Why private equity instead of banking?
“I don't like the hours in banking, and I want a better lifestyle.” “You can make much more money in PE because you're an investor rather than an advisor!” “Well… all my friends are doing it!” “I want to control companies rather than taking orders from my MD all day.”
- Highlight that you have some transaction experience.
- Express an interest in a sector that the PE firm invests in.
- Position yourself as a long-term thinker or investor.
- Show that you know what the PE firm has invested in.
On the whole, investment bankers are drawn to private equity for its long-term focus, greater control over investment decisions, higher compensation, entrepreneurial opportunities, and the opportunity to develop a more diverse skill set.
Low correlation to other asset classes: In terms of performance, Private Equity funds are less volatile than listed markets. Diversification: You can diversify away from more traditional asset classes.
Private equity associates are usually older individuals who started out and were successful in investment banking in their earlier years. While there is sometimes quicker money to be made in investment banking, usually associates in private equity have higher salaries and make more in the long term.
In summary, thorough research about a private equity firm prior to an interview can help you stand out from other candidates by demonstrating your knowledge of both past accomplishments and its future aspirations.
Some of the notable advantages of working in private equity are the high salaries at all levels of seniority, the interesting work with exposure to different companies, potentially better hours compared to investment banking and the fact that career progression often directly linked to individual performance.
In private equity, you'll work hard, but the hours are not nearly as bad. Generally, the lifestyle is comparable to banking when there is an active deal, but otherwise much more relaxed. That said, there is some upside other than money and career prospects.
While both are among the most competitive Wall Street careers, investment banking is considered easier to break into than private equity.
Compared to other jobs in the financial space, private equity roles can provide a more balanced lifestyle, potential for better pay and more engaging, connected work. Private equity is growing in popularity, and an increasing number of college graduates or financial professionals are looking to break into the space.
What are the disadvantages of private equity?
Private equity comes with a few disadvantages. These include increased risk in the types of transactions, the difficulty to acquire a business, the difficulty to grow a business, and the difficulty to sell a business.
What are the cons of private equity investing? Private equity investments are illiquid: Investor's funds are locked for a certain period. As such, investors in private equity must have a long-term investment horizon and be willing to hold their investments for a few years, if not more.
Landing a career in private equity is very difficult because there are few jobs on the market in this profession and so it can be very competitive. Coming into private equity with no experience is impossible, so finding an internship or having previous experience in a related field is highly recommended.
Even with education, experience, and enthusiasm, investment banking might not be for you. Investment bankers work long hours and often earn a high income. Lack of work-life balance is one reason to avoid becoming an investment banker. Investment bankers must also be able to manage high-pressure situations.
Private equity employees are compensated for making good investment decisions. The larger and more successful the investment, the more money there is to go around. Mega funds offer large salaries in part because they manage large quantities of money.
Some firms will prefer only investment bankers; however, many are open to candidates with consulting backgrounds because they acknowledge that many top undergrads go into consulting after graduation.
Private equity describes investment partnerships that buy and manage companies before selling them. Private equity firms operate these investment funds on behalf of institutional and accredited investors.
Investment banks and consulting firms are organisations that private equity firms often pay attention to when sourcing candidates for open positions. If you have at least a few years of experience in investment banking or consulting, your chances of impressing recruiters in PE can increase.
While the travel will be less, the work in private equity is very stressful and demanding, so the hours you actually spend working may be more stressful or mentally demanding.
Private equity is an alluring career goal for those drawn to the financial world. These companies pay big salaries, plus incentives and bonuses. The potential is there to make a lot of money, even in your first year. And, the career carries a lot of prestige in the finance world.
Does private equity pay well?
For the vast majority of first-year private equity associates, the base salary is around $135k to $155k. Then, based on fund performance, bonuses tend to range from 100% to 150% of the base salary.
Private Equity Analyst Hours
To be conservative, I'll say the average range is 60 – 80 hours per week, with numbers at the top end of that range (or even above it) when a deal is in its final stages. Weekend work tends to be minimal, but it does come up when deals are in their final stages.
As many private equity firms specialize in certain sectors or asset classes, the experience gained can help with moving into another role in that sector. Private equity professionals also sometimes move into areas like hedge funds or corporate development, where their skills can bring some added value to the table.
Investment banking is a division of banking that provides advice on large, complex financial transactions on behalf of individuals and corporations. Private equity, on the other hand, is an investment business that uses collected pools of capital from high net worth individuals and firms.
One potential route to break into private equity without a banking background is via management consulting. It's slightly more difficult than breaking in from investment banking, but it's common enough that you'll still be able to leverage headhunters and participate in standard on-cycle and off-cycle recruiting.
