Investment Banking Exit Opportunities: The Myth Of The Buyside Job
“Before I became so fervent about Private Equity, I thoroughly considered all my other career options: hedge funds and VC.”
-Hicks Musings, The Leveraged Sellout
One common question I’ve been getting lately goes something like this:
“I just started as a freshman at Harvard. I am majoring in economics and finance and I’m in the stock market club, the investment banking club, and I even borrowed $500,000 of my Dad’s money to invest in my personal accounts. So far I’ve earned a 50% return in 6 months.
How can I make sure that I work at Blackstone by the time I’m 25?“
Another variant of this same question:
“I am only doing investment banking so that I can pay off all my student loans in 2 years, but I have no interest in ever doing it again. What are the exit opportunities like for Associates at boutique banks who want to get into hedge funds?”
For those breaking into investment banking, the exit opportunities are always a big motivation.
It makes sense on paper: you go from working 90-100 hours a week and doing mindless work to working 60 hours a week and doing meaningful work 100% of the time, right? Right?
The Hours
Lifestyle is a common reason for switching from investment banking into private equity or hedge funds. Specifically, people assume that they will actually be able to have lives for once rather than sitting in front of a computer for 18 hours a day.
Private Equity Hours
If you go to a large private equity firm, like Blackstone, KKR, TPG or Bain, this assumption is false. You will be working banking hours for another 2-3 years – bet you can’t wait for that.
I’m amazed at how many people don’t realize this until they get to interviews with these places or until (gasp) they actually start working there.
If you go to a smaller PE or growth equity firm like Summit Partners or TA Associates, then you won’t be working 100 hours a week. But you will still be doing 60-70 – significantly more than a normal job – and on top of that you will have to travel quite a bit, so forget about a consistent schedule.
And when a deal heats up and you’re close to acquiring a company, your hours may remind you of what it was like to be an investment banking analyst: weekend work and sleeping under your desk for a few nights each week.
Hedge Fund Hours
Hedge funds tend to be better than private equity in terms of consistent schedules. You work market hours, and weekend work is not required unless you work at a PE-like fund that acquires companies.
However, some travel can still be required for doing “channel checks” (e.g., checking to make sure that the toy retailer you’re acquiring still has Wii stockpiles even in its Minnesota office).
And if you’re at a West Coast hedge fund, you now get to wake up at 5 AM every day so that you’re at work before the market opens on the East Coast.
Bottom Line
Some exit opportunities can indeed offer a better lifestyle, but you’ll never be working 40 hours a week in any of these industries. And you’ll almost always have a difficult time getting a consistent lifestyle with anything in finance.
Before diving into your next job, figure out what the lifestyle is really like so that you aren’t surprised by the mandatory weekly visits to the Yukon Territory in the middle of winter while doing diligence on an oil company.
The Pay
Yes, private equity and hedge fund pay tends to be higher than those investment banking salaries you always hear about… but that’s not the whole story.
Private Equity Pay
At private equity firms, you will make about as much per year as post-MBA Associates at banks make (e.g. significantly more than you made as an Analyst). At smaller places and growth equity firms, the difference in pay is not as huge, but it does tend to be higher than banking at the equivalent levels. At bigger places, it can be much higher than entry-level banking Associates; some even guarantee $500,000 or so per year.
However, the pay difference is much greater at the Managing Director/Partner level than it is at the more junior levels of private equity and investment banks.
So it would not be rational to want to switch into private equity solely because of higher pay, unless you are a very senior hire.
Hedge Fund Pay
Hedge fund pay can vary wildly between different funds. The standard seems to be a base salary of $100,000 for those coming in directly from banking, plus a bonus that will take you to the $200,000 – $300,000 total compensation level (very similar to private equity Associates).
This is much higher than what you could get as a 3rd year investment banking analyst, and is about on par with what post-MBA Associates at investment banks make.
Depending on the fund, their performance, and your performance, the bonus could be significantly more or less than this; if you have really bad luck, you might just get nothing as the fund collapses before your eyes! (ok, this is unlikely) And if you do really well, you might make closer to $500,000 total. That scenario is unlikely except for the largest funds.
However, as with private equity pay, there is a significantly greater difference at the Partner level, where top hedge fund managers can pull in over $1 billion in cash per year. That is more than private equity Partners make and far, far more than even the CEO of Goldman Sachs made last year.
It should also be noted that hedge fund managers making $1 billion are exceptions rather than the norm and most managers don’t make anything close to that, though in general they still make more than investment banking Managing Directors.
Exceptions Apply
One exception to all these salary figures is prop trading and certain small hedge funds / prop trading firms that could potentially pay you an unlimited bonus. I know of at least one place that actually pays you 50% of what you earn from trading, and there are several recent college graduates earning millions of dollars per year there.
But most people going into buyside jobs are not going to suddenly be earning millions of dollars at age 24. Your salary will almost certainly increase, but the really substantial increases over investment banking salaries come at the more senior levels.
The Work Itself
This is where people have some of the most incorrect ideas about private equity and hedge fund jobs.
Yes, there is a lot of stupid grunt work in investment banking that everyone hates doing… changing periods and commas in presentations, editing text in documents 500 times… formatting PowerPoint graphs.
The amount of stupid work you do certainly decreases when you move onto private equity or hedge fund jobs.
But guess what?
If you don’t like Excel or you think analyzing companies, doing valuations, or modeling are boring, you’re not going to like the buyside very much.
The work is just not that different.
You still do financial modeling… you still do diligence, and you still have to do some annoying grunt work. When private equity firms acquire companies and work with banks, for example, the Associate will be tasked with writing “bid letters” and working with banks on financing, which can often require a lot of number scrubbing and attention to detail.
Sourcing
Not only is the work fairly similar to what you do in investment banking, there is also a new type of work that most people despise: sourcing.
“Sourcing” is a euphemism for cold-calling. This is more prevalent at growth equity places (Summit is notorious for making its Associates cold-call companies all day) than at large private equity firms.
It may sound impressive at first to say that you’re in charge of bringing in deals. You may even think to make it part of your private equity resume.
But actually, you’re just in charge of cold-calling; the Partner still owns the deal, even if you “sourced it.” Some private equity firms do pay their Associates a bonus for closing deals they generated, but it’s paltry compared to what the Partners will make off it.
Managing Directors in finance source deals via their long-standing relationships and through regular communication with prospects. They don’t cold-call every company on the Inc. 5000 list until someone says, “yes.”
You, by contrast, will be doing this, or at least some form of it. And it’s one of the most common reasons why people don’t go into private equity or at least avoid the firms with a “sourcing model.”
The Social Aspect
This is one of the most overlooked aspects of investment banking vs. buyside jobs. With banking, you have a group of other Analysts working alongside you and you chat with them in your downtime, go to Starbucks together and enjoy models and bottles with them outside work. It’s almost like living in a dorm in college all over again.
With buyside jobs, this disappears.
You might be the only Associate; you might even be the only person under 30 in your office, depending on the firm.
Private equity firms and hedge funds tend to be much smaller than banks and don’t have as much of a need for an army of Analysts and Associates to do work… there simply isn’t as much work to be done.
This may sound less significant than the other factors I list above, but don’t underestimate it.
I actually know of some 2nd and 3rd year Analysts who were reluctant to leave for this very reason – yes, the pay and upside might be better, but not having any close friends in the workplace can make for a bad experience.
The Bottom Line
I don’t agree with those who think investment banking is only a stepping stone to working in private equity or at a hedge fund.
Doing the job only because you think those options are going to be completely different experiences is a bit absurd. They’ll be better in some ways, but they can also be worse in some respects as well. No one in banking ever yelled at you for not cold-calling enough companies.
If you want to work in private equity or at a hedge fund, it’s better to go there directly; if that is not possible, just do banking for a year and switch over (harder to do now with the market downturn).
But What About Venture Capital And Other Jobs?
I know someone is going to bring this up unless I discuss it here.
Venture capital and corporate development jobs can indeed offer a significantly better lifestyle than either private equity or hedge funds.
However, you will likely take a pay cut compared to what you were making as an investment banking analyst. You could actually be as senior as a VP in banking and make less than a 3rd year Analyst!
Plus, you still have the issue of the work not being that much different and the social aspects referenced above.
Don’t get me wrong: if you want to still have a good salary and a much better lifestyle, venture capital or corporate development could be right for you.
But recognize that, as with any other choice you make, there are tradeoffs between all these options and nothing is “the best.”
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I saw you say that CFA is relatively useless in IB/VC/HF/PE. Therefore, I would like to know why. Also, will certifications like CAIA help in getting a job in these few areas? Thank you.
http://www.mergersandinquisitions.com/stuff-investment-bankers-dont-like-cfa-activities-advanced-degrees/
CFA is more helpful if you’re in a Equity Research role.
Most Head of Sector research has a CFA qualification
Agreed, at the bank I’m at, all the heads of different research departments are CFA chartered.
I am working (11 months) at a prop trading firm (based in India, trade on NYMEX, CME etc) as a derivatives trader (though i am an MBA from finest B schools in India, had to take this job due to recession). I want to movie into banking but still not able to. I want to ask what exit options are there for traders like me at such prop firms. How easy/difficult it is to break into banking/I Banking/Hedge Funds from there… (needless to remind, at such prop trading firms its majorly intra-day trading that happens)
It’s always tough, and it comes down to how persistent you are / how much networking you do. In India it’s even tougher than elsewhere because it’s more structured and they place higher value on certifications and your background. Your best bet is to start contacting bankers now, see what the reaction is, and then react accordingly… it may be that in-person networking events are your best option for breaking in, or it may be that cold-calling is better.
Thanx for your reply. I still have been hesitant in cold-calling thinking what the other person would think when i just cold-call someone out of nowhere and whom i dont know at all. I have an MBA from IIM (Indian Institute of Management), but here major stress is on campus placements. During that they don’t even bother to see your previous exp or like that. Fresher (without any work ex) land up lateral offers. But when you apply from outside for same job, the criteria of relevant work ex etc etc kicks in. One more thing i want to know. This prop-trading (trading US & European markets) concept is quite new in here. What could be my exit opportunities from this? Could u just highlight this aspect a bit? Thanks for your time.
From prop trading you’re limited to more trading or hedge funds – it’s much harder to move into banking / corporate finance / PE because your skill set is more specialized.
I’ve been working as an IB Jr. Analyst for the past 21 months in India and have an Interview with a PE firm coming up. I intend to make a career in PE/VC in the longer term so I’m quite excited about the opportunity. However I will join as an Analyst there and the firm’s expectation is to have me spend two years at the firm. My dilemma here is – whether I should take the plunge and work at the PE firm for 2 years and then do my MBA (with a total of 4 years of experience – 2 at IB and 2 at a PE) or pass, in which case i continue in my current role in the IB, and go for an MBA next year (3yrs of pre-mba work experience). Which of the two would be a better bet with respect to a top notch bschool admit and job prospects post MBA… would appreciate your thoughts on this.
If you want to do PE post-MBA, definitely move to the PE firm right now. Very difficult to get in after unless you’ve done PE before.
I am in the process of making a career change. I have spent the last 8 years as an officer in the Marine Corps. I am going to attend a top 10 MBA program this fall. What do I need to do to move directly into a PE/HF directly after my MBA? And what can I expect being I have no prior finance experience?
Lots of networking. Focus on former Marines / anyone else in the military, and try to highlight any quantitative or finance experience you’ve had, spinning where necessary.
I am comp sci background, both work and education from a top engineering school, and want to switch to IB. I am 32 and have a grad degree in engineering. If I go to b-school, I’ll be be 36 by the time i graduate. I want to switch because I tried many jobs in engineering and do not find it rewarding in terms of impact that it makes; so much of quality engineers are dependent on business funding controlled by vc, mbas and the like.
How can I make the switch happen? As a 36 yr old associate can I fit in and advance in a forceful way in IB similar to the way a younger guy can. Or will I be reminded of the age issue even after joining the ranks at every turn?
I would still go to a top business school… you would be older than the average associate, but I’ve seen people up to 40 get in. No one cares about age once you join.
Are there things I need to do to prepare myself before I go to b school to land a good IB job? I’d like to think that I do have a shot at top b schools but not sure as hbs like schools will reject me due to my age. Also b school admission look random in some cases even at the top schools. I know of a guy with stellar profile not getting in hbs and some top schools and a more mundane profile getting in hbs.
Also, the b school one goes to will stick with for the rest of one’s life. My ug is from a topmost school so I never had any complex, but not sure how bad I should feel if i do not get into a top three bschool. I should probably do more research on my own about what b schools can get me IB job with a bank like goldman, but any comments from you will be helpful, thanks.
I really don’t know much about the business school admissions process, but if you want to have a good chance you need something impressive outside of work and school – that’s the biggest thing for getting in.
Hi,
I’m a senior at a top 4 university in the US going on to work at one of the old-line mutual funds in New York. The firm is similar to a Loomis Sayles, Dodge & Cox or Eaton Vance. There I will be doing equity and fixed income research. Although it’s an old firm, the program I will be in is only in its second year.
I was wondering what you think my exit opportunities to hedge funds would be (not trading though) or to switch over to banking. I asked people in the class above me, but unfortunately no one has cycled through the program yet so no one knows. Also, what skills should I focus on developing and how should I develop recruiting contacts to make a switch since I doubt recruiters will be heavily canvassing my company.
Any advice you can provide would be really helpful.
Thanks,
PB
Hard to say but I think moving to trading or a hedge fund would be easier than going into banking. Focus on developing your analytical / modeling skills and try to get recruiting contacts by going through friends / alumni / calling headhunters yourself and introducing yourself.
Hi,
I am one year out of undergraduate (state school) and I after interning for my last year of school at the state’s $28 billion pension fund I was hired full-time. We are a very small organization so I am getting hands on experience in every asset class and area of the organization, but I have become very interested in private equity. Since being hired as a Research Officer (created annual report, quarterly reports, performance reports, budget, etc.) I have been promoted to Investment Officer and I am involved in EME, GTAA, and PE manager due diligence. I am participating in meetings with some of the biggest PE firms as well as some of the smaller firms. I am also doing some (but not much) modeling for co-investments and other deals (this is what I enjoy the most, but it is probably 5% of my job). I have passed CFA Level 1, sitting for Level 2 in June, and after passing all of the CFA exams I plan on getting my CAIA.
Do you have any recommendations on the steps I need to take in order to move on from my “state” job and work at a private equity firm? I would really appreciate any advice you could share.
Thanks,
JTO
It will be difficult unless you’ve done investment banking before. I would start by contacting headhunters and doing some networking with alumni / anyone else you can find in the industry and seeing what their reaction is – they may tell you that you need IBD or business school first.
Hi,
I currently work in ‘industry’ and would like to eventually work in finance. Based on my current situation, I was hoping you could offer some advice. I have a mechanical engineering degree from a top public university and graduated cum laude. I’m currently working for a well-known industrial/finance company in a operations leadership development program. This program lasts two years and I’m trying to decide what my next step should be.
From what I understand, an MBA is probably the best option to make a switch into finance. However, I have considered possibly doing management consulting before b-school, mainly under the assumption that this strengthens my MBA app and finding a job in finance without an MBA would be difficult.
I majored in engineering thinking it would be helpful to learn operations before going into finance. However, I’m a little concerned that the transition may be more difficult than I anticipated. Much like many of your other readers, I would eventually like to work on the buy side but would like sell side experience first. I know there is no one path, but any advice on how to play to my strengths given my current situation would really be appreciated.
Thank you.
I would try to at least do a pre-MBA internship before going to business school full-time. If you can, doing consulting or another business-related field for 1-2 years beforehand would also be helpful.
http://www.mergersandinquisitions.com/business-school-rebranding/
Thank you for a very informative post. I am an MBA (class of 2008) and currently working as a consultant in one of the Big 4 accounting / consulting firms. I was hoping to get some advice from you on what are some of the best ways to move into PE or Hedge funds. Which headhunters do I contact and how can I know about the job positions (I am assuming that most of the recruiting is quite closed / network-based)?
Thanks in anticipation.
These articles address those topics:
http://www.mergersandinquisitions.com/private-equity-recruiting-in-2550-words/
http://www.mergersandinquisitions.com/investment-banking-private-equity-recruiter-interview/
http://www.mergersandinquisitions.com/investment-banking-private-equity-recruiter-interview/
Its a pleasure reading your posts. I have a question.
To get into a PE with a 10 year background in Technology Consulting via an MBA route from a top 20 school – Is it possible?
Or does it makes sense to join Management consulting after an MBA (Again before school I’ll have 10 years behind me in Tec consulting)?
Can you throw in your views please
Honestly it will be pretty tough unless you’ve been an investment banking analyst. At this stage doing management consulting and then an MBA (or after finishing the MBA) would be your best option but even with that it’s still tough.
Thanks for your comments.
So you agree that?
1. MC is career option that is feasible for a Technology consulting background guy, post MBS or even pre-MBA
2. And post MC, if I get lucky with right opportunities and networking may get a chance in PE?
Yes, but again it’s still very tough to get into PE unless you’ve been a banking analyst.
Great post, as usual. I am in banking now but would like to transition into a different field. Am I doomed to take a pay cut? I am considering investment management or asset management (as opposed to a hedge fund)? Or, doing something completely diff. like a startup? Thanks.
Yes, you will take a pay-cut if you go to something outside banking / hedge funds / private equity. But hey, at least you might be helping people rather than destroying the world then.
First off, thank you very much for putting this site together. You cut to the heart of the industry like nothing else on the net, and I have found your articles incredibly interesting, elightening, and helpful.
I am currently working as an entry-level financial analyst at a small RE and bank holding company (doing corporate finance, not i-banking) in the midwest but want to break into a buy-side career. I majored in finance and economics with a 3.7 gpa in undergrad, but I went to a no-name liberal arts college in Indiana. So I have two questions:
1) Would you recommend going to grad school for my MBA (from a ranked school, obviously) immediately in order to break into the industry, or would it be more advantageous to relocate and get a back office job in the industry first?
2) How common is it to start directly in a buy-side firm vs. transitioning from i-banking? I have no aversion to working on the sell side temorarily if need be, but I’m pretty certain that is not where my long term passion lies.
Thanks in advance, and keep up the great work on this site!
Sincerely,
Derek
An MBA is better if you don’t have a brand-name school / brand-name company. Breaking in from the back office is almost impossible.
It’s difficult to start directly in PE because they pretty much want all former bankers. Not impossible but quite difficult.
Hi,
Two quick scenarios:
1. Analyst in Boutique IB -> small/mid PE fund -> large PE fund
2. Analyst in Boutique IB -> Analyst/Associate BB -> large PE fund
Which one is more likely to succeed? I am based in India.. so if you could include that perspective in your answer…
Also, how great is the difference in monetary terms between a mid PE or a large PE fund… i am thinking real long term here …partner level and later on starting my own PE fund (how do investors perceive this difference when one plans to raise funds for his own PE)…
Either one works, not a significant difference. Large PE firms make significantly more, at the Partner level it can be a difference of 20x or more.
I am sort of a career crisis. I have two career paths
Pharmacist: 40 hours, 150K pay, but dont start still age of 27
Investment Banker: I heard if you graduate out of a good college and get into a good firm you get paid 75K at 22 but hours are like 100-120 for the next four years. What happens to the lifestyle of the IB at age 26 does it get better pay and less hours. And how do the post-analysts/associates work (like do they retire early)
What is the typical pay of an associate. do most or half of IB see 200K salary with a 60 hour workload. Please correct me if im wrong on any of this stuff.
Basically im trying to look for a good social life from 27 to 50 while getting sufficient amount of money. Is Pharmacist the better choice for me
See below:
http://www.mergersandinquisitions.com/finance-investment-banking-jobs-tradeoffs/
You will never work 40 hours a week as an investment banker at any level, including Managing Director. You make a lot more than $200K even as an Associate, but you will never come close to having a life. So the pharmacist is better.
I’m not sure how into pharmacy you are, but a 40 hour work week is not reasonable there either. Good starting pay but very little room for advancement. You’ll be filling prescriptions at Walgreens from dawn til dusk.
First of all, I applaud you for a great site! Second, what about jobs in investment management for the person whose ultimate goal is to become a portfolio manager/senior research analyst at an IM firm or asset management division at a bank? (1) Do you see many bankers making the transition into IM instead of PE/VC? (2) Does having banking on your resume give you an advantage when applying to IM positions? In other words, what I really want to know is whether it is a more viable track to win a banking position first in order to get into IM, or to attempt win an IM research position directly.
Few bankers go to IM, though it is possible. Most people in IM start out there rather than moving over from banking, but you could do that as well.
Thanks a lot for your response, I have a follow-up question. Have you seen any cases of post-MBAs who first entered banking at the associate level and left for say, hedge funds later? Or is it the case that if you skip the banking analyst path, your exit opportunities diminish significantly as an associate banker?
It happens occasionally but more so when the market was very good (2005-2007), harder to pull off when things are poor to mediocre
I must say, it a great site !!
I am in dliemma. I am a graudate from the premiere most Management Institute in India (Indian Institute of Management, Ahmedabad) and currently working as a Business Analyst in IT firm and primarily involved in the Fund Management domain.
I need your advice on how to shape my career to enable me to get into the Investment Management industry. I am primarily interested in Buy Side Research Analysis.
After graduating in 2009, I was not able to bag a job in the fron end of Investment Management. Do you see any advantage in doing CFA and trying for Research Analyst positions in US or would it be better to work in the back end and then try and do another MBA Masters in Finance fron top US B-School.
Basically, I am concerned whether the movement from Business Analyst profile in Fund Management (Performance Calculation) would be possible with CFA / MS (Finance) / MBA (US B-School).
Please help me with your reply.
CFA would not be terribly helpful in the US, more so in India and emerging markets. It’s better to go to a top US business school and do an MBA there.
Thanks for quick reply. Just a follow up question.
I do stand a good chance of moving into US in near future. Hence I was looking at getting a job of my preference in the industry (even smaller firms would be fine) with Indian MBA, FRM (already completed) and CFA (planning). This is to just get an entry and after enough experience in similar field, another MBA from top US B-School would catapult my career.
I dont know if the plan is realistic, hence seek your inputs on the same.
Thanks
The CFA won’t hurt you and in some places it will help a bit – if you have already networked exhaustively and can’t do much more, you can do it if you really want.
Thanks for your great post. I have the following question: one year ago I’ve started as 2nd year analyst (experienced hire) at a MM investment bank in Europe. Before that I have worked 2.5 years at a Big4. I’m 30 now, have a PhD in Finance and am a CFA Level 3 candidate.
A couple of weeks ago, I’ve received an offer from a small PE shop. I know that PE is something that really would interest me and that this is an industry I would like to get into.
My dilemma: On the one hand, my original plan was to stay at the investment bank for at least two years. I sort of dislike to change my career path already after one year. On the other hand, people tell me that PE offers are pretty rare and that this could be a “once in a lifetime” opportunity for me.
Given the fact that I would like to work in PE sooner or later, should I accept this (100% guaranteed) offer now or can I rather stay with the bank for one more year and be “confident” to receive an offer later in my career.
Thanks for your quick answer.
Yes accept the PE offer.
If I want to get into investment banking or hedge funds or private equity, will it be imperative that I go to an Ivy League school for my undergrad degree? I live on the West Coast (California). Thanks.
See all the articles on networking under “Recruiting” at the top of the page. It is not “imperative” but it does help a lot.
Hi, first of all many thanks for what you are doing. it is highly appreciated.
i currently work for a bulge bracket IB in M&A as 3year. would like to join a hedge fund but they are mostly looking for traders or quant. in some cases such as l/s strategy. what do you think about a move into equity research for two years and then try HF? if you think this makes sense, what it is crucial? is it better to become sector focused vs generalist? what institutions to ideally join?
Thanks so much in advance
Mike
I don’t think ER will really help that much, plenty of HFs still hire ex-IBD analysts… and with 5 years of experience it gets harder to move over anyway. Sector focused is better because sector-focused firms always prefer to hire people with sector experience.
Are there any exit opportunities for Associates, (assuming no IB analyst experience)? My motivation would be to make the most amount of money in the least amount of time.
I already think I know the answer to this (get an MBA, work as an associate in a Western financial center for two years, go work in Saudi + renounce my green card.), but I just wanted to see if there really were any options for Associates.
Thanks again!
They are more limited, if you want to exit at that level it’s more about corporate finance / development at normal companies and less in the way of PE/HFs
Hi
Great site.
I’ve got a retail background and was hoping to get into IB as an associate after having qualified as a CA with a big 4 firm, is this realistic?
Ov
Not unless you go to a top business school first
Great website and loads of information!!!
OK i am 30 and have been into Online Marketing for quiet sometime now.
I am unhappy as am spending a lot of hours on the same with very less returns.
I am keen to know more about IB and the first step that i should be taking to get into this completely.
My bachelors degree is into commerce but not with great marks (50%) as I was down with Malaria but have a post graduation in Marketing and International Business with really good marks.
How and what should I be doing?
At this point you should consider a top business school if you’ve already been out of undergraduate for many years.
Okay, so the main exit opportunities for IB are PE/HF/VC. Are there any typical exit opportunities for people entering investment management after college? (Let’s say the position is as an equity research analyst).
How would you compare the skillsets of someone in IB compared to someone in investment management?
Is joining a PE/HF/VC completely out of the question for someone who started out in investment management?
More investment management, maybe mutual funds and related fields. PE or VC is almost impossible coming from investment management, hedge funds it depends on the type of fund… if they use a similar investment strategy it may work.
What are the work hours in the investment management divisions of buldge bracket banks?
Thanks
Generally less than IB, maybe 60-70 per week
Hey buddy, many thanks, long time reader, wonderful stuff.
My questions,
Can you please suggest if you know any good sister sites which deal with career advisory in fields other than IB.?
I read your article on S&T but my friend in London says he works only 12hrs and MBA entrees get 200K/annum, dosent sound so bad as you portrayed?
After you convinced me of the side effects of IB, I plan on undertaking MBA(Duke) in Marketing(product Management), or General Management, Strategy to have a sane lifestyle and paycheck.
Any advise on the recritment chances in Marketing/General Management roles for an International & annual pay & bonuses for a Manager in companies like Kraft Foods.
Thanks.
You might want to ask on WallStreetOasis – honestly, there’s almost nothing on other fields online because there is not much demand. This is a tiny market compared to, say, health or relationships and I am the only person crazy enough to build a major site around it.
Management roles at companies can be good, but for most people $200K is not that much money – most people reading this site want at least $10 million or billions, so I don’t really cover those types of jobs.
lol, really. Wow, then I guess I honestly have no clue about the real range of paychecks in the Finance field.
But, your site is great man, and your not crazy to be doing it. I am also considering taking up your products. great stuff.
Just another request, did you by any chance cover the important tools required in the Finance/ IB field.
I mean like Excel is a must in any Finance field.
Since your site is the one stop for all Finance information, it would be useful to write an article on the most important tools used in IB , S&T and other Finance fields.
Regards.
I also cover wallstreetoasis by the way, I think I found it through your site long time ago.
The courses on the companion site to M&I cover those topics: http://breakingintowallstreet.com/biws/breaking-into-wall-street-courses For banking it is really just Excel, PowerPoint and some Word. For S&T tools, see S&T under Regions and Groups at the top and look at the On the Trading Floor article there.
Thank you for the information.
Appreciate the good work.
Hi,
I am Himanshu Kumar, pursuing my B.E. in Civil Engineering from Delhi college of Enigneering, Delhi, India. I am in the final year of my degree curriculum. Although I am pursuing civil engineering, I am really not interested to pursue a career in it. Finance/ Investment Banking turns me on. I regularly read financial newspaper and listen to financial news to keep myself updated with the ins and outs of financial markets. I want to get into the Investment Banking career. I have already planned to pursue my MBA-Finance from London Business School after a work experience of 4 years ( will have 3 years work – ex at the time of applying). Please tell me how should I plan to get into the Investment Banking so as to start my career in the same afetr completing my engineering in 2011. And how should I proceed in my career to make a solid profile to match the standards of getting into MBA-Finance programme of London Business School. Please guide me.
Thanks and Regards.
There are some India-specific tips here: http://www.mergersandinquisitions.com/investment-banking-india/
Hi Brian,
How much would you be making at KKR/TPG as a first year associate right out of banking Pre-MBA?
I know how banking works- 3rd year analyst—> associate—> VP—> Director—> MD
What about PE? How does it work and what’s the timeline. Lets say someone goes to KKR- when can they expect to have a life (i.e 50-70 hr work weeks)?
Maybe $200-$300K? Used to be higher in the boom years. PE is very similar in terms of advancement, but:
1) At large firms like KKR you still work 100 hours per week and have no life.
2) Advancement is way harder and almost no one makes it to the top. If you do not make money, you get booted out quickly.
Booted as in fired?
Also, how do the top hedge funds compare to that? And this may sound dumb, but what are the top hedge funds. PE firms are pretty well known e.g Blackstone, KKR, TPG, H&F but what about hedge funds, especially in California?
Also do these firms force you to get an MBA after 2 years, or is it like banking where 3rd year analyst—> associate?
Yes, fired. Very, very, very few people make it to the top, and by the time they do it’s less about money and more about power / competition with other people. Hedge funds are similar but even more strict about profit (and they don’t care about MBAs at all). No one gives a crap who you are or where you’re from – it is all about your P&L and how much cash you bring in.
I don’t have a list of hedge funds but if you ask someone on WSO may have it.
http://www.mergersandinquisitions.com/myth-career-path/
Have an offer to go to the buy side right out of college but worried about not getting the technical skill set and the exit opportunities on the buy side…what opportunities are limited going directly to buy side/ what skills aren’t refined by missing out on banking for two years? I’ve been told that your opportunities are actually improved by working in PE if you want to stay on the buy side and if you’re crazy enough to want to go to the sell side the transition isn’t too difficult (but might include getting an MBA?)
Thank you Brian and fantastic website!
Brian, to clarify, it is basically a PE fund, and going right into PE, does that limit you to PE?
Thanks again!
Yes, you are more limited to PE (see the link I copied above)
http://www.mergersandinquisitions.com/start-on-buy-side/
Hi,
I’m an asian working as a 1st-yr analyst in the loan syndication and structured finance department of an taiwan-based ibank in hk.
I’m having salary few times less than those working in corporate finance in BB ibanks. And the bank does not offer 10x monthly salary as bonus apparently.
Because of the commoditization of the loan market, i’m afraid the profit is shrinking dramatically in the market.
Could you please give me some advices on:
i)What are my exit opporunities? ii) is it to switch to the bond side asap? iii) what qualifications are needed/ steps should I take?
Really appreciate your patience and insights.
Ivan
I would switch to a LevFin or DCM team at the bank instead. It’s really all about networking at this point – network to one of those groups, then maybe move to a distressed debt type of fund or a PE firm more focused on debt and financial engineering afterward. If you read the site under Recruiting and Case Studies there are some interviews there with readers who networked to other divisions.
Hi Brian,
Thanks for your insights!
Is it correct for me to assume the working hours for people on the debt side (loan, LevFin,project finance, DCM) are generally shorter than those on ECM, Corp Fin. sides in top/ 2nd tier ibanks, with salary lower? Thanks again!
Ivan
I don’t think so, if anything they are probably longer since debt is more technical.
Firstly, great website. It’s a shame I found out about it so late in the game because this is a great roadmap for someone who just started college.
I’m about to go into a MM IBD, and I was wondering if I would be better positioned if I was going to be in a coverage group or M&A. I’m entering as a generalist, so I go in with a game plan. Thanks!
It doesn’t really make a huge difference, but most would say M&A is better because the work is more technical.
Hi, just spend the whole afternoon at work reading your website. Definitely not billable hours. But well worth it.
I was wondering, do you know what the hours, pay structure and progression prospects are for people in management consulting?
Also from management consulting, is it possible to move into IB/PE/VC? I think the answer would be is very difficult, but i was wondering if you could give a gauge of how difficult and what you would need to do to position yourself.
http://managementconsulted.com/
http://www.mergersandinquisitions.com/consulting-to-finance/
I don’t understand. If the Harvard freshman makes 50% ROI in 6 months, why does he even bother to work? He can just daddy’s “loans” to become a millionaire in 5 years and open up his own fund.
It was just an example of the kinds of ridiculous questions received here
Hi! I was wondering if you can describe a bit (perhaps I missed it in your other articles on exit strategies that I’ve read) regarding whether PE Associates (post banking analyst) will learn a lot on the job. Will they learn a lot more about modeling, about the industry the PE firm specializes in, or not at all?
I’m currently a first year analyst at a middle market bank. I realized that it is extremely competitive and difficult to get into a top PE firm post analyst years from my position, but more likely a very small PE fund if I’m lucky. So it would be great if you could provide some insight on the learning aspect during the two years as a PE associate.
Thank you!
Yes you will learn a lot, arguable whether it’s more or less learning than as an IB analyst though. Probably more about due diligence and leading a team and less about nitty gritty analysis as in banking
I see! Thank you for answering!
This talk of exit options is really very silly if you are good you always get exit options. Providing you are good.
I’m working at a small boutique which has only been operating since 2005 and the past analysts have gone to top business schools, merg-arb hedge funds, corporate finance shops in monaco and one girl ended up at a top PR firm (she didn’t like finance). These people were all GOOD. If you’re crap no one will hire you.
The real point here is even if you do get in as an associate in PE/VC or whatever you’ll be the only young person in the firm that for me isn’t so great I’d like a couple young turks around me for support and just someone on my level to shoot the breeze with.
Plus I still think that at the age people join Ibank grad programmes they are usually 21-24 and you’re constantly changing your mind/views etc that in 2-3 years you may want nothing to do with finance. The idea of a career path is a silly assertion.
I also have no idea why people even want to work at KKR/Blackstone/TPG. They rape you at those places. My boss was thinking of raising finance from blackstone and was telling me about an MD there. She is filty rich but shes 40, unmarried and takes holidays ALONE. Why would you waste your talents and more importantly your life on that its too much of an extreme trade off in life. You’ll never receive a work-life balance doing that job. Ever.
Kids should all eat their broccoli, but they’d rather eat ice cream. Hence the focus on KKR/Blackstone/TPG over others.
Hi! After graduation I started as an analyst at a top PE firm. I don’t like PE because it is too operational and there’s little finance. I think that PE has more to do with strategic consulting than with banking (ie company management and operations improvement over investment period). After 2 years as an analyst I would like to join a BB bank as an M&A associate. I want to do 100% finance. Do you think this change could be possible?
Yes but it’s difficult because PE –> IB is uncommon. You will need a really good story that explains why you’re moving in that direction because most people go the other way.
Do you think that my story won’t flow? Would you change/say something differently?
PE is 80% company management & operations, 20% finance. I studied finance and want to do something 100% finance-related, not kind of strategic consulting stuff at a PE.
Thanks,
Francçois
It sounds reasonable, I’m just saying that bankers will be skeptical no matter what you say – so be prepared to defend it.
Hi. Great website. Would you rename an “infra fund summer internship” at Macquarie and call it “private equity summer internship” to better position myself for the PE industry?
I would run it by them first and verify that they’re OK with it, otherwise it could come back to haunt you.
Hello. I have been approached by someone working at a small PE firm created a couple of years ago by former bankers. They focus on low to mid market investments (10-20m) and have raised 100m. It seems that higher % returns can be achieved on that market (vs multibillion deals) as companies are less professionally managed and there’s room for value creation through consolidation. Do you think that there’s the same earnings potential in the long term than let’s say at Blackstone? It is a young and small firm, ie easier to become partner. Where do you think I am more likely to make big money in the long term: at a big and established KKR or at a small firm growing and partnering with it from day one?
No. The reason is that PE firms earn a % of their AUM. Blackstone manages tens of billions, and that startup firm manages 100m. You are much more likely to make a lot of money at Blackstone, assuming you don’t die in the process and defy the odds to make it in in the first place.
Hi! I have 2 options (I just graduated!): regional PE firm (€2bn in AUM, including a €1bn fund to be fully invested) or M&A analyst program at bulge bracket bank. The PE firm does not seem very professionalised, employees have poor backgrounds (no banking except CEO, tier-2 consulting firms for most of them), their management style is more about industrial focus and less about financial engineering. I definitely want to do PE in the long-term, if possible at top firm. I think that I could learn more at a the BB bank (although not really sure) and evolve professionally faster, but the job at €2bn firm seems very exciting from day 1: I would sit on boards of directors (of small companies, OK), talk to portfolio companies management, think of new ideas to improve companies performance (vs being a robot at the BB bank and not thinking at all), look for new investment opportunities and talk directly to PE owner (let’s say that his employees don’t seem very clever and motivated vs I am really motivated), carry, management incentives, no structured professional evolutional (vs huge hierarchy at BB bank) so faster progression maybe, specific remuneration agreements with owner based on performance (vs classic analyst 1 bonus at BB bank)… However, I am not sure if a few years at this €2bn PE firm would help position myself for the big ones in PE managing €80bn…
What would you do? Have a lot of fun (maybe) at small PE or do boring stuff (for sure) at BB bank? How do you see earnings potential on each? How about possiblities to move later to top PE firms?
Thanks
Take the banking offer, banking and PE are almost the same and you want the better-known name and access to larger funds / pay down the road that you would get from the bank.
Brian:
What about investment banking in California? How’s the lifestyle and salaries comparable at more senior banking positions? and Are the exit opportunities really that limited when it comes to PE outside of NY?
It is not that much different, a little more laid back and pay is arguably less depending on the group and bank. It’s harder to interview for jobs in NY because of the distance so most people tend to stay on the west coast.
Hi,
I am from India. I graduated in Engineering and worked in IT Industry for a couple of years. Then I did my MBA from an Indian University and joined a quasi-government VC firm. After working for about 6.5 yrs, at a comparatively low salary and no career growth (the firm did not have any policy or growth vision – it was a VC firm by default than by choice), I was able to get job at a boutique investment bank recently. This job is just 2 months old. What I would like to know whether it would be possible to go back to VC/PE after a short stint in IB?
Yes.
Thanks.
Hi there,
Do you think MBB consulting or BB Investment banking would position a candidate better for an exit role in corporate development?
I assume IB would equip you with better skills in relation to mergers and acquisitions and financial modeling, whilst consulting would provide a more generalistic problem-solving/operations-focused skill set?
Is either a easier/more natural transition?
Thanks!
Either one works, really depends on whether you want to do corporate strategy or corporate development (M&A). Go to the front page of the site and look at the new corporate development interview.
Thanks, super happy to see the new article!
Hi Brian
This is a really awesome website! Tons of useful info that you’d never see anywhere else.
I’ve read a few of the articles on exit opportunities and on the CFA, and the term portfolio management comes up quite often. Forgive my ignorance, but could you elaborate a bit on what this job entails, which are the biggest portfolio management firms, the compensation of portfolio managers, etc.
Thanks and keep up the great work.
Paul
Managing investments for institutions or high net-worth individuals, i.e. deciding how they should allocate money between stocks, currencies, bonds, etc. http://en.wikipedia.org/wiki/Investment_management
Hi Brian,
Thank you for the articles, very helpful. So after 2 yr of banking, people go to buyside, ie. PE/HF/VC. But what do they usually do after 2 yrs on the buy side then? Since it’s hard to switch from one buyside shop to another and it’s unlikely to become very senior there without MBA/being on the ‘right’ track, do they all go back to business schools after a total of 4 yrs in banking and PE/HF?
Trying to figure out the typical career path after an analyst survived banking AND managed to get buyside experience.
Thank you!
Continue on the buy-side, move to a different firm, advance within their firm, or business school
Thanks for this website. I have been reading your publications for about a year now and and I was very prepared for my interviews in Finance when graduating in 2010.
I am currently a 1st year IM Analyst at a top bulge-bracket bank and work in the Institutional Sales group. While I enjoy interacting with various portfolio managers, clients, and following financial markets, I would like to be more entrepreneurial or involved with business strategy in my work. With that, I have interests in working in VC/PE/Corporate Strategy, etc., however I am concerned that I may not be considered as having the necessary transferable skills. As it stands, what is the general recruiter sentiment of someone with my profile (graduated from a top undergraduate business program) to make that change? Do you suggest I try switching to banking or consulting? I am nearing my 1-yr mark as an Analyst and would like to make an educated decision before making any change. Thank you for your feedback.
Yes I would try to move into banking or consulting as Institutional Sales is fairly distant from PE/VC
Hi,
I just graduated and am more market oriented so prefer to work in ER than IB, but I am wondering what would be my alternative opportunities after 2-3 yrs in ER? Any idea? Thanks in advance for your help.
Most people go to hedge funds
Thks for your answer, thats what I thought before, but once starting reading your website, I ve felt like an IB analyst will be preferred to an ER analyst for the same position in a HF, is that right?
Sorry to bother you with these questions, but I am just trying to find the best way to work in a HF after (global macro, L/S, event driven,… “fundamental” ones). Thks again
Depends on the fund and the industry… generally yes but not always.
Hi Brian,
I hope all is well :)
I was wondering if you could please tell me the name of the prop trading firm that pays 50% of the money that you earn from trading? If you don’t feel comfortable doing this, would you please let me know the names of prop trading firms or hedge funds of a similar calibre, where the earning potential would be much the same (or higher)?
Many thanks
Leon
Jump Trading but that was back in 2005 so not sure the same deal is in place.
Was it Jump Trading that had several recent college graduates earning millions of dollars per year there?
Could you please tell me the names of any other hedge funds or prop trading firm that have similar earning potential to the firm that allowed recent college graduates to earn millions of dollars per year there?
Leon
I think you might have the wrong idea. They don’t say, “OMG awesome you are a new grad, we’re going to pay you millions of dollars!!!!!!!!” They say, “Ok, if you can work your ass off and trade better than a pro and make tens or hundreds of millions for us, we might give you a piece of that.” Not sure offhand what other firms offered/offer that and to be honest most places probably won’t even come close especially post-financial crisis.
looool would you say something like £200k is a benchmark figure for top performing traders at a prop trading firm or hedgefund 2-3 years out of uni?
Leon
Can’t really generalize there as it depends a lot on the fund size, strategy, etc. But yes people could potentially make that much.
I was born in china and studied in australia for a few yrs. I graduated with a accounting degree and did some insolvency work in australia. i couldnt see my future as an accountant so i quit after 2 yrs and did a finance master. i found it hard to break in finance in australia given my background, not to mention the downturn after financial crisis. so i return to china and got some PE offers. however, these are all local firms in small size. the pay is even less than the accounting work in austrlia if i converted the currencies. it would be impossible for me to break in any of those US ones given my background. i have no idea how much i can learn or how many doors these small local PE firms will open me, i am not even sure if i can get into a decent graduate school in the states after a few years working in these firms. any advice will be much appreciated.
I would only take those PE offers if you can find absolutely nothing else in Australia or the US – if you haven’t already tried cold calling places in those locations don’t just accept the PE offers.
Hi!
I’m still in business college (a top one)
I’ve just got an internship at a small investment management company (about 17 employees). I plan to spend a year there. Is it a good plan overall? Then for the next year I plan on spending six months in China and try to find a related finance job there. I’m not a native chinese speaker. Do you think I could get an IB internship while I’m there? I’ve been studying chinese for the past 3 years. While I think I’m pretty fluent, I’m not sure about business lingo. What about another investment management internship at a top chinese firm? I plan on cold calling from skype and/or emailing.
Cheers!
BTW: Great website, long time reader.
I wouldn’t do that as they don’t care much about non-native speakers in China, they have millions of smart and hyper-achieving Chinese people to fill roles and it’s hard to get a company to sponsor you. I would just spend 1 year at your current company and then try to move into banking or something related in your current country rather than going to China as there’s a huge bias against non-natives. http://www.mergersandinquisitions.com/languages-investment-banking/
Fantastic discussions, sir. Question for you related to a Research Associate position with a big IB. I have retail banking and retail investment background (series 7, 66), worked in audit with big 4 (2 years), have CPA license, transferred and worked in consulting arm of big four (1 year), mainly assisting with liquidation/conservatorship/failed financial institutions.
Career question:
Is this background sufficient for an entry position with an IB as a research/due diligence entry level position.
Education question:
Given the recent economic melt down and the return of many to school in the past few years, do you think returning to school for a 3 year JD and/or MBA program at this point would be worth investment, or does it make more sense to get that knowledge on the job and spend the money/hours/resources on networking while on the job (out of school).
Thank you for your advice.
Yes but you might actually have too much experience for entry-level positions. Personally I would just network and try to get work experience now, an MBA won’t help as much if you already have the Big 4 background.
Hi, I’m aiming to be in buy-side research for a hedge fund in the long-run.
Am 36 and have total of 6 years work experience post university:
*4.5 years in the States for an large Aerospace company (financial analyst/project mgmt)
*1.5 years in Hong Kong for a large U.K. based I-bank. (mgmt information/data analysis for HR)
*Obtained MBA part-time while employed at the Aerospace company, grad 2.5 years ago.
*B-school was University of California but not top 10.
I’m still in Hong Kong doing as much networking as I can to land an internship- as I think that might be my only option left to break-in. But so far nothing tangible.
1) Intern -> sell-side research ibank -> buy-side analyst hedge fund: Are there other possible options for me?
2) Followed a sector, read annual statements, even performed stock valuation and developed monte carlo simulatios on its options- How do I turn these efforts into an internship? Or am I wasting my efforts?
Would appreciate any additional suggestions or feedback.
Thank you so much for your time and feedback.
Networking in HK is extremely difficult because it doesn’t work as well in Asia. I would focus your efforts on the US or UK instead if at all possible. You could also go the CFA route and attempt to get in via networking with CFA societies and such and then move into an asset management firm and then a hedge fund. For #2, just contact small AMs or HFs and talk about what you’ve done and offer to send your work over to them.