Why does every 2nd IBanker want to transition to PE?

I've done research and spoke to a lot of people in the industry and it seems like the hours aren't that better at all from IB and the all in comp is roughly the same as in IB. So why does every second person in IB want to make the transition one day? The only thing I conclusion I could come up to is that maybe the work in itself is intellectually stimulating. Or am I wrong?

Comments (52)

Nov 24, 2018

You can influence the company, get to sit on the board, can swap into operations, etc...

Like the poster below said though people either go the HF or PE route post IB, depends on what you like more.

Nov 25, 2018

I thought hedge fund was for ER/AM types, not IBankers since the skills aren't transferable at all.

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Nov 27, 2018

Dude you realize that all of the top hedge funds recruit analysts from all of the top IBs, right? The skills you learn in 2 years as an analyst are enormously helpful in performing any sort of investment work whether that's PE or HF. Hedge funds would be less likely to recruit senior bankers, but they scoop up analysts all of the time

Nov 24, 2018

Some want to go to hedge funds

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Nov 24, 2018

Your guess is pretty much correct - comp & hours don't vary materially these days between IB/PE (exceptions exist of course), but the work is definitely a lot better, dare I say fun

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Nov 24, 2018
DalaiLama:

the work is definitely a lot better, dare I say fun

How would you know? Maybe I'm mistaken, but your profile indicates that you've never worked in PE.

"Fun" sounds extraordinarily optimistic.

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Dec 1, 2018

Did an internship at an upper MM PE before starting in banking FT. Small sample size but found the work & general dynamics a lot more enjoyable. Agreed that "fun" is a liberal use of the term - end of the day can you really say any job is "fun" (outside your sports/entertainment/celebrity roles)? Was speaking on a relative basis in terms of the options available to us monkeys.

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Nov 27, 2018

Two points I think I should make here. One, your life becomes invariably more predictable due to obvious factors, most stemming from the fact that you are no longer a servicer to a client: you are the client. This washes away the last minute, out-of-the-blue client requests on a Friday afternoon. Second, there is less volume of work due to the fact that you are doing only what is required to get a deal over the line, while using investment banks for the ancillary tasks that may otherwise keep you up late at night. Management presentation needs to be prepped? There's a banker for that. CIM needs to be prepared for a portfolio company? There's a bank for that. Hell, I have even heard of people sending their comps to banks to be updated, completely unrelated to a deal they have been retained to advise one.

These factors GENERALLY make PE a better lifestyle, but there are many exceptions. I think the rule of thumb is as follows: larger firms tend to become more and more bureaucratic, which results in a higher frequency of work being pushed down and mid-level people going the extra mile (often for little value add) to impress those above them by creating more work. I think this is a common reason for why you see hours similar to banking at mf's, if I understand correctly. However, it is the exception in MM PE that the hours are equal to banking, and these exceptions seem to be far and few between (but I see you Mariner).

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Nov 27, 2018
10xleveraged.sellout:

Management presentation needs to be prepped? There's a banker for that. CIM needs to be prepared for a portfolio company? There's a bank for that. Hell, I have even heard of people sending their comps to banks to be updated, completely unrelated to a deal they have been retained to advise one.

Haha so true, in one of my recent deals, our M&A team was their buyside advisor and the PE guys made them essentially write up their entire 80+ page investment committee memo. As in like from all the IRR sensitivity charts to all comps, sponsor investment thesis, even directly edited the sponsor model etc.

The best part was that PE associate wanted to make it look like as if he was directly doing all the work. So for example the PE associate would give instructions to our M&A guys that evening then go home at like 8pm, then our M&A guys would churn all night send him a draft at like 4am. PE guy comes in next morning at 9:30am then sends it straight to his Principal without CCing the bankers to make it seem like he did all the work. Absolutely hilarious

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Nov 24, 2018

The actual reason is that PE is sustainable. IB eventually becomes sales.

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Most Helpful
Nov 25, 2018

Everything eventually becomes sales.

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Nov 27, 2018

was gonna say...what do you think fundraising in PE is?

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Nov 27, 2018

Yes but sales is much more central to IB than to PE. In fact I would say a passion for selling is probably the most distinguishing characteristic of successful bankers. I wouldn't say the same is true in PE, although relationship-building is very important and obviously has similarities to sales.

Nov 27, 2018

Yep, deal flow deal flow deal flow deal flow. The easiest way to make a deal work is to get the asset at a good (great?) price.

Dec 2, 2018

so.... much... this.....

Dec 3, 2018

not all sales roles are created equal however...

Ty

Funniest
Nov 27, 2018

Oh God no, not sales! clutches pearls

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Nov 27, 2018

Having worked both sides of the tables, I don't believe one is better than others. I have seen many people moved back to IBD from PE side. PE is great if you really want to be involved with actually investing, fixing companies and exiting. A lot of people say that they enjoy operational aspects of PE, but that can also start becoming a pain in the ass. On the better side of IBD, once a deal is closed, it is done for good and you get paid by then. PE people often complained that the real deal starts when you invested in a company; from now till exiting an investment it takes at least 2-3 years - that is a lot of sleepless nights ahead of you. The only upside with PE is when you actually invest your own money (GP capital), and you can significantly claim the larger portion of carry - which doesn't happen that much at the junior level. Was in IBD > then PE > IBD > now thinking about PE for the right fund environment.

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Nov 27, 2018

On that last sentence, just want to clarify: are you saying you are thinking about going back to PE if an opportunity avails at the right fund? Curious about that move. Obviously it is an obstacle if you went back to banking, and there are just generally less mid level positions open, most of which are filled by lateral IP's. Do you think this will be a difficult move? How do you plan to execute on it? Business school? Would be very interested to know your strategy here.

Nov 27, 2018

I cover a very niche area so the only reason I would move to PE would to be:

  • A co-investment structure rather than a fund structure (assume USD 500MM fund size)
  • I will fund raise 50% of the total fund commitment (i.e. USD 250MM); thus 100% of 2/20 of that USD 250MM (USD 5MM annual + 20% of profit made) go entirely to my team
  • For my team, we put in 1% of our portion of committed capital USD 2.5MM on the management company level rather than holding company level
  • The co-investor must be a regional/ global fund which covers my niche sector
  • Me and my team sit on the IC along with the co-investing team's GP
  • Their job will be to structure exit to strategic investors and portfolio management
  • My team's job will be focused on deal sourcing and portfolio operations
  • The right to set up my own additional investment vehicles to co-invest along with the main fund at same terms and also exit at the same terms

My niche is 1) being able to fund raise myself, 2) do my own deal sourcing, and 3) do my own process improvements on the invested companies. I won't be going back to B-school for that.

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Nov 27, 2018

More money less hours.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

Nov 27, 2018

Good question - I wrote a piece on this topic a couple months ago you may find helpful. I went from IB to PE and back. The link below outlines my reasons and rationale of what I was looking for. To no surprise, the grass isn't always greener.

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

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Nov 28, 2018

If you compare PE vs other exits opps out of banking such as HF or VC, PE is the one with the least prerequisites. For example, HF and VC both require a strong pre-disposition towards the craft -- whether it's a passion for stock picking or keen interest in the tech industry or entrepreneurialism. The reality is that most analysts have never picked a stock in their lives / follow the stock market, and outside of using Instagram and Snapchat with their friends, don't have enough of a passion for tech to make a career out of it. So that leaves PE. You then couple that with all of the great things you hear about PE, does it really come as a surprise that most analysts go into PE?

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Nov 30, 2018

Troll post? Do you want to sell stuff or buy stuff? The carry.

Dec 2, 2018

Does anyone else find the term "ibanker" extremely cringe

Dec 2, 2018
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Dec 2, 2018