Does private equity or IB pay more?
Private Equity Analyst Salary + Bonus: You'll almost certainly earn less than an IB Analyst in terms of total compensation; your salary + bonus will likely be in the $100K – $150K range, with the bulk coming from your base salary.
Private equity firms are investment businesses comprising investors who use their capital to invest in private businesses. Those working in private equity can often achieve a higher salary, but their income may be less stable than those working in investment banking.
So, if you're interested in finance and deal-making, investment banking is the way to go. If you're more interested in strategy and operations, private equity might be a better fit.
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.
Management Consulting vs Investment Banking: Salaries and Bonuses. Almost everyone agrees that investment bankers earn more than management consultants. The exact differences vary, but total IB compensation is often 50-100% higher in most levels of the hierarchy.
While both careers are highly regarded and financially lucrative, the choice is personal. Investment banking is typically viewed as glamorous but also requires longer hours and the sacrifice of a personal life. Private equity is extremely prestigious.
Long-term focus: Investment banking is known for its fast pace and short-term focus. Private equity, on the other hand, has a long-term focus and allows investment bankers to be more strategic in their thinking.
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.
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.
but nowhere near as much as in management consulting. 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.
Are people in private equity smart?
Private Equity Career Training
PE firms are small, tight-knit, and full of extremely smart and highly motivated people.
Private equity investors also face greater market risk with their investments compared to traditional investments since there's no guarantee that any of the small companies in which private equity firms invest will grow at all.
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.
Investment banks sell a service: Investment banking clients pay tens of millions in service fees to be served what they want when they want it. This means someone at the firm (usually an analyst) will need to be on-call for most days and late nights.
Recruiting for Investment Banking
Everyone's investment banking analyst recruiting process is different. For me, two factors played the most important roles: networking and obsession. Coming from a consulting background, it was important for me to explain my change of heart in a way bankers would understand.
As of October 2023, according to Glassdoor, the average annual investment banking salary in the U.S. is $131,021. In New York City, where the cost of living tends to be the highest in the country, the average salary is $316,432.
Individuals may choose to leave a career in private equity for investment banking, particularly in the Mergers and Acquisitions (M&A) division, for various reasons, depending on their career goals, interests, and circ*mstances.
Students who take IB classes in high school have higher acceptance rates into Ivy League schools, but this doesn't necessarily mean a higher acceptance rate than AP students; it just means that IB students have a higher acceptance rate than the general application pool.
Harvard does not explicitly state a preference for IB or AP courses. To receive credit for IB classes, accepted students must earn an IB diploma.
Private equity firms buy companies. Then, they operate and try to improve those companies. Finally, they try to sell these companies at a profit. Private equity employees are compensated for making good investment decisions.
How many hours a week is private equity?
Private Equity Associate Lifestyle and Hours
At many smaller funds and middle-market funds, you can expect to work 60-70 hours per week, mostly on weekdays, with occasional weekend work when deals heat up.
According to the H1B Database, which compiles the base salaries of all U.S. employees under the common H-1B visa, in 2019, the firms that paid the highest figures for an associate position were Apollo Global Management, KKR & Co., and Brookfield Asset Management.
| Annual Salary | Weekly Pay | |
|---|---|---|
| Top Earners | $241,298 | $4,640 |
| 75th Percentile | $187,500 | $3,605 |
| Average | $143,004 | $2,750 |
| 25th Percentile | $113,500 | $2,182 |
For a student looking to break into one of the top 10 PE firms, your chance is 1 in 300 or 0.33%. To break into one of the top 10 hedge fund firms, your chance is 1 in 147 or 0.68%.
Private equity firms are usually smaller and more selective about their employees. But once a hire is made, they care less about how performance is maintained. There are exceptions and overlaps in every industry but, in general, the average day is a bit less stressful for private equity associates.
