by Brian DeChesare Comments (423)

Investment Banking Exit Opportunities: The Myth of the Buy-Side Job

investment-banking-exit-opportunitiesNOTE: This is a new version of one of the oldest and most popular articles on this site (the first version was written in 2008, pre-Bear Stearns).

While the main points in the original article still hold true, a lot has also changed in the past ten years. So I wanted to cover the differences in today’s landscape of investment banking exit opportunities.

What’s the easiest way to distinguish an American investment banker from a European one?

You might point to one of the following:

  • The European banker probably speaks 4-5 languages; the American one knows only English and 5-10 words of Spanish.
  • The European banker is still having nightmares about assessment centers and logical tests, while the American one is still worried about a slightly-too-low GPA from a non-target university.
  • The European banker is panicked over the consequences of Brexit, while the American one is more concerned with a psychopath or criminal assuming the White House.

But something much simpler tends also sets them apart: The American banker is far more obsessed with exit opportunities.

And that might not be so smart in today’s environment:

Exit Opportunities… What?!

Many articles, videos, and forum posts jump into a comparison of different “exit opps” without defining what an exit opportunity is.

So let’s start with the basics: An “exit opportunity” is another field that you go into after starting out in investment banking and working there for a few years.

Often – though not always – this field involves investing in companies instead of advising companies, or acquiring companies rather than advising on those acquisitions.

Examples include:

Other examples include investor relations, equity research, a different group or a different bank, or an MBA, though some of those are not true “exit opportunities.”

Bankers are motivated to move into these other fields because the work is more intellectually engaging, the pay is higher, and the hours are slightly better.

The Most Common, Flawed Thought Process Behind Exit Opportunities

For many years, the thought process behind exit opportunities was:

“I’ll suffer through investment banking for 2-3 years and work terrible hours, but that suffering will allow me to move into a more interesting and lucrative role with better hours in the future.”

In the original version of this article, I pointed out the flaws in this reasoning:

  • The Work is Not THAT Much Different: Yes, there’s less grunt work, and you get to use your critical thinking skills since you’re acting as an investor… but if you think financial statement analysis is boring, you’re going to hate these jobs as well.
  • The Hours Aren’t Necessarily That Much Better: For example, you’ll still be working long hours that prevent you from having much of a life if you’re at a “mega-fund” (one of the largest private equity funds or hedge funds). The hours are better at smaller firms, but you’re still looking at 60-70-hour workweeks in many cases.

Then there’s the social aspect – you’re more of a “lone wolf” in many of these roles since you have to come up with investment ideas and drive deal processes by yourself.

There’s less office politics, but also less teamwork.

All those drawbacks still exist; almost nothing about the work itself has changed.

So What Has Changed?

Much of the process that takes place before you can access these exit opportunities has changed.

Also, the industries have changed – everything from compensation to long-term prospects is different.

Here are the main changes and how they affect the appeal of exit opportunities:

1) You Need a Sequence of Other Internships Before You Can Even Win an IB Internship, Let Alone a Full-Time Role

Often, these internships will be at small private equity funds, hedge funds, or venture capital funds.

There are three implications:

  • These early internship experiences are a great way to “test drive” exit opportunities before you commit to anything.
  • You might not even need investment banking to pursue some exit opportunities – if you get the right sequence of internships early on.

For example, you could potentially move into hedge fund or asset management roles right out of undergrad if you’ve gone the CFA route and completed prior internships.

2) Buy-Side Recruiting Now Starts Ridiculously Early

If you’re working at a bulge bracket or elite boutique, headhunters will start contacting you a few months into the job, even if you’ve had no real deal experience yet.

So you might not have much to talk about in interviews, at least if you focus on the mega-funds that start ridiculously early.

It also means that you may not have much time to decide on your best option – wait too long, and many PE and HF opportunities will be gone.

You can still move into other industries, but you’ll have to focus on smaller funds or areas like corporate finance without hyper-accelerated recruiting.

3) The Lifestyle Improvement Might Not Be So Great Anymore

Banks, realizing that investment banking jobs were no longer desirable next to jobs at Facebook and Google, have been attempting to improve Analysts’ lives for several years now.

They started offering “protected weekends,” where Analysts get guaranteed time off from Friday night into Sunday morning for one weekend per month, and some banks have gone beyond that and attempted to limit office time on all weekends.

Banks have also been trying to keep junior bankers around longer by promoting them more quickly and paying bonuses in December/January.

You’ll still be working all day and night on weekdays, but these changes have made 110-hour workweeks a bit less common.

So the lifestyle improvement in moving from IB to exit opportunities might not be as dramatic anymore.

4) There’s a Greater Variety of Exit Opportunities

Anecdotally, it seems like more bankers are pursuing non-PE/HF exit opportunities now compared with 5-10 years ago.

The tech startup is the biggest and most obvious new area, but there has also been more interest in corporate finance and areas like consulting and equity research.

An optimistic interpretation of this trend might be: “Aha! Finally, people realize that there are other options outside of private equity and hedge funds.”

A more cynical interpretation might be: “PE and HF roles have become so ridiculously competitive that bankers have to look at other options.”

5) Private Equity and Hedge Fund Compensation is Down and Probably Won’t Recover to Its Old Levels

For reference, pre-2008-financial-crisis pay was insane.

IB Analysts who left banking and went to mega-funds would often earn $500K in all-in compensation, and it could be even higher at the top hedge funds.

Pay dropped immediately after the financial crisis, and it hasn’t recovered since then.

Over the past five years (2011 – 2016), the average “all-in” PE compensation across all levels has been around $250K – $300K, with HF compensation around $300K – $350K (Source: The Job Search Digest compensation reports).

But those are averages across all levels: If you enter after a few years in banking, you’ll be earning on the lower end of that range until you move up the ladder.

Average Analyst and Senior Analyst compensation at hedge funds has been around $200K – $250K over the past several years.

Yes, those are big numbers, but they’re not that much of an increase over investment banking compensation: Associates currently earn between $200K and $400K all-in.

You do get a bump if you go from being a 2nd or 3rd Year Analyst at a bank to a buy-side role, but you won’t double your compensation.

6) You’re Not an Early Mover Anymore – Everyone Knows About These Industries

Finally, all these industries are more mature and developed now.

If you had joined a hedge fund in 1996, you would have been an early mover.

But in 2016, you’re another one of the tens of thousands who wants to move in.

It’s better to join new industries early because there are more opportunities, and it can be faster and easier to advance.

With many investing roles, there’s now too much money in search of too few good opportunities.

Simple math means that many funds will not perform well and will shut down.

You’ve already seen this in the news with many high-profile funds closing over the past year or two and more funds closing than opening.

Many investors have also been clamoring for lower management fees – less than the 2% of assets that funds typically charge – which will reduce base salaries and make total compensation more variable.

The Best Way to Think About Exit Opportunities

These changes mean that you should not think of exit opportunities as the be-all and end-all.

Even the word “exit” is problematic because it implies that you’ll only move in one direction: From investment banking to something else.

But if you read some of the reader accounts on this site, you’ll see that reality is not quite so rigid.

It’s better to think about exit opportunities like this:

“I’ll test various fields with internships in university, or with pre-MBA internships or school-year internships during a Master’s program, then go into investment banking, and then think about returning to one of those fields.”

What Do You Need for the Best Exit Opportunities?

To pursue the “best” exit opportunities – the most selective or prestigious ones – you need:

  • A Bulge-Bracket or Elite-Boutique Bank – You have the best chance of winning mega-fund offers if you’re at one of these. The specific bank matters less than the type of bank you’re at.

So if you have a choice between two bulge brackets, don’t choose based on which one is “more prestigious”: Pick based on the team and culture you prefer.

If you’re at a middle-market or smaller firm, you can still win exit opportunities, but you’ll have to do a lot more work on your own and aim for smaller companies.

  • The Right Geography – There are far more exit opportunities in New York, London, and Hong Kong than in other cities in North America, Europe, and Asia. And it’s tough to make an East Coast to West Coast move, or vice versa, if you’re in the U.S.
  • A Top Undergraduate Institution and GPA – Yes, these still matter, especially since recruiting starts so ridiculously early.
  • The Right Industry Background – It’s tough to move from something specialized, such as FIG investment banking, into a more general team, such as a healthcare or consumer/retail-focused private equity fund.
  • Relevant Pre-Banking Experience – Ideally, you’ll have previous internships that are related to this exit opportunity, such as VC or PE internships if you’re aiming for growth equity roles.

You should avoid super-specialized groups such as FIG if you don’t want to work in those industries in the long term.

But other than that, you shouldn’t obsess over your group too much.

Yes, you’re more likely to get solid deal experience in some groups, but it’s difficult to predict deal flow in that critical 6-month window when you first start.

Yes, it’s better to be in M&A, Leveraged Finance, or a good industry group than the ECM or DCM teams, but it’s not the end of the world if you’re in capital markets.

Which One is Right for You? Rank the Exit Opportunities!

Someone will now ask for a “ranking” of exit opportunities.

I won’t do that, but I will briefly describe the trade-offs of the most common ones:

Private Equity

Private equity is best if you enjoy working on deals, but you want to think about them more critically and work with companies over the long term – years instead of months.

You have a lot of options if you go into PE and decide you don’t like it: You could go to business school, join a portfolio company in a finance role, or even move to some other exit opportunity.

You get more of a “generalist” skill set because you’re not doing just one thing over and over: It’s a mix of financial analysis, negotiations, leadership/team coordination, and sales skills (if you do sourcing or fundraising).

Compensation is another positive, but to make serious money – in the 8-figure range or beyond – you’ll have to advance to a very senior level or start your own firm.

Besides the fact that it’s so difficult to get into private equity, another drawback is that it’s very tough to get promoted up to the top.

Partners at these firms have such cushy positions that hardly anyone leaves voluntarily.

Hedge Funds & Asset Management

Hedge funds are so different from private equity that it’s almost deceptive to group them together.

The main difference is that you follow and invest in individual companies, or other securities, rather than buying and selling entire companies.

The day-to-day work is more stressful since you monitor the markets constantly, but you’re less likely to have a disaster on a pending deal that kills your weekend.

You should consider these roles only if you have a track record, an undying passion for investing, and specific ideas; you don’t necessarily need those in PE since you can talk about your deal experience, but it’s essential here.

The main downside to these roles is that you develop a very specialized skill set, which makes it difficult to move to different funds or different industries.

It’s also tougher to get into top MBA programs because it’s difficult to explain a complicated investment thesis to admissions committees.

By contrast, it’s easier to explain a deal or a difficult client situation, so you have an advantage coming from IB/PE roles.

Venture Capital

Venture capital is sort of like “private equity lite”: You still work with entire companies, but the deals consist of minority-stake investments.

Since you invest in early-stage companies, there’s less financial analysis, and you spend most of your time analyzing the market, finding interesting companies, and networking.

You also earn quite a bit less than you do in private equity, but the hours and lifestyle are better.

If you want a long-term career in venture capital or you want to work at a tech or biotech startup in a finance or business development role, VC is a good path for you.

But if not, it’s not necessarily the best option: It’s even more difficult to move up the ladder since firms make hard distinctions between Partner-track and non-Partner-track positions.

Also, while you can get into top MBA programs from VC roles, it would be tough to move into private equity, go back into banking, or go to a hedge fund.

Corporate Finance

Corporate finance is quite different from these other exit opportunities because it’s arguably not even a front-office role.

In other words, you’re not working with clients or companies that your firm might potentially invest in – corporate finance is mostly internal and related to your company’s budgeting, internal processes, and financing needs.

You’ll earn less than in the PE/HF/AM exit opportunities, but you’ll also have better hours and a more regular lifestyle.

The end goal in corporate finance is to become the Chief Financial Officer (CFO), which has various trade-offs vs. becoming a Managing Director in investment banking.

Corporate finance roles are best if you want a better work-life balance, you don’t care about a slower progression up the ladder, and you want to use your skills at a real company that makes something.

Corporate Development

We group corporate finance and corporate development together on this site, but the roles are quite different.

Corporate development is all about working on acquisitions and joint ventures at a companydeals – rather than the budgeting and financing processes at that company.

So if you like working on deals and longer-term projects, but you want a better lifestyle than what you’ll get in PE, and you’re willing to accept lower pay, corporate development is a solid option.

If you work at a well-known company, you’ll have many options afterward: You could go to business school, go back into investment banking, or even go into private equity.

It would be tough to enter a public markets role such as hedge funds or asset management from here, but I’m sure someone has done it before.

Startups / Entrepreneurship

This last one is very different from everything else on the list.

It’s less of a traditional exit opportunity that requires a finance skill set and more of a “trendy thing” for bankers to do.

The banking skill set is not particularly useful for these roles unless you join a later-stage startup that has budgets and customers.

The main advantage of this path is that you get to determine your destiny.

The disadvantages are that the risk-adjusted returns are terrible and that it will be almost impossible to go back into finance if you’ve run your own business for a long time.

It would also be tough to move to a normal company if you’ve run your own business for years and years.

So you have to be pretty certain you want to go this route, and if you decide against it, you need to get out ASAP.

Other Options

Take a look at the Articles page on the site or do a search to find coverage of other industries.

Finally, don’t rule out staying in banking.

This obsession with exit opportunities is a U.S.-specific phenomenon, and it makes less sense now than it did in the past.

While the work is still less interesting than critically analyzing deals or investing, there are some benefits to a career in banking:

  • Mid-six-figure to seven-figure pay at the mid-to-senior levels, and if you’re at an elite boutique, that pay will be in cash rather than stock or deferred compensation.
  • The risk-adjusted compensation can’t be beat. Yes, you can earn far more money in buy-side roles, but there’s also far more risk from your fund blowing up or shutting down. And pay at normal companies doesn’t come close unless you reach an executive position at a huge firm.
  • There is a clear progression up the ladder. This progression is in sharp contrast to many other roles where you keep the same title for years.

To Exit or Not to Exit: Is That the Question?

No, that’s not the question – or at least, that’s not the complete question.

Rather than thinking about “exit opportunities,” you should think about your long-term career progression.

Test out different industries with your internships, see what you like and don’t like, and then see what you think of your full-time role in banking.

If you want to leave and you have your heart set on a mega-fund, move quickly!

If not, take your time and see what fits you best.

With enough time and treatment, you might just lose your obsession with exits.

Do it well enough, and people might start thinking you’re European.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. Brian – very interesting article. I have a question. I am currently in an IB role and I was wondering if you think working at RE private equity firm is possible or if you ever see anyone moving from IB to Real Estate at all?

    1. It’s possible, but normally for real estate they want to see more of an industry background. So your chances would be better if you worked in real estate investment banking or even something like infrastructure or project finance. Most of the RE PE stories I’ve seen have been people moving in from one of those or from commercial real estate brokerage firms.

  2. I am a 1st-year analyst at a good boutique. I am still undecided about what I want to do so could I stay for 3 years in banking and then jump to the buy-side? Would I be at a disadvantage if I recruit a year late?

    1. I don’t think you would be at any disadvantage if you recruit a year later. It’s just that you’re taking a bit of a risk because the market may worsen or there may be fewer opportunities by then. But plenty of analysts do actually stay for a year before they begin to recruit for buy-side opportunities, often because they don’t have enough deal experience a few months into the job.

  3. I am a first year at a BB and was wondering how you think it is viewed to leave after only 1 year? Do you still have strong exit opportunities or are they more limited?

    1. Some firms would view it negatively, but it depends on where you’re moving to. If you get a PE offer that starts after only 1 year, sure, take it… but most of the time, they don’t, so your exit opportunities are more limited at that point.

  4. What exit opportunities have you seen for people working in Public Finance at at top 3 BB firm?

    1. Go to another bank, maybe go into DCM or LevFin, or maybe trade municipal bonds or do something else related to municipal bonds at a hedge fund. It would be tough to move into a standard IB/PE role from public finance.

  5. Nice article on investment banking opportunities….

  6. Undergraduate

    Why would anyone ever choose to stay in IB rather than move to PE?

    According to the article above, in PE the pay is better, the work is less grunty, and the hours are at least slightly less terrible. What is the upside to staying in IB? What prevents every IB associate from quitting and going to PE?

    1. M&I - Nicole

      Because some people prefer to be in IB doing deals and on the sell-side. Some people may actually do better in IB vs. PE.

      Pay, hiring needs all play a role in your 3rd question.

    2. There is also the fact that at higher levels of IB, you get exposure to media and could become “a well known banker” for the general population, less so as at PEs

  7. Hello,

    when you said that its a typical path to go from IB to PE and from trading to Hedge fund,

    Investment bankers who are going to PE all come from M&A or other IB job like ECM/DCM/leveraged finance/structured finance are also eligible for PE jobs ?

    And what about hedge funds, are there just traders who can land a job in hedge funds or is it right for sales and structurer ?


  8. Steven Jang

    M&I , great articles as always !!!

    I would like to ask a question about Hedge Fund and Private Equity.

    I know that there are always exceptions.

    But, is it commonly true that investment bankers generally go to Private Equity and traders commonly go to Hedge Fund (as exit options) ?

    I really wish to work on Hedge Fund in the future, and I have no idea which one (investment banker or trader) has more advantages to get a job on Hedge Fund.

    1. M&I - Nicole

      Yes this is a common path.

      I’d say you’d want to stay on the markets side (i.e. S&T and perhaps research) for HF roles. Bankers do end up in HFs though, but it also depends on the geographical location and the opportunity.

      1. Hi Nicole,

        I thought it is the Bankers who usually end up in Hedge Funds as Portfolio Managers.

        Is it really a common path that Traders end up in Hedge Funds?

        1. M&I - Nicole

          Yes many traders end up in hedge funds.

  9. Syrymflash

    M&I, AWESOME article !!!
    Honestly speaking, I never understood and still don’t get when someone says hours are terrible in finance. People in finance love money, thus they all are in finance (Talking about IB, PE, and HF). They sacrifice their time, relationships, and so on and so forth for better life later on.
    You work more, make more and have better life; I think fair enough. At the end of the day, everyone works equally long hours. But, the difference – investment bankers work those hours in their 20s and 30s while others work entire life.
    Personally, I prefer working while young; probably, it was the main reason I study finance in college and want a career in IB.

    1. M&I - Nicole

      Thanks for your input!

      1. HedgeFundGuy

        Hi Nicole. I am studying Petroleum engineering and Finance in UNSW, which is in the top 10 finance schools in the world. I want to work in a hedge fund and was wondering what is the best way to break into it? Also, should I eventually get an MBA after my work experience?

        1. M&I - Nicole

 should help you. An MBA from a target school maybe useful if you can’t get into the field with your bachelors, but otherwise, no I don’t think its that useful

          1. HedgeFundGuy

            Thankyou very much for your help. I was also wondering, how are the hedge fund industries in Australia (Sydney) like? Also, are there any specific bachelor degree/s could I do inorder to improve my chances to get into hedge funds in Australia (I am still in first year and hence capable of easily transferring to other courses). I understand form your other articles that there is no specific path but surely there must be few degrees that would be helpful in the future.Finally, how can i get some work experience in these and related financial industries despite being a freshman. I would like to thank you again for all your help.

          2. M&I - Nicole

            I’m not 100% sure with industry in Australia, but I think talking to fund managers through LinkedIn and industry events will help you. It also helps if you’re from a target school. I don’t think there are specific degrees though Finance/Accounting maybe preferable.

  10. Hi Nicole, I’m an engineer by degree. With effort I have changed my career from IT to Finance. Currently I’m working for a leading KPO in India.

    If I apply for a top B-School chances of being selected are slim as I neither have exceptional achievements nor grades. My plus points will be 3 years of work ex and GMAT score (assuming I do well in GMAT)

    On the other hand boutique banks or PE firms are not very interested in my KPO experience. They are more looking for deal experience which I do not have. I do not have any degree in finance, this might be a negative point too.

    Taking all the above points into consideration if I have to get into a decent IB or PE firm where should I invest my next 1 year time. Should I continue to apply for boutique IB or PE firms or should start preparing for GMAT and try getting into good B-schools.

    Please guide me for my career path.

    1. M&I - Nicole

      I’d do both. Pick a few schools to apply to, and continue to network with boutique IB and buy-side firms to get an offer

      1. I don’t think I can get into long networking process. I must just start cold calling then. Is it a good idea to personally visit banks with CV in hand :)

        1. M&I - Nicole

          You can try though I don’t recommend that. Maybe best to cold email and cold call.

          1. You guys have been very helpful.
            Thanks Nicole.

          2. M&I - Nicole

            Thanks for your comment. You’re welcome.

  11. Good read. I’m a rising undergrad JR majoring in Finance and Math in Wharton. I want to try to get a PE internship as opposed to an IBanking internship next summer as a junior. Will that be detrimental to me if I ultimately decide that I want to get into IB after graduating?

    Since I still am not 100% sure of what I want to do, my rationale for this is that it would be easier for someone with an internship experience in PE to break into IB, than someone with an internship experience in IB to break into PE. Is this wrong?

    Basically, I want to set myself up so that regardless of what I end up in after undergrad business school, I will have the most opportunities in front of me, be that climbing the ladder or exiting (I know it sounds selfish haha). Thanks!

    1. M&I - Nicole

      No it is not detrimental at all. You just need to explain yourself well. I think its a good idea to try a PE internship, though it can be challenging to come across such opportunities. If a PE internship comes by I’d take it. Otherwise, I’d also leave doors open for IB roles.

  12. If a MBA works as an associate, would be it years behind the banking analyst who got into private equity directly? How could a MBA to outperform or catch up with the people who got into pe directly?

    1. M&I - Nicole

      Not necessarily. In some cases that can be true if the analyst is very smart with great deal experience.

      To outperform, you’ll have to gain as much deal experience as you can and demonstrate your ability to source/bring in deals

  13. Hi Nicole,

    What is the difference between asset management and hedge fund? Are they the same thing?


  14. Hi Brian,

    My banker friend broke into private equity as an associate this yr after 3 yrs working experience. If I get a MBA and get into private equity, will I be starting from senior associate positions?

    Does private equity firm really value MBA degree? Thanks!

    1. M&I - Nicole

      I’d say associate, not sure about senior associate.

      Yes if it is from a target

      1. So if I am not in the Target school, say I am in Ross/Cornell/Duke, do I have any chance break in? Does private equity value networking as much as banking do?

        1. M&I - Nicole

          Yes you have a chance – the schools you list are good schools. Yes they do but they value IB experience

  15. Hi Brian/Nicole,

    What level will I be at if I were to get MBA, work 2-3 years at a BB and get into a mega fund?

    And how do you define mega fund? Is a fund with $7 billion considered as a mega one?


    1. M&I - Nicole


      I don’t have the exact numbers but I’d say firms like Blackstone KKR etc

  16. Hi,

    I am just beginning my role as an analyst at a BB in Asia. I was wondering if PE/Hedge Fund recruiting worked similarly here as in the US? I understand that in the US, analysts get contacted for the buy-side roles as early as few months into their jobs and some even have buy-side offers by end of their first year at the BB. What is the scene here in Asia – Singapore, Hong Kong etc? Do analysts have similar opportunities (of course, not as prevalent as in the US) to make the shift early on?


    1. M&I - Nicole

      I’d say usually in 1-2 years. They may contact you as early as in a few months, but this can be relatively rare, at least in my experience, and I may be wrong.

  17. I am a post-MBA first year associate at a bulge bracket firm in New York. I was a summer associate with another bulge bracket during my MBA. Prior to my MBA I worked with a bulge bracket investment bank in a non-finance role for 4 years. I have completed my CFA as well.

    I have had relatively decent deal experience. I now want to try to get an associate position at a private equity firm. I would like to know if candidates like me land private equity jobs and how quickly is the window closing on me.

  18. Great article. How difficult is it for a post-MBA banking associate (2-3 years of experience at associate level) to get an investment analyst job at a hedge fund (Long Short, or distressed)? (assuming my odds of getting into a hedge fund right after MBA is slim)

    I am trying to figure the best path of breaking into hedge funds after MBA. It seems like banking analysts make the jump regularly, but it is much less common for associates.

    Is that true? Should I go to equity research to have much better chances?

    1. M&I - Nicole

      I think you can start moving now. You’ve already had IB experience and this should be useful for HFs

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