This mainly applies to those who did’t do PE prior to an MBA. What if someone breaks into IB at 25, does 2 years, and then goes to HSW. Why is it that a PE firm wouldn’t take that person as an associate, but they would offer a 22 year old right out of college an associate role after the 2 year IB stint?
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Cause as an analyst you're doing all of the number crunching. As an associate, you're probably doing most of the pitching, working on PowerPoint, looking at the analyst's numbers from a high level perspective to see if they make sense.
PE people are looking for number crunchers, and those who can think and understand the numbers they are crunching have a chance of rising up at the firm. Usually PE firms only employ analysts for two years, so another argument could be that they're looking for relatively cheap labor that is well trained, and they'll find that from analyst classes at banks.
Because most analysts are gone by associate at IBs And pedigree bias is much stronger at PE They are looking for someone from BB or EB rather than some F500 and MBA business schools">M7 Also those coming from F500 likely had a chill life, unlike analysts who have been used to doing menial data mining and number crunching, building appendices for all nighters
It’s simply the fact that it’s a pre-MBA job and intended to last only 2 yrs before the next move to b-school. Post-MBA hires are for the longer term, I feel like you’re comparing apples to oranges when you compare a post-MBA candidate looking for a long term career while the pre MBA kid isn’t looking for a 2 year program.
Prepping for truckloads of monkey shit here, but the truth is that the work you do as a PE associate is not only more difficult but comes with far more responsibility. You don’t get to “massage” numbers in PE, you need to explain them. Your investment committee will laugh you out of the conference room is you can’t back up your assumptions. I could go on and on. A few years of additional education certainly does not prepare you to be a PE associate. Transaction experience, modelling experience (not talking about comps here), time spent with management/CFOs, etc. does. My two cents after jumping from less than two years of M&A ad an analyst to PE associate at a MM PE fund (~$5-10B AUM).
This question is very much top of mind for me as someone who went target school->solid job->starting MBA business schools">M7 in the fall. Only discovered what IB and PE even are maybe 2 years ago and since then struggled with whether to get my MBA now or totally reset as a 25/26 year old analyst. Chose to MBA route but have learned I'm essentially blocked out of any career in PE now feasibly.
I totally get why it's the norm to only take post-MBA senior associates/VPs in PE if you have prior experience in the industry. It's just very frustrating for me as someone who now knows this is my greatest career interest to have no prayer at the industry when I'm still only 25 years old and feel I'm more than capable of doing the job well.
How did you go to a target and not know what IB was
A bit of ignorance on my part but I was recruiting for consulting, strategy, and some AM while paying very little attention to IB. I applied to a few roles in IB with literally zero networking or added effort not realizing how the process went, and even assumed it was the same thing as AM based off the name ("investment" in the name). Foolish on my part as an econ major but kind of saw the guys going into IB as the popular, fratty bros and never thought it could be a path for me no matter what the nature of the job was. As I began working with IBs advising us over the last two years and talked to friends who did IB->PE, I realized way too late it's something that genuinely interests me a ton.
FWIW I'd say over half the people from my school who even do consulting or corp finance (let alone medicine, law, tech, or academia) wouldn't be able to articulate to you exactly what IB is (and even fewer what PE is) or how the whole IB to PE process works, so I'm not alone.
calm down, buddy. if you go IB out of b school (esp an m7), you'll be able to recruit for PE later on. i've seen it done a handful of times. they're obviously going to prefer other paths, but it's not like the avenue is closed to you.
You're not wrong but when I look at people who have gone top MBA->IB there are only a couple of success stories across hundreds of people (more actually who have gone consulting to PE). I talked to only one person from my future school who did it successfully and it was GS IB to one of their PE groups and he confirmed it's not impossible but an incredible uphill battle and luck of the draw for him.
Not trying to overreact or oversimplify but compared to pre-MBA IB, it's night and day--not impossible, but unstructured and incredibly challenging.
It's money. Just money. Purely money. Post MBAs will expect to stay at a fund for the long term and, as a result, they will expect a slice of the carry. Funds are going to give as few slices of that pie as possible. Pre-MBAs well they are, by definition, going to leave for MBA school at some point and won't expect to get a piece of the pie. Funds will only hire post MBAs if they have (1) raised a much larger fund and the work load requires more mid-level talent or (2) are filling holes caused by turnover. If the latter, then watch out. Funds with turnover have underlying problems (e.g., culture, returns, leadership).
In short - firms don't need to hire MBAs without experience, because there are already more MBAs with experience than seats.
Your scenario also compares 2 different positions. An associate role at a PE firm isn't for post-MBA candidates, just like an analyst role at an IB.
People have touched on a bunch of points, all of which are true to some extent, but the main factor is that most PE firms (and most organizations generally) have a pyramid-shaped org structure with more VP/Principals than partners, and more Associates than VP/Principals. As you go up the ladder, the sheer volume of roles decreases.
As a result, the supply of VP jobs is fundamentally outstripped by the number of available PE Associates gunning for those jobs and as a result, most PE firms can easily fill their ranks selecting only from people who previously worked in PE. If you had the choice between someone with PE experience and someone without, why wouldn't you choose the former, all else equal? There are certainly some people who are able to break through without PE experience, mainly at smaller, less established funds that may not have the pick of the litter when hiring from the PE associate pool, but by and large VP roles are filled by former PE associates.
Banking is difference because so many analysts leave and don't return to banking that there is fundamentally a shortage at the Associate level. PE doesn't have this structural issue because voluntary attrition from PE is much lower than in banking.
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