What is the point of doing private equity if you will be pushed out after two years to get an MBA? and then wind up as an associate when you could have just stayed in banking and be close to getting a VP promote?
Am I totally confused about how this works? What am I missing?
It's almost impossible to enter PE post MBA without doing it before your MBA. Also pays the most and is the path that keeps the most options open. And then there are some who just do it because everyone else is doing it.
Lots of reasons:
There's a few more minor reasons but those are the big ones.
Thanks, curious though a) why does PE keep more options open than banking? Isn't it a more niche field to be in / more specific skill set with less exposure to various transaction types, less brand name recognition outside of high finance? What do people do after PE?
Let's say you aren't able to recruit well back into PE post MBA and decide to go back into banking, will you start at the associate level? Is it true that most banks don't force you to get an MBA anymore and if you perform reasonably well you can become an associate after 2-3 years? Why aren't there more people trying to do this? This forum makes it seem like being an associate is the pits.
I know people say the hours never really improve in banking, but by the time you're an VP/MD I'm imagining the type of work you are doing is easier/more enjoyable/relationship based and potentially more predictable because you can delegate. I'm just confused why everyone is in such a rush to leave banking.
Are hours actually better at megafunds? I've heard mixed things.
By the way, thank you. Sincerely curious.
Hours usually aren't better at a MF, but the pay is usually much better. MM PE varies widely depending on the size of the firm, usually hours are better and pay is a little less, but there are some MM firms that pay a ton and are sweatshops.
More paths are open because PE includes an elements of operations work that banking never touches. Even on the investment side, you're usually required to think deeply about how the business is going to run and will probably be involved with many of the big operating decision. It is because of this that PE guys(and gals) usually have more flexibility when moving around. Banking on the other hand, especially past the analyst level, develops less of a varied skillset and while there are still exit opportunities, it would be tougher to convince someone that you could do Strategy/Product/Marketing/Sales etc at a company whereas someone in PE could easily talk about how they restructured the selling process for a company, changed up the marketing strategy, had xyz results, etc.
If you're purely optimizing to make money in the short term an want to be a career banker then yes, doing well for 2-3 years as an analyst and getting a direct promote to associate is the way to go. With that being said, being a career banker is a tough life, the work at the associate level is still pretty tough(I'd argue tougher in some ways than being an analyst) and your upside is limited. As a VP at a strong performing PE fund, you could easily make $1M a year, plus the work is generally pretty interested and varied. In banking, its a slog to get to the top and even as a successful MD, you might pull in a few million a year for a ton of work. The big differences are that in banking you service clients, so you're always at the mercy of what the client wants and there's no concept of carry, so its harder to make outsized returns based on your effort. In PE, you're the buyer, so people cater to you, plus if you get to the point where you have meaningful carry in a fund, you can "passively" make money as the firm exits investments.
Banking isn't a bad career by any means, I've seen people who like banking more than PE and end up moving back into that role either pre or post MBA. With that being said, the fun of finance for me is testing my investment mettle, so to speak. I like the risk/reward profile and want to develop to the point where I can look at business and get pretty good at making them better, regardless of the circumstance.
@apollo95" I've been thinking about this, too.
Also curious: why do people go into corporate roles after doing PE/consulting? It seems like getting into an EB/BB/MBB, grinding to make it to an MF, and then exiting to an ops/corp fin/corp strat role could have been accomplished by going into a rotational program at an F500 out of undergrad but with less stress/fewer hours.
I don't mean any of this in a condescending way -- I'm genuinely curious.
Faster progression. I did four years at a Tier 2 consulting firm pre-MBA grinding it out. I joined a F500 as a director. Lots of MBAs in our rotational program reporting to me at 1-2 levels below. I'm planning on leaving to do my MBA and hopefully coming back or going elsewhere as a VP. It would take most people years out of rotational program to hit that.
A few reasons why people go the 'harder' path:
You're generally very good at financial analysis, working under pressure, multi-tasking, etc. for someone with similar years of experience (this brings me to the next point)
Banking / PE years are considered 2x an industry job years. For example, if you do 2+2 (IB / PE) then go to corp dev, you'll be at least a level higher than someone who started from the bottom in the corp dev group out of school.
You'll make more money doing PE / IB for a few years than corp dev.
Because everyone else does IB / PE and people get scared when they don't follow the herd (myself included).
It's been said below but to reiterate: you progress much faster by doing MBB --> Corp than by going straight into Corp. For instance, post-MBA it might take you 6-8 years to make Director at a F500 (it varies a lot between companies depending on how high "Director" is, how many titles in between, etc). People leaving MBB after ~3 years (maybe 4) are generally exiting right to Director roles. They get to the same place eventually but the people who do MBB --> Corp do it in half the time. I'm saying this as someone who did the Corp route for interest & lifestyle reasons (I find Corp work more interesting than consulting work, which I did pre-MBA).
The one caveat to the above is consultants generally won't exit directly into P&L ownership roles, whereas those who started out pre-MBA will often start/quickly be promoted to P&L ownership roles.
If you forget about the money and prestige for a minute, I would mention the following points: - The job is less repetitive and more challenging (i.e. you won't spend your nights pasting logos or formatting slides): Every investment is truly unique and there is not set path - You develop financial, legal, corporate and interpersonal skills (e.g. You might be asked to fire the CFO of one of the portfolio companies while you only are an Associate) - Whether you join a large fund or a much smaller one, you will most likely get exposure to very successful entrepreneurs, seasoned investors, sector experts... and have amazing opportunities to learn from them. As a consequence, you grow up / mature faster - The project doesn't stop when the investment is made but genuinely starts when you are given the keys of the company - You may be given the opportunity to help companies grow further and faster (e.g. store roll out in new markets, development of new product lines, etc.) or turn them around - You may be given the opportunity to sit on a Board (even as an Observer) before you reach your 30s - You are on the client side, so people respect you way more (including your former colleagues who used to make your life miserable) - More importantly and that's the case in most funds, you are no longer a resource and your opinion truly matters
Happy to discuss these points further if people are interested.
Camondo
Wow, a lot of really solid posts. Thanks everyone.
Sounds like if you have the opportunity to work for a MF, it's a worthwhile experience for a number of reasons, (work-life, compensation, learning opportunities, exit ops) even if it's only for two years.
A couple things I'm curious about: - I've heard that you can spend a lot time as an associate working on deals that end up getting passed over. Do you actually spend a significant portion of your time working with management teams? What's the breakdown? - Do you ever miss the industry exposure banking offers? Even at the larger MM/MFs, I image the number of people you interact with on a week to week basis is fewer (internally and externally) so you've got to be absolutely sure you like the culture of the fund. Even some pretty large teams, I've looked into seem to have only have a couple dozen associates -- fewer than a coverage/product group at a BB. Does this sometimes feel like a major change of pace (potentially a positive one)?
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