Why do so many jump to PE?
What I have noticed is that almost everyone going into investment banking going out of undergrad seems to want to jump into PE or other buyside positions, with a specific focus on the MFs/UMMs? But how I see it, the work does not seem to be that much different, the hours are probably going to be worse, and your compensation would be lower (assuming you make Associate at an EB). The only possible benefit I would see would be slightly better exit opportunities into HFs. Am I missing anything here? And do you think it will be harder to move into MFs from IB going forward, as these MFs increase their Analyst class sizes? Also, is my ranking of projected 4-5 year comp seem correct?
Ranking of projected 4-5 year compensation:
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EB Associate
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MF Associate
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UMM Associate
Investing vs Advising (at the higher levels)
Lol what's funny to me is that people go into IB for the sole reason of breaking into PE because they think:
1) They'll be working less hours: They then get fucked once they realize that this couldn't be farther from the truth, especially at the MFs ad UMFs.
2) Pay would be better at the junior level: They then get fucked with the steep pay cut at the MMFs and LMMFs.
3) Investing work would be more interesting: They then get fucked reviewing boring ass teasers and CIMS all day for companies they could get less about, in a secluded environment. At least there is a level of comradery with the juniors in IB
4) Pay would be better at the senior level: They then get fucked in a 2 in n out program, forced to go back to business school, and with the intense competition for post MBA associates, go back to banking. Or better yet, they get fucked with shitty carry that takes forever to realize upon exit
What's crazy is that I'll still recruit for PE in my first year 😂
Totally agree with everything above, and sadly I will probably recruit for MF in my first year as well. Only thing, assuming T10 MBA, is post b-school associate recruiting that tough? I would think that following that path, one would have options pretty much anywhere in banking, PE, or even some decent HF looks. Am I missing something here?
You're mostly correct in this assumption. Would probably have to recruit for PE in 1Y and then work there over the summer. You could re-recruit for IB in fall of 2Y but would be limited by the banks who haven't filled their classes with summer interns.
Idk man, I'm just a shitty college senior, sadly going with the herd.
Man you're a hs senior deciding what college you want to go to. at least have some fun in life before it beats you down. really? you already decided to recruit for MF PE before you've entered college?
PE recruiting isn’t quite a T10 MBA arena. Your chances drop significantly outside of Harvard, Stanford, Wharton. Within these schools, it’s also very tough and involves a major test of your risk tolerance. If you have Pre-MBA PE experience and want to go back to PE, you should probably adopt a HSW or bust mentality.
I would add to this list that the often forgotten GP commit required at senior levels can suck up a lot of the post tax carry dollars.
With the right banker, a PE principal/partner can get a coinvest loan at L + 135ish bps. But yeah, having to coinvest is less than ideal
These threads come up every week. Use the search function. You'll make more money in banking unless you're at a mf most likely. People go into pe because there's not a huge downside with more potential for upside. There's literally no harm in 25 year old trying a new job that keeps just as many, if not more doors, open than banking. You can always go back to banking and 2 years of 30k less comp is pennies in the lifespan of a finance career. Don't worry about why others do something, just figure out what's best for you, and don't use comp to pick your career otherwise you'll end up being miserable.
My buddies and I all left our EBs (few of us were early promos) and were fortunate enough to all get into MFs or UMMs. The best piece of advice we all got at some point in our early years was to diversify our experiences and network and consider the risk/reward in our careers. Could we have all stayed on and collected paycheck after paycheck at our EBs? Sure. But we all knew we weren't gaining more skills or progressing at the pace we wanted to. Within EBs, the consensus was always the Partners were strong but the MDs and VPs who were homegrown had no way up and were overall just less impressive. I personally went into PE because I didn't want to be in the situation down the road where I did not have an extensive network or a certain niche skillset and see myself get dicked. For those on this forum who are interns or analysts, I'd say you'll quickly find the incremental post-tax difference in pay between an EB or MF or MM etc. is pennies in your career. Invest in yourself today and set yourself up for success in the future.
I'm 2 years into my MF program (not a 2 and out) and can confidently say I've learned a lot more than excel modeling in PE that I know I would not have learned in IB (I spent a year as an A2A). I've also grown my network immensely by working with a number of companies both in evaluating deals and portfolio work. Some things, $ and compensation can't buy. My friends and I all feel we have a lot more optionality going forward (staying on, b school, back to IB etc) as well
Feel free to PM if you want more details as I am happy to help. WSO has been a great resource to me back in the day and hopefully I can give back
Great response.
Was it harder going to MF as an IB associate vs analyst?
I found it easier. As an assoc, I had more deals under my belt, ran point on a couple processes and just generally had a better grasp of finance. I was very upfront with HHs and told them I was only interested in a certain industry and fund size and was open to doing off cycle too if things came up then that fit my criteria. I'll say I was generally pretty immature my analyst years and found it tougher to be serious about some aspects of work as an analyst, so I think being an assoc actually helped me out in the end
Based on you and your friends experiences in large cap pe, how are you guys thinking about your next moves? If given the opportunity to stay on, did you enjoy your experiences enough to stay with the firm and take the promotion? Did you find the job draining and want to move to growth equity or a hf?
I can't speak to the specifics for my friends but can say generally we are all having a positive experience. For me, I was fortunate to join a group with a very good culture and plan on staying on. With that said, I won't lie and say everyday is a 9-5 flip through a few CIMs, dick around with some colleagues and call it a day type of day. I think if you go in with the mindset that you'll work hard but will come away with a ton of experience, it isn't as draining. I will say my life is a lot more predictable (no random calls from an MD saying we have a bakeoff in a few days, etc. like in IB). I might work about the same or fewer hours than IB but having predictability means I can plan around work (e.g. if I know IC is on a Monday, then I have to send around the memo by saturday noon so I know the rest of sat and sun are free, etc.).
I don't have any experience in GE or HF but from what I can tell from some of my college buddies, it could be more draining given the relatively less structured nature of the programs (this isn't a bad thing, just not my cup of tea). PE programs in my opinion offer a lot of structure and a great way to develop your investment acumen early on in your career.
Thanks so much for doing this. Where do you think the future partners will come from if not homegrown? Do you think an EB is a worse place to go than a BB if one is hoping to be a career banker?
They'll likely be hired in from other firms. This is purely my own opinion but I think an EB offers a great analyst experience and partner experience. if I had been interested in being a career banker, I would have either started at a BB or lateraled from an EB to a BB for my associate-VP/director/MD years. In addition to joining a larger firm (wider network), you also learn the different products aside from M&A or rx (eg capital markets, levfin, etc.). being a partner at an EB is definitely a sweet gig - you've proven yourself to some extent and at this point raking in more in salary doesn't hurt. In the end though, if you've made it to the MD/partner level, it probably doesn't really matter if you're at an EB or BB - you'd likely already have a great lifestyle and solid career
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Gotcha, thanks for sharing. Did you see good workers get stuck before making director or did most move up at your firm if they wanted to?
It really depends. You could be the best associate but sometimes politics, headcount needs (who's above you, who might be coming in, etc.), group performance, etc. play in. To be fair, you don't really need to be stellar to be promoted from an associate to VP. In my opinion, I don't even think you have to be stellar to be an A2A. I was an early A2A promo and I'd categorize myself as pretty average in terms of technical speed, etc. but definitely had really good relationships with the partners at my firm and an associate had recently left. So to answer your question, if you have baseline competency (really table stakes anyway) and spend time developing your relationships with seniors, the assoc->VP promo should be pretty achievable. the only caveat I'd add is if you're at an EB, there actually may not be a spot for you for a VP promo (some EBs are really small), so definitely don't go in thinking the VP promo is guaranteed. I've seen plenty of friends who were forced to lateral because there was no way up
Ahh that's super interesting. Also, last question I promise haha. In the case of your friends forced out were they able to move to BBs or if you're pushed out of a boutique do you tend to have to go to a smaller/lesser known one?
Do you plan on taking the GMAT/if you already did, when did you do that? Do you think an mba is needed for someone who wants to pursue growth/VC long term after banking? Going to be starting FT at a BB after graduation, but don’t really want to spend my last semester of college grinding for the GMAT.
From a current MF associate trying to figure out how to find time to study for the GMAT while working 80+ hours a week - take the test while you have the free time / flexibility. It isn’t that big of a commitment especially now when most schools are virtual / you can’t do the normal fun senior year things anyways
Because they know they can't rise in banking :)
Good bankers are already more scarce than they used to be with the glut of non-banking, high-paying jobs that now attract smart people. I think the future of banking is bright for those who can stick it out, as the roster of good bankers keeps getting worse. Easier and easier to stand out. Also, I don't think software will be able to replace people when it comes to strategic and M&A advice. I'm making the contrarian bet and staying on the sell-side!
I agree. I’ve always wondered this myself, and it seems that with respect to IB, automation will only help by speeding up tedious processes or streamlining BO/MO work. An S&T trader’s role can largely be automated (maybe not with complex products, exotics, etc) because the job is essentially matching buyers and sellers instantaneously (something a computer can do perfectly and quickly), but the complexity and the human element of specific M&A strategic advice most probably cannot be automated.
Can you say more? Was consulting --> PE and now thinking about either going back to McK or going to banking tbh
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