Going back into Banking from PE

I graduated from a top 3 MBA last year and before that worked for 2 years in a Top 10 boutique bank and 2 years at a global CPG company as a corporate development professional.

My dream for B-School was to land at a mid-market consumer PE/Growth fund, and I made it happen by hustling harder than everyone despite all of the warnings against not doing it; I got an internship at a top quartile PE fund in my sector of expertise.

There was no FT job for me after the internship due to typical PE firm dynamics (could not afford/did not need another VP). I kept recruiting and didn't get anything else by graduation because I didn't have pre-MBA PE experience and my classmates who did were getting all the jobs; things then changed at my internship PE firm and they offered me an opportunity to go back and be a Sr Assoc/VP on a new fund they were raising in addition to their main fund.

I spent 7 months working there and the fund didn't get raised due to b.s. partnership issues (politics). I got paid out and had to leave but with good references/on good terms (none of this was my fault). Despite all of this, I have been massively struggling to get any other decent PE offers or jobs at this point given:

  • Dynamics of the industry supply/demand for mid-level roles
  • My effectively PE experience despite the great name of my former employer
  • The opportunities I find myself working through now are all at very high-risk/new and/or shitty firms

I don't have a problem going to work for a 1st time fund, but unfortunately even the more "entrepreneurial" places I'm talking to seem terrible with very low likelihood of being able to raise a 2nd fund or be successful.

I now may have an opportunity to go back and work for a top-tier investment bank (GS/JPM) as a 2nd or even 3rd year associate; the comp would honestly be even more than what most mid-market PE firms pay (excluding carry obviously) but it would be going back to banking which I thought I would never do again.

Curious what the forum thinks -- should I fold my cards and go into a prestigious/top tier bank and work my way up, maybe even in 2-5 years switch out again and work for a newish fund, or just work my way to becoming an MD, or should I go work for a shitty/no-name PE fund where I risk not getting the right experience potentially, "deflating" my personal/resume brand equity, and getting underpaid?

Thanks

 

Understanding it's more risky, I would strongly consider taking an opportunity at one of the "newer / shittier" funds you've mentioned. Reasons why:

  • If you didn't like banking and didn't want to stay in the first go-around, I don't see why you'd necessarily want to go back. I understand you'll be a bit further up the ladder and life is easier, but if you don't dig the work, you don't dig the work
  • If you want to stay in PE, PE experience will matter more than banking experience, even if you were at a prestigious bank (from what I've seen in my career). Say you go work at a new fund and it doesn't work out long-term. At that point, you've got a few years of deal experience on the principal side as opposed to advisory, and you could likely find your way to somewhere else if you were good at your job. Don't get me wrong, you're not going to land at KKR after working for a ~$300mm AUM start-up fund, but you could likely find your way to another MM or LMM fund. At the end of the day, you're still in PE and not in banking
  • Your background in consumer and specifically CPG seems to fit well with a lot of new / smaller funds. It's such a hot space, that there's a decent amount of funds getting kicked up more so on the VC / Growth Equity side
  • There is soooo much upside at a new fund relative to working at a big bank. Obviously a lot of risk, but there's huge opportunity

Potential Reasons Against:

  • I would be wary of going to work somewhere that's still trying to raise money, unless you really believe in the team. Raising funds is hard
  • I would also obviously be wary of going somewhere that doesn't have much dry powder left. If you go someplace like that and it folds after a few years, but you've only gotten like 2 deals done in three years, there's obviously not a ton of value to your experience
 
saconsult3:
If you didn't like banking and didn't want to stay in the first go-around, I don't see why you'd necessarily want to go back.

If the guy doesn't fundamentally enjoy banking, I doubt he would fundamentally enjoy PE either.

"The power of accurate observation is commonly called cynicism by those who have not got it." - George Bernard Shaw
 

I see where you're coming from, but I'm not sure I agree.

Really depends on what you didn't like about banking. If you hate M&A or despise finance altogether, then, yeah, obviously you're not going to like PE. Judging by the fact that this guys on a finance forum and the options he's talking about, I don't imagine that he hates doing deals.

I would imagine there's a ton of people on WSO, myself included, who really enjoy their PE jobs but would never even think about going back to banking. Sure, at a junior level the required skill set is pretty similar, but they're two distinctly different jobs especially the further up the ladder you get. Not just in the content of the work and skill sets required, but also in lifestyle, compensation, etc.

Anyway, I think it's pretty reasonable to say you can enjoy PE if you didn't enjoy banking.

 

Are you happy with that kind of life? You've already proved you can kick ass and do anything. Chase your dreams and let others follow, instead of helping others build theirs.

Let me hear you say, this shit is bananas, B-A-N-A-N-A-S!
 
Best Response

I'd stay take a higher level view - don't focus on the individual merits of either per say:

  • How important is money to you? Do you "need" to earn a high income? Would you be okay potentially not earning a lot? Are you married? If so what does your wife think about money?

  • How important is work life balance? Does it trump money, do you have tons of hobbies or are you kinda just a worker bee?

  • How much do you value structure? Are you more of a hustler or more so good at staying in the lines.

  • Do you like risk? Could you stomach the possibility of blowing up your career track, in the short term at least?

Basically unless money isn't that important to you, you have tons of hobbies, you are a hustler and you thrive in unstructured environments I'd go with banking. I've actually been in similar situations and always take opposite path but I don't care as much about money/prestige etc and like smaller environments. By the very nature of your post, I don't think you fall into this bucket.

 

"top quartile PE fund" - when top 25% doesn't sound cool enough

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.
 
Arti:
"top quartile PE fund" - when top 25% doesn't sound cool enough

I was trying not to be a douche because my fund was actually the best (as in, the #1 IRR net of fees in the U.S.) of its original vintage, and top 5% subsequently for its next two funds....who says "Top Decile" or "Top 5 Percentile" anyways?

The point was to indicate that I was working at a shop with great people and a great name. The issue is that building a career in PE isn't about working at the best fund from the beginning, because there's limited advancement opportunities.

 
xps900:
Arti:
"top quartile PE fund" - when top 25% doesn't sound cool enough
I was trying not to be a douche because my fund was actually the best (as in, the #1 IRR net of fees in the U.S.) of its original vintage, and top 5% subsequently for its next two funds....who says "Top Decile" or "Top 5 Percentile" anyways?

The point was to indicate that I was working at a shop with great people and a great name. The issue is that building a career in PE isn't about working at the best fund from the beginning, because there's limited advancement opportunities.

My guess is that he wasn't trying to knock your post, but rather the industry jargon that has evolved.

 

I understand you are having a hard time getting traction in PE, so I just wanted to point out that just because PE isn't working out does not mean that you HAVE to go back to IB, which it sounds like you hate.

 

Seeing both sides will help me negotiate better deals in the future. I know what the seller is looking for and what I should be looking at as a buyer. I will also build relationships at the banks that will help with deal flow later on.

26 Broadway where's your sense of humor?
 

I have see ppl come back to IB after a stint in PE. They just preferred the solely transnational approach of IB. I do think though that the mentality that you have to do IB first is retarded. If you want to do PE and are able to get a decent analyst position - then go for it! No reason to go through IB just to end up in the same position. However, if you are still hesitant, IB gives you more optionality

 

Going from an unknown PE shop to a top tier PE shop is fairly unheard of. Even going from CSFB PE or MS PE to top tier PE is very uncommon. Best way would be, yes as you said go to a top group on Wall Street. I know how much everyone prematurely ejaculates over these groups on WSO, but they really do make it a buyers market for you... in terms of getting a lot of very high quality interviews.

While you may think PE is a better training ground for top tier PE than banking, that's not really the way these guys see it, and for good reason. First off, the well known banks are already vetted and everyone knows the quality of training and experience you'll get at these places. Second, the volume of deals and modeling you'll get in banking vs in PE is much different in alot of cases. I worked on I don't know, maybe 5 live closed deals a year in banking... that's unheard of in PE. And that's just closed deals.

That being said, going from an unknown PE shop to a top Wall Street group is no easy task either.

 

Thanks Marcus. Understand your point, but wouldn't it be fair to say that in general a live closed deal experience in PE is much more in-depth and intensive than a deal closed in banking? I've worked with a lot of bankers from top shops on deals and didn't seem like they get in-depth exposure.

 

I know actually two people who did something similar, with one going from a small PE to GS and the other to Merrill. They are both in decent groups, nothing that would make people on here drool, but they are both now recruiting for PE positions with megafunds and both told me that the stuff they learned at their previous PE firms help them out immensely in interviews now. I think this is something to keep in mind, especially if you are really keen on going down that route. FWIW, they both spent roughly 1 year at their PEs.

I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing. See my Blog & AMA
 

This is a bit of a tangent, but what is the appeal of going to a PE megafund? I get that the pay is a little better than a solid mid-market fund, but the quality of life is generally on par with BB banking (bad). Is it all about the biggest and best name on your resume?

I'd much rather go to a smaller shop where you might have the opportunity to move up the ranks quickly to get some carry. Good luck moving up the foodchain and Blackstone, Carlyle, etc. There is too much hierarchy above you.

Also, the opportunity to drive substantial organizational change in your portfolio companies is greater at the lower end of the market where you can improve management, processes, technology, capital structure, etc. I've always viewed the mega end of the PE spectrum as somewhat less rewarding because you try to drive returns through financial engineering and hope for some tailwinds to provide multiple expansion. (Note: I do believe there can be real value driven through take privates and realigning a company away from a quarter-to-quarter earnings based mindset.)

P.S. I worked in sponsors coverage back in the day so I have had exposure to a wide range of funds; I just never got the appeal of working for the big ones.

 

@TechBanking , I feel the exact same way. I'm not in banking or would ever want to do PE, but hope to jump to HF someday. For me, the allure of working at a huge HF or something seen as "prestigious" just doesn't make sense.

I mean, isn't the buyside the end game? What is the point of joining KKR or Blackstone for its prestige? I guess maybe this is what differentiates myself from true go-getters, but after you've made it, who cares about the marginal pay discrepancy and name on your resume?

If you have worked at a good prestigious group in IB, seems you'd much rather work somewhere "fun" where you can be more involved with the actual business and have growth potential. Not just become another number.

However, perhaps people who are in PE or IB can explain it to me better than my current rationale.

People demand freedom of speech as a compensation for freedom of thought which they seldom use.
 

I definitely agree with TechBanking.

However I do think its fairly important to most analysts to keep maintain as much optionality as possible... and going to a big shiny megafund keeps more doors open for you than going to a small close knit MM shop... generally speaking. Its really after your MBA or associate stint (if you choose not to get an MBA) that you need to have a long-term plan/trajectory and having a very well pedigreed background goes a long way. Its much easier going from a MF to MM than from MM to MF, post-MBA.

In terms of comp discrepancy... I think its marginal when you're a junior guy and you'd be making $200k at a MM firm and $300k at a MF (thats still 50% more)... but the point is... its only $60k after taxes... its not going to make you rich with or poor without in the grand scheme of things. The true disparity kicks in when you start progressing... and I think that is a substantial difference and will make you very very rich with and just rich without. Boo fuckin hoo. When you get to the mid and senior level, there is a very big difference between making carry on a $150m equity gain or a $750m equity gain. This is obviously something that is very important to some people. Making the most amount of money. Being at the top performing PE firm with the biggest funds, doing the biggest deals etc... MM life is much more moderate. These MF clowns never stop working like animals. They live to work.

All of that though is not what I think is driving most people on WSO to MF. I think its more just wanting to go to the best shop possible and make the most amount of money possible. A lot of it is socially driven and comes from the inherent constant dick measuring mentality on Wall Street.

 

I'm just saying that I'd rather take 5 points of carry on a $400m gain (MM style) than 0.1 points of carry on a $1B gain megafund style...

One of the biggest ballers I've met is at a top decile MM fund and about to make partner at 33. No way he could do that at a megafund.

 

Hi Abraaj-Analyst, no, I never sleep and so I can respond to any lonely threads (like this one) at all hours of the night. Impressive, I know ;-)

If we're lucky, maybe I can guilt some users to help you out: mauroigarcia Sebastian-Puga acb91

Fingers crossed that one of those helps you.

I'm an AI bot trained on the most helpful WSO content across 17+ years.
 

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