about grades. To stress about an MBA, would be to cut out at least 3-5% of my life, assuming I live to 100, and it might not even be necessary. It MAY even be a long-term money loser!
But exactly the extent to which, if at all, an MBA will be a money loser, I cannot grasp. I am unsure how financial firms (PE, hedge funds, and investment banks) would view me as an applicant without an MBA. I grew up in a background that highly valued education and, for the better or worse, looked down on those without a graduate degree (doctors, lawyers). At the same time, the question was never really brought up whether I actually need an MBA, since the topic always revolved around my brothers who are aspiring surgeons. Hopefully, you can see how this has confused me...
In retrospect, I have become disillusioned by school. While I am confident that a BA is critical to succeed in today's life, I am starting to get vibes than an MBA is not. That my whole life has been built around education has utterly confused me about the importance of graduate school. I never bought the whole I-'aint-need-no-eduction argument when it came to the BA, but I am started to get the sense that this actually applies to the MBA.
I want to move on with my life and constantly see great idleness in studying for a class in order to get an A in order to get an MBA from Harvard. To be clear, if I find out that an MBA is not necessary, I will mostly give up on my classes and wind up with likely a 3.5 or better (although it could end up worse). I do not want to screw matters up and find myself unable to get into a top MBA program. My goal is to maximize my income going forward and to keep great opportunities open.
These are great answers so far, but what would be a more clear-cut answer? Bear in mind my background, so you can cater a response around it. Thanks.
who cares. it's your life. live it the way you want to live it. why be so insecure? if you want to get an MBA, then get it. There are no guarantees in life and your future is risky whether or not you get an MBA.
The "big-picture", "no-nonsense" answer to your question is that as a sophomore in college this should have no bearing on your life and you should be more worried about a) getting good grades even if you feel it's "idleness" and b) enjoying being a 19 or 20 year old with essentially zero life responsibility.
Look, if you don't want to get an MBA, no one's going to put a gun to your head and make you, but don't try to use anecdotal reasoning about people who were successful without one to justify being lazy because you don't want to work hard and get good grades.
You've also skipped the step where you get a finance job in the first place. Do you think that GPA is irrelevant for finding a job after you graduate, especially in finance, especially in this hiring climate? Dartmouth is a great school but a 3.5 isn't going to blow anyone's socks off and you're going to face a lot of competition from people who didn't decide to "put their educational career to a close" as sophomores.
You've got an uphill battle ahead of you to get into finance and then to make it to the buy-side, and a million things could derail you-you could decide to do something else, the economy could melt down again, you could get fired, you could have some sort of event in your personal life that forces you to put your career on hold, etc. Even if you are successful in getting into finance and then to the PE or hedge fund job you want, you might find out you hate it-lots of people do. MBAs can help you make a career switch. That goes both ways too-maybe you don't get a banking job out of college and end up working in-industry: going to a top MBA is a major path people use to get into finance later in life.
As for your question on MBAs in general: The simple answer is that a LOT of PE firms DO require MBAs, and it's silly to assume you'll be some sort of golden child exception. On the other hand there are also lots of finance career paths that will not require an MBA. At the firm I work for, there are six senior analysts, all but one of whom have either an MBA or a master's from a top school. The other has a CFA. Hedge funds in general are probably less MBA-focused but there're still plenty of MBAs in that space and CFAs are also popular "alternative" to an MBA. I don't know very many senior people who don't have one or the other.
I second Kenny's comments. You sound like someone who wants a roadmap given to you. Sorry, but this doesn't happen in real life. If you want to be successful, you're going to fail often but are capable of learning from your mistakes. Going to Dartmouth means squat if you can't produce alpha/profits in the long run. MBA or not, do things that you enjoy in life and don't live life according to other people's dogma.
Thanks. Ha, I knew some of these responses would make me cringe. It is definitely not a laziness issue, that much I can say for certain. I consider a 3.5 to be a TERRIBLE GPA and have had no problem maintaining a 4.0, but I am only a sophomore. BTW, I foresaw the comment about needing a good GPA for an entry-level job. Kenny also makes a concerning point that PE firms care a lot about MBAs and I most certainly do not want to put myself under the delusion of trying to end up a golden goose.
But, pray tell, why does KKR list plenty of men without MBAs on their website? Maybe I am reading something the wrong way? Other opinions about the MBA...
A few things:
1) Finance, especially PE, has become much more structured in the past 30 years, and the proliferation of MBAs is part of that. You can't rely on the paths of senior people who entered a very different marketplace 30 years ago to determine what makes the most sense for you now.
2) Going through the list of Members and MDs on KKR's website, almost all of those without MBAs have non-MBA graduate coursework (especially law or MS degrees) and/or are located outside the US where the MBA degree is not as prevalent (both, in most cases). This list also includes CFOs, general counsel, technology heads, and other non-investment professionals like HR and investor relations. Even their head of HR has an MBA from Stanford. Don't assume that the exception is more relevant to you than the majority. This is what I meant above about anecdotal reasoning. Even if only 50% had MBAs (it's a lot more than 50%), you should look at that list and say "the most common shared attribute here is that they have MBAs, I should keep that option open."
Again, I'm not really even arguing for or against attending business or other graduate school. Plenty of people with less-than-stellar undergrad pedigrees get into top MBA programs due to some unique qualifying factor that they bring to the table. I'm saying that getting anything less than the best grades possible can only close doors for you, even if you think the work it takes to get them is a waste of time.
MBA importance (Originally Posted: 04/28/2013)
Hey! How important is an MBA for getting into PE? I've looked at a variety of MM PE firms and even the more major PE firms like Bain Capital, KKR, Rothschild, HIG, and it seems as if a significant percentage of the partners don't have an MBA.
If you're qualified, then you might not need an MBA degree. However, keep in mind that times are different.
A lot of partners don't have MBAs because back in the day, it wasn't as necessary to have one, since most people don't learn anything from an MBA program anyway- it's really just for show. As you have probably picked up, most of these guys are in their 40s, 50s and 60s- back when MBAs weren't really a thing.
Today, with degree inflation everywhere, an MBA is not necessarily useful, but shows that you have what it takes to get into business school, and you're serious about finance, or whatever field you're in.
To add to that if you talk to anyone in PE, getting in post-mba without pre-mba experience is extremely difficult. Heck, even with pre-mba PE experience at a legit shop it is hard to get back in.
It might depend on your undergrad education. If you did not go to a super target school you might need an MBA.
Should I get an MBA if I want to stay in PE? (Originally Posted: 10/29/2010)
The Josh Kaufman article on the front page has got me thinking about career plans and whether or not I should get an MBA. To give a little background, I got into a MM PE shop straight out of undergrad (a non-target). The work is great, and there will most likely be an opportunity to be promoted to a post-MBA position (without an MBA). Right now, I could see myself working in PE for my whole career.
However, there are three main reasons that I am still considering B-school:
So it all comes down to this: is it worth the cost? And given what I would be making if I stayed in PE, the total cost (including opportunity cost) is much higher than the $350,000 that Kaufman cited. The real wild card in my mind is the life experience piece. Can B-school be a life-changing, mind-bending experience? Or is it going to end up being another holding pen of over-achievers looking for nothing more than a seat at the top of the class. Thoughts?
You're asking the exact question the other thread is directed at answering.
But by the sounds of it you want to go anyway, but don't do it for reason 2. Try to talk to people about the life experience and ignore the monetary aspect for now, get a feel for how they spent their time and whether they enjoyed the break from real work.
folks on the board were very helpful in the post below. similar dilemma. cheers
http://www.wallstreetoasis.com/forums/ib-bb-pe-growth-equity-pe-mega-b-…
[quote=tubs]folks on the board were very helpful in the post below. similar dilemma. cheers
http://www.wallstreetoasis.com/forums/ib-bb-pe-growth-equity-pe-mega-b-…]
Tubs, I sent you a message.
tubs - thanks for link. much appreciated.
Merits of b-school for hedge fund guys (Originally Posted: 01/27/2015)
Hi guys,
I just wanted to see if there was anyone on here who worked at hedge funds prior to b-school and could comment on their experiences / why they went to b-school / what kind of value add they got from the experience / what they ended up doing afterwards.
I'm currently a chinese american in the HF industry as an analyst in HK (liberal arts college background, majored in asian studies, l/s fund with longer term time horizons) and thinking about applying in 2-3 years largely because the network appeals to me, maybe could help me raise money if I ever start something of my own, expose me to different perspectives that could make me become a better investor, give me time to travel and meet cool, well educated people, etc.
I generally would like to stay in Asia but the HF industry is still young / most funds are small in terms of AUM (i.e. less pay/chances for progression) so might be interested in covering asia/emerging markets from nyc. It is incredibly difficult for homegrown asian hedge funds to raise money since most of the LPs are in the US/Europe and less willing to commit money to asian funds (especially since the US market has done so well and china is tapering off). What I find is that most of the successful fund launches were started by guys who started at NY hedge funds like Perry Capital, highbridge, york, etc., opened up asian offices in HK, and spun off on their own after a few years. I came out to asia right after I graduated and don't have much of a network in the US.
HOWEVER, truthfully I'm not sure if I really want to do HFs down the line. While I think the work is interesting I also think I'd get bored down the road but not really sure what else I'd do and the pay / work life balance ratio is much better IMO than any other job out there.
Lastly, seems to me that HBS/Wharton (lauder program) have the strongest networks out in asia (though in general it's fairly easy to network out here) but maybe stanford or LBS might be interesting. This is assuming of course if I get in - on one hand I've never worked for a name brand fund but on the other hand how many applicants come from an asian HF background anyways.....
Thanks in advance for any thoughts someone could provide
From what I've seen, an MBA seems pretty useless at the Analyst/PM level (assuming you are a PM that does not need to raise capital for your team). Once you start dealing with capital raising/ trying to make it to the partner level, it is much more common to see individuals with MBAs.
Business School for HF? (Originally Posted: 01/13/2011)
Do you really need to go to business school in order to get a job at a top fund? I get mixed comments about this topic. Let's say you work in banking as an analyst for 2 years, do you need the MBA?
Thanks in advance.
m
You don't "need" an MBA - they're generally used more for job advancement or career changes.
Excellent work experience should speak for itself.
MBA necessary for PE? (Originally Posted: 12/27/2006)
Will the top places BS, TPG, KKR, etc. look down on no MBA? Even if you have made it to associate at a BB?
I hope not, cause there's no way in hell I'm going back to school, and I do want a career in P.E.
with no mba, you still come in at pre-mba level. on the other hand, with mba but no pre-mba PE experience you probably can't get top post-MBA PE job anyway, so...
I'm curious because I'm getting my Master's now and I wouldn't mind skipping the MBA track myself
probably depends on the name of the of the masters granting institution
But I'm also currently working.
how necessary is an mba if you want to go into PE? (Originally Posted: 12/27/2006)
Is it really necessary to get an MBA if you want to head into PE, or maybe even come back to IB later on?
don't need to get an MBA to get into PE, but to get promoted, at a lot of funds they like for you to have an MBA. most "associates" or "principals" have MBAs.
it's like a "stamp of approval" for the industry.
what if you studied business as an ug and already know the stuff?
I'm not in IB, i'm an undergrad student trying to get in just like most people here but from the research that i've done on the industry, this is what I really don't like about the nature of the industry. Regardless of how much people insist that it is competitive, nobody cares about the individual. If you meet the cut off for that year, you get the bonus. It's more of a grouping rather than a person by person analysis. Just because you completed deals generating more revenue than someone else, you're likely to be in the same grouping as them, receive the same bonus and receive the same promotion opportunity.
This relates to your question because you won't be part of the group that has their MBA from a top school and is "ready" to be promoted. They won't sit down and actually analyze your skill set and the experience you have.
Again, this is in my opinion and I may just be completely wrong.
Most PE funds prefer Pre-MBA associates who did either banking or some funds like consultants for operational type work. Alot of funds also promote top performers without them going back to bschool. I as well as many of my analyst class have went/will be going to PE without MBAs, top tier like KKR, Silver Lake, Leonard Green, etc.
livintoolive, I disagree with your sentiments. I believe the PE Industry is very meritocratic.
The smaller the fund is, the less important an MBA is toward progression.
Hedge Funds and B-School (Originally Posted: 09/04/2014)
It seems like most people think b-school experience is not very helpful for pursuing a career at a hedge fund (I refer to your traditional long/short funds). Assuming you have some finance experience under your belt and aren't coming from industry, in what ways might the b-school experience be helpful for you?
Would be great to hear what those already in the hedge fund industry think. Might it be the network of people you gain who will go into the industries in which you might invest into, the extra finance training?
I think its pretty much these 3, in order: Networking, presenting an investment idea in a competition to hedge fund titans (like at Columbia), value investing classes.
People likely also feel more comfortable hiring an MBA candidate for various reasons.
Agree with Cries. I know very few people who've gone to get their MBA after getting a toehold in the hedge fund world (especially vs PE). Most of the people I know who're in-process or post-MBA did it to help get a shot at the switch from non-finance or lower-prestige buyside, not so much for the raw "learning" (excluding a few Columbia VIC guys).
kennypowers, what do you mean by lower prestige buyside. from what I can tell, mutual funds are among the top exits and desired jobs for post-mbas. fidelity usually hires a handful from even the top mbas.
Apparently, it's common for a junior employee at an HF to be making 350k/yr. The standing logic is that compounded 12% returns over a 30 year career of your opportunity costs + 250k price tag for b-school would equate to missing out on $18MM in earnings. Therefore an MBA is a poor investment and the industry doesn't need them. At least that is my takeaway from a recent WSO thread on the subject.
The irony is that WSO's own compensation report is very contradictory to those claims. http://www.forbes.com/sites/kenrapoza/2013/03/13/how-much-do-wall-stree… . If that is any indication of the credibility of these forums. Take it all with a grain of a salt, or ignore it all together if it seems far fetched.
Common isn't the right word, junior employees at top HFs are not common. As stated in the other thread, 350K/yr as a fresh analyst occurs at probably the top 5% of funds.
Nothing ironic about the WSO compensation report showing lower numbers - just an obvious indication that you lack reading comprehension skills and/or a basic understanding of statistics and distributions.
MBA- Worth It for PE? (Originally Posted: 11/21/2010)
Hey,
I had a question about my situation that I was hoping someone could advise me on.
Basically I want to move to California in the future and work at a PE firm there, I'm currently an undergrad on the East Coast who transferred to an Ivy League school. I've been doing a lot of reading about breaking into PE and from what I understand the hierarchy usually goes Pre-MBA Associate to MBA to Post-MBA Associate. However, I searched the profiles of some PE firms in California and I saw Partners/VP/Associates who didn't even have MBAs just Bachelor degrees. The thing is an MBA costs a lot of money and I'm gonna be attending an Ivy League school that will also cost me a lot of money as well and I feel that because there aren't that many prestigious MBA programs in California IMO (Stanford/Berkley/maybe UCLA) plus given the fact I'm already paying so much for my undergrad, which is already a very prestigious school, is it absolutely necessary for me to get an MBA in order for me to stay in private equity in California or can the fact that I attended a top undergrad account for the necessary prestige that a resume needs and a top MBA gives it. I will also try to get into a BB/top boutique IBD out of undergrad and I don't really want to stay in PE forever since I eventually want to open a business. Also, if I choose not to pursue an MBA, how could I move from IB on the East Coast to PE on the West Coast?
Thanks for any help and advice.
I am willing to bet those guys are older. MBA's weren't really as common as back then as they are now a days and now that those guys are at a point where they have a ton of experience, there is no reason to have an MBA.
So basically they got grandfathered in.
i think you are getting a little ahead of yourself. and no, if you are exceptional then no-mba needed, but at a megafund it is very very difficult to get promoted after 2 years of pre-mba associate work
So basically the overall message is that I should get an MBA?
Not in industry, second-hand info
I'd just talk to the people you work with. As you're still undergrad you've got a ways to go. And (from what I've read from other posters on here) it seems like the people that haven't been "grandfathered" in without an MBA generally have BSDs and are fucking geniuses. It doesn't have to do with the school they came from, or their GPA, or their ECs, it has to do with them making it rain in the Sahara. Once you get your first job, UG doesn't matter as much, you just have to start impressing the shit out of people.
Getting into PE is mostly about connections. Even if you go to HBS or Wharton, you may have a hard time trying to get a job in PE without good connections. The guys that make it without connections are extremely good, and they deserve the jobs, so competition is fierce. If you start working for a good PE firm right out of undergrad school, you don't necessarily need to do an MBA to get promoted. I know a lot of YOUNG MDs with just undergrad degrees, but not surprisingly, most of them started working in PE after undergrad school.
MBA for PE? (Originally Posted: 05/18/2013)
There have been several threads covering the value of an MBA in general in the past few months. Looking at input from experienced users on this site, it seems like the degree is most beneficial for people looking to either switch industries (Banking/Consulting), take a break, or re-brand themselves if they can get into a reputable program.
One facet that hasn't been discussed in depth as of late has been the MBA's value in the Private Equity world. This topic has been glossed over in much older threads. But these days I often read that the landscape has changed somewhat, so its hard to know what information still applies.
In short, how necessary is an MBA in the PE landscape these days? 10xleverage said some firms have a culture that demands most of its associates to leave after 2 years, whereas others are open to promoting if the associates are competent. Are there today a fair share of firms that don't care and are in large part willing to promote its associates, or have expectations swung the other way and even more firms expect people to get MBAs?
Do people who already have a target degree need to worry about this less? If one already has an Ivy degree and broken into PE, will an MBA add much value rather than the two extra years of work experience? Could one get by comfortably without it? Is the two years off from the workforce worth it if you don't need a break, even for Harvard/Wharton?
i'd say the world is still the same way it was a few years ago. Most PE firms have the 2-3 and out with some small MM firms having a partner track. I think an MBA is a waste of time, for me at least, and the opportunity cost is too damn high...probably switch to HF or something
But you're essentially saying that staying in PE is a waste of time. It's a bummer though to hear that everyone still needs MBAs to be promoted.
It really depends on what school you went to for undergrad. If you went to a target you might not need to get an MBA, if you did not MBA would be the best option to put some brand school on your resume.
No I'm still in UG, I'm just asking what the PE landscape is like. I'm not saying I'll get that far or anything, this is just informational.
I am asking if pre-mba PE Associates are still for the most part kicked out to get in an MBA and try again for Post-MBA, or if the culture has changed for a significant amount of firms and they're okay with promoting Pre-MBA associates.
I see, I was just wondering from you guys already in the field if there happens to be enough firms that don't require MBAs to feel comfortable about leaving the present MBA-based shop and not pursuing the MBA. I'm starting to understand that the MBA is the safe bet though either way, and for people really shying away from it Hedgefunds are always the viable alternative.
I'm not a super PE guru and certainly haven't studied what many other firms or most other firms do but, anecdotally, I would have to think that most places send their pre-MBAs packing...though some do so with the intent of hiring them back.
Just from a logic standpoint, a fund would likely pay that pre-MBA guy the same as a post-MBA guy if you promoted the pre-MBA guy to the post-MBA level sans MBA...or, at the very least, that would probably be the expectation of that pre-MBA guy. So...why pay a guy with less resume cache the same as someone with more?
In theory, there are plenty of well qualified people to choose from coming out of top flight MBA programs, that just built a solid network with hundreds of other success-bound people, so why choose someone that doesn't have that? At the post-MBA levels networks become more and more important as you grow senior and that's exactly the benefit provided by a good MBA program...and that point puts the potentially promotable pre-MBA guy, with no MBA, at a distinct disadvantage to the folks with MBAs.
But, with all that said, it's possible...it's just more likely to happen at smaller firms, so there is a risk involved.
Regards
Is an MBA needed to progress in PE? (Originally Posted: 01/24/2010)
Hello,
Assume someone goes from GS/MS IBD to one of the megafunds / (or just large cap funds) after two years. Is an MBA explicitly needed to progress in the PE industry after two years as a PE associate? Or are there places that will let you simply continue on to senior associate (or let you lateral in as one)? Just wondering - as it seems at that point the opportunity cost of getting an MBA is almost prohibitively high.
Thanks in advance
monkey31,
People have found success going down both paths. While there are certainly some shops that force associates to get an MBA after two years, a large number of them do not. If you are a polished, technically capable associate with an expansive network, you'll have a lot less to gain from an MBA than those without. That said, I think that saying the "opportunity cost of getting an MBA is almost prohibitively high" is a very unfair statement. I'd argue that the total cost of an MBA is less prohibitive for a PE professional than it is for someone earning substantially less. Let me expand on the thought:
If you are making $500k a year and go get an MBA, you will be foregoing $1 million in income. While this is a lot of cash, your expected future earnings completely trump this amount. Assuming you continue with the megafund post-MBA, you will make tens upon tens of millions of dollars through the rest of your career. As a result, that $1 million will be a minor amount, and the cost of tuition will become a rounding error. So to call the opportunity cost of an MBA "prohibitively high" is, in my opinion, very misleading. While your opportunity cost is prohibitively high for a typical applicant, I don't think it should be the deciding factor in whether or not you choose to apply & attend as a PE professional.
Completely agree with compbanker, that was very well said. Just wanted to add that most MDs (especially at megafunds) have an MBA so I guess most people in PE end up getting one at some point
Thanks for your reply.
One concern I have is say you do the PE Associate -> H/W/S route. There doesn't seem to be any sort of guarantee that you'll obtain a PE job after graduation from business school. I understand that you'll be at an advantage, but there's always the off chance you strike out (bad interviews, shitty market, whatnot). What then? Go back to being an associate at an investment bank?
Do these megafunds have informal agreements that they'll be taking you back after you obtain your MBA? Otherwise it seems the downside scenario (IB Analyst->PE Associate->MBA->IB Associate) is a waste of 3-4 years compared to a direct promote from IB Analyst to IB Associate (which may be possible for me personally).
As an aside, I know someone who did an IB Analyst->Megafund PE->IB Associate track, and that is something I want to stay very much clear of...
IB at the associate level will never take any pre-MBA PE associates after HSW. You're just way over qualified at that point.
The vast majority of the the pre-MBA PE guys i know (assuming a decent PE firm) all go back to PE after their MBA, usually at another firm. A few will go corporate for a better lifestyle, or use the MBA to change careers completely. You also get a couple guy into hedge funds or VC, tho very few.
If they cannot find a job, they'll just keep looking. Sometimes they have to settle for a lesser firm than their pre-MBA firm, if economy is bad.
Basically, if you're IB+PE+HSW, you're almost guaranteed a PE gig at some point, these guys are the first in line to get offers, they're the type of people that fill the higher ranks in all the good PE firms.
What kind of complete career changes are you talking about? I was in a BB M&A group, now corporate M&A, and might take a pre-MBA associate PE role. I am debating whether to re-locate and take the PE role or try to interview again here, but either way I am concerned about what I will do after the 2-years are up. Hedge Fund or VC would be nice - am I better off declining my PE offer and trying to get into that pre-MBA? Im just not sure that I am in love with the "deal" / M&A lifestyle in general, but am having a real difficult time turning down a PE offer.
Anyone who did IB Analyst > PE Associate > HSW > IB Associate is out of their mind.
B-school is also an opportunity to prevent burn out. You've cranked for four years - if you need it, relax while you still can
Yes.
bump. would love to hear more thoughts on this. Doing an MBA, without having an agreement with ur current PE shop, seems pretty risky to me. like the OP said, shit happens and you might not get the private equity offer and might have to do IBD. i personally know two people that have have done BB IBD->PE(~500mm-1bn)->HSW->IBD Associate. that is a pretty scary scenario to me
Isn't there a lot of downside risk, plus cost considerations, that doesn't make sense to do MBA after they have gotten PE and want to stay in PE? only way i would do it is the firm wants me to get an MBA and come back, and therefore would sign an agreement to come back.
i also had a conversation with a principal at a megafund and he said getting the MBA makes it a bit easier to sit on boards of portfolio companies and tell people 20 years older than you to make operational "changes". so i guess in that regard, getting an MBA is helpful if you want to stay in PE.
You hit the nail...
"i also had a conversation with a principal at a megafund and he said getting the MBA makes it a bit easier to sit on boards of portfolio companies and tell people 20 years older than you to make operational "changes". so i guess in that regard, getting an MBA is helpful if you want to stay in PE."
Shall I do a MBA to pursue a PE career? (Originally Posted: 05/01/2012)
Dear all,
I have been thinking for the past few weeks regarding whether to pursue a MBA given my situation. Would be great if some experienced people here could give me some valuable opinions.
I have a finance postgraduate degree already from a top UK university (think oxbridge, LSE etc). I have more than 2 years of BB investment banking experience in London. Currently i work at a megafund (think KKR, Blackstone, TPG etc) in Asia.
I would one day want to work in the U.S or go back to London to work in either PE or HF.
My question is that should i pursue a top MBA (Harvard, stanford etc) in the U.S in order to work in HF or PE in the U.S? I would like to know my chances of getting into a good HF or PE in the U.S? MBA is indeed very expensive, so i would like to make a well-informed decision here.
My concerns are firstly i will need to get a work Visa to work in the U.S, some employer might not like this. secondly I dont really have mature market (U.S or Europe) buyside experiences, I have good Asian PE experiences but not sure how relevant it is if i want to work in the U.S. thirdly from my experience i am not sure how valuable MBA is to break into HF, as i dont think HF really values MBA that much. PE does value MBA, but i am not sure how competitive i will be going against other ppl who are also after post MBA PE opportunities.
Thank you so much!
In London, the PE route from what I understand is less structured. The opportunity to move up the ladder in the US might require a MBA but in London, it's less rigid.
That being said, doing an MBA at a top school WITH prior PE experience makes you a good candidate for post MBA PE jobs and the US wouldn't be out of reach in terms of employability.
My question is, are you hoping to gain a shot at the EU/US job market with a MBA? I know most people will use the MBA as a switching tool but for jobs, not geography. Why not stay on in the megafund (since that will be your exit op post business school) and find an opportunity to move abroad that way?
thanks for this.
That is exactly my problem. I think you are right saying that I am using a MBA PURELY trying to switch geography, so that is why i dont know if that is worth it. I like what I am doing now and see HF or PE as a long term career focus but just cant see myself living in Asia for the long term. I am not sure whether using MBA to switch geography but doing the same job afterwards is possible or not.
Also you mentioned that with my mega fund pre MBA experience that make me a good candidate for post MBA PE, however do you think my experience in Asian PE is that relevant? i think the skill set is different between the U.S and mature market. I also heard some bad stories about how hard it is to get a work visa in the U.S.
Of course ideally situation will be i can relocate to US or London with my current fund, but as you know this is very political and difficult to do in reality.
Ideally i wouldnt mind moving back to London again to do HF or PE given i dont need a work visa there, so probably make things easier. But europe has been very difficult given the current weak economic situation.
Are you a EU citizen (re London visa?)
At the end of the day, you are at a megafund and while average asian PE experience might not cut it, MF PE experience will.
Visa wise, I doubt a big PE house is going to choke at the thought of a visa considering the number of international MBA students staying on to work in the US.
I went through some of the same issues that the OP did - I tried (and failed) to transfer to another office within my bank and therefore decided to go to b-school to accomplish that geographic change (long story). Based on my experience, here are my two cents with regards to your questions:
Getting a HF job: this is certainly possible if you are at a good b-school in the US. HFs are more flexible with regards to a candidate's experience, and even though they definitely value the MBA less than PE funds, they still recruit at business schools. Furthermore, your international experience in London and Asia might actually be an advantage and a way to differentiate yourself. HFs tend to have smaller global footprints than PE funds (i.e. less offices), and therefore have a bigger tendency of covering certain far flung geographies from a central office in London or NY. This might be your ticket to getting H1-B sponsorship, which depending on whom you ask can be a major or minor issue (I know people that have gotten sponsored at smaller HF/PE funds so its not impossible, but it is a point against you).
PE funds: I think mega-fund in the US will be tough, but not impossible because it sounds like you have a great resume. Unfortunately, it seems to me that PE is a very "local" business, which requires experience and contacts in the specific geography you are investing in (believe it or not, more so than banking and definitely more so than HFs/public markets investing). Again, you may be able to leverage your int'l experience to swing something in the States, but I think most megafunds already cover Asia via local offices. It may be easier for you to find something in London, given that you already have the visa and the IB experience there. Finally, you can try to recruit at solid middle market PE funds - these tend to be more domestic focused and might balk at sponsoring your H1-B, but brand names matter and your CV will let you at least get you through the door for interviews at many places.
With regards to the H1-B: I am less well versed on this as of this point, but it seems to be mostly a matter of hiring a lawyer to do a bunch of paper work and paying some $3,000 - $5,000 dollars. I.e., if an employer wants to hire you, this should NOT be an issue. However, every place is different - I know certain megafunds here in NY who had a policy of not sponsoring H1-Bs for junior ppl (despite having plenty of resources to do so), though nowadays it seems like the application process is a lot easier due to lower hiring across the board (both of US workers and foreigners - this means the annual H1-B quota is only met towards the end of the Fiscal Year; in 2007 there were no H1-Bs left after the first week of applications).
Finally, with regards to tranferring internally: every case (and firm) is different, but I had bad experiences in this regard. Its tough nowadays to transfer to London or NY because there simply isn't too much hiring. I tried to do this at my former bank and wasn't able to (like you said, politics, etc.). I think in PE its even harder based on the "local" factor I mentioned above (and also because PE investment teams tend to be much smaller than IBD teams).
Overall, if you are hell-bent on switching geographies, I would consider b-school. It is expensive, but its a terrific experience and in my (biased) opinion worth it just in that regard. However, the job search will be painful and stressful, and you are right in trying to make as informed a decision as possible.
Hopefully others can chime in based on their own experiences. Hope this helps.
Holy shit, didn't realize how long that post was. Sorry!
Have you tried reaching out to some London based Headhunters directly? You might be in a position to break in directly at the pre-mba associate level in London. I know of some people that have made the move from BB/MBB in Asia/Middle East to London based PE funds (MF and mid market).
It would possibly mean a sidewards step (assuming you are already at the pre-mba associate level) but since a lot of funds in London will promote through without an MBA, that mightn't be a big concern.
Re Rumplesmoothspin: thank you for your response, i am an EU citizen, so working in London is no problem at all from a visa perspective. i am a pretty pessimistic guy in general, so let me be honest, in Asia private equity deal is typically minority investment with very few control deals. therefore although i know how LBO etc works from my European investment banking experience (where i had a lot of LBO modelling experiences), but i have never done nor looked at a buyside LBO case in Asia. I am about to close a cornerstone deal for an upcoming IPO and the equity check is about $100m and it is already consider pretty big in Asia by even mega fund standard. After considering what I have just said, what is your honest view of me landing a post MBA PE offer in the US?
re masolam: thank you for such insightful advice. I agree with you that I am not banking on the chance of moving geographically within my existing fund, chances are very small. From your analysis above, I guess it is reasonable to conclude that i am more likely to get a HF or solid mid market MM after I pursue a MBA in the US. I agree with you totally that PE is such a local business, in Asia for example, if you dont speak the language it is almost impossible for you to invest in certain countries. Based on this and the fact most megafund already has Asia local offices, i would think making into megafund post MBA for me is not likely. I also forgot to mention that if i decide to purse a 2013 MBA, that would mean i only have 1 and half year PE experiences as oppose to 2 years experience that most other ppl might have. Do you think this will work again me?
re PZ87: yes, i am trying to reach out to some old contacts in London to get into PE or HF there. Let me be honest, i have no interest in doing a MBA, the only motives for me to do one is change geography as I cannot stand the lifestyle in Asia in the long term (personal preference). However, as you probably aware the economic situation in Europe, it is not looking bright and it is hard to find jobs there. I know that MBA in Europe is not valued as highly as in the US, so i am approaching headhunters directly as well.
also guys, i am turning 26 next year. Ideally as many ppl have suggested is for me to directly find a job in the US or in London without a MBA, however that would have meant i will need to do my search this year and probably miss the MBA application process for 2013. If that is the case, and i didnt find anything say until 2013, that would mean i will do my MBA in 2014 at the age of 27. is this abit too old for a MBA already??
[quote=Summer Intern]also guys, i am turning 26 next year. Ideally as many ppl have suggested is for me to directly find a job in the US or in London without a MBA, however that would have meant i will need to do my search this year and probably miss the MBA application process for 2013. If that is the case, and i didnt find anything say until 2013, that would mean i will do my MBA in 2014 at the age of 27. is this abit too old for a MBA already??[/quote ] 27 is not too old to start an MBA. You won't be missing the boat if you wait a year, and you could save a lot if you find you don't need the MBA.
Best, Linda
Why are you so sure that moving within your fund is nto possible? Have you made any inquiries?
(genuinely curious)
I really don't know how recruiters / funds / etc will look at you having done 1.5 years of PE vs. 2. If I were looking at your resume, I wouldn't give a shit... plenty of ppl use the time between January/Feb bonus and the start of their b-school program to travel, and I think it's the best possible thing to do, as opposed to doing the same work for a few more months for which, in most instances, you will not get a pro-rated six month bonus anyways. That being said, you are better off listening to what others in this site have to say, or maybe actually ask this to recruiters if you think it is appropriate.
For what it's worth, before b-school I had the same anti-b-school mentality as you, but decided to get one anyways because I was dead-set on changing geographies and, to be fair, got a free-ride (making my opportunity cost much lower). After a year here, I am glad I did it, and so is every ex-PE guy I know (many of whom could have stayed in their funds). Life is short, you are young, and you have the rest of your life to chase the dollar.
On a final note, if you disagree with me re MBA, then I would recommend Europe / UK in terms of getting into a PE megafund. The economy might be shit, but you are still a junior guy, and I know plenty of ppl that have gotten into megafunds (KKR / Carlyle / Cerberus, etc) in London as IB Associates (i.e. they had no buyside experience whatsoever). Based on my experiences so far, megafund PE in the States post-MBA is extremely tough... many second years I know, with two years Pre-MBA megafund experience, have been unsuccesful in returning to megafunds.
re 09grad: i have been around in the finance industry long enough to see many ppl failed to transfer overseas due to lots of reasons and it leaves you with a very difficult environment afterwards. I am not saying it is impossible, i will surely try my best to give it a shot, but what i am saying is i am not banking all my chances on it.
re masolam: i am not negative towards MBA in general but given personal finance reasons, i really cannot afford it unless i took on lots of debt and even if i do go, i cannot see i a good finance backbone to live decently enough to enjoy my time there, so that is why i am not too keen on MBA. Of course if i get a scholarship or something that will be different, i will probably go. I see you are saying that post MBA megafund is very difficult, then what about a solid MM PE fund? do you think it is possible given my background? i.e Asia PE experience, work visa issues etc
Also do you think it is too old to go to do MBA when i am 27?
thanks.
First off, you are 100% right with regards to transferring offices. I tried it twice (one time it worked, barely, the second it failed and I had a horrible time afterwards... and had to work my ass off to "make it right").
Second, I see your point about the finances. The MBA is an expensive proposition, especially if you are in an expensive city or have a significant other / kids to support. A few years back ppl would have said "don't worry about it, just get a loan, you'll repay it in a few years because you have a good CV and the market will pay you well", but I don't know how confident you can be about that in this day and age.
As for PE funds in the states... I am a first year and got many many interviews for smaller funds (i.e. between 500 MM and 1.5 billion AUM). In my case, I am very interested in going to PE as a long-term career, so I would consider funds of this size with a good track record as interesting places to work in. Anything larger, I really don't know... it gets harder to be honest. I think your best bets are megafunds (PE and HF) in London/Europe, HFs in the States, and then everything else.
And no, 27 is not too old to get an MBA. The average in my school is roughly 4 to 6 years experience after undergrad, i.e. 26 to 28 years old upon entering first year.
If you have questions or would like to get more into specifics, PM me.
to the OP: An old acquaintance of mine went from a firm in the middle east to a mega fund in NYC after business school at hbs. I honestly think a lot is possible as long you are smart and have a compelling story.
Ea sunt sint labore consequatur inventore ut esse. Vel exercitationem a atque nobis nam perspiciatis. Quae nisi cumque ullam voluptatem possimus omnis quisquam.
Quod veritatis et ad officia. Et mollitia dignissimos et. Voluptas ut omnis rem harum est eaque. Dolore est qui culpa asperiores magnam et.
Molestiae animi voluptatem dolor dolore. Voluptatem ea et perferendis aperiam quo reiciendis voluptatem. Est sunt molestiae velit vel quia quos. Assumenda autem sit odio dolorem molestias. Commodi accusantium minus ut doloribus vitae. Ut corporis nostrum labore architecto amet voluptas. Quae omnis officiis cum voluptatem velit.
Qui aspernatur officia explicabo velit enim dolore. Sint sit possimus sit nostrum aut. Doloribus quod cumque accusamus est iure qui id. Beatae occaecati ut at voluptatem inventore atque et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Ut molestiae quas laborum quia. Dignissimos alias atque nostrum quod dolor reprehenderit. Excepturi accusantium qui quo quas. Cum praesentium qui et nulla. Suscipit at tempora laudantium laboriosam harum.
Qui consequuntur consequatur id. Ad qui suscipit ad labore porro. Est officia optio sunt vel deleniti consectetur. Assumenda officia quia eaque minus et quis.
Earum qui deserunt ullam quia odio minus. Et magnam commodi aut vero aspernatur aut veritatis. Accusamus et odio explicabo omnis aut ut sit.
Reiciendis eum omnis sed assumenda ut quidem. Ex dolorem et consequatur quisquam. Et ut cum recusandae suscipit fuga quo explicabo. Dolorum laborum repellat nobis. Odit aut delectus deleniti dicta et dolor ea quidem.
Natus delectus doloribus distinctio odit qui consequatur omnis. Itaque neque ullam maiores ut. Placeat dolorem doloremque reiciendis ratione voluptatem sint eos.
Alias omnis reiciendis tempore culpa sint dolor nobis. Dolorem earum consequatur omnis iste. Illo impedit architecto laboriosam voluptas aspernatur numquam provident. Eius omnis numquam aut enim nihil facilis. Ut libero dignissimos maxime iste perspiciatis. Dolorem impedit vel quidem et ab.
Minima eaque sint eos sequi a. Itaque vel impedit et aut natus. Sed cum ex quo quia vel quaerat earum. Autem inventore voluptatum eum et.
Veniam esse ipsa temporibus praesentium. Nihil corporis occaecati iste recusandae consectetur numquam. Autem qui beatae molestiae commodi.
Qui omnis tenetur accusantium quia ex cum modi ab. Qui porro ut dolore. Ut hic quasi molestiae qui illum labore. Ducimus laborum et quos non sunt.
Totam eos quas eveniet quisquam omnis aut illum. Tempora debitis id placeat maxime dicta.
Commodi tenetur vel quas accusantium et voluptas adipisci. Est vitae iste provident nobis accusantium quos tempore et. Sequi ipsum voluptatem eos placeat. Et pariatur fugit ut asperiores reiciendis incidunt sint. Nihil ab asperiores laboriosam laudantium. Ea tempora quaerat officia.
Consequatur omnis in sit odio ut. Quo rerum id voluptate consequuntur nihil. Voluptate possimus perspiciatis et repudiandae. Est harum aliquam consequuntur enim non mollitia ipsum. Asperiores consequatur debitis et suscipit aut. Quo voluptates praesentium unde adipisci.
Aut nihil est quia aliquam rerum repellat est et. Impedit eum dolorum ipsam sunt. Nulla ut enim magnam debitis quia rem id.