Career in Investment Banking Vs Private Equity

Investment banking and private equity are the two vital tools of fundraising in the financial markets that serve in unique ways. Private equity is usually considered an exit path for investment banking consultants and analysts. In this article, we will be discussing the pros and cons attached to the two major professions in finance.

Key Differentiation Between the Two

While investment banking involves identifying businesses and seeking ways to raise money from the market, PE, on the other hand, shortlists high-net-worth funds, and later invests them in private businesses. Basically, both converge to a common goal while taking different paths.

PE Job Vs. A Career in Investment Banking

  • Investment banking is a high-stress job that can, at times, test your patience. You might need to work crazy hours as an investment banker. Contrary to that, PE professionals are generally older individuals that have had been highly successful as investment bankers in their past life.
  • Investment bankers do get their chances to make quick money once in a while, it’s the PE associates that receive the big paychecks.
  • Day-to-day work in an investment banker’s life comprises pitching deals, process them, and do the related administrative work, e.g. sending emails, performing research, overseeing the investment banking data room, and nurturing high-quality leads.

While PE associates daily work involves attending meetings to shortlist prospective investors, perform company-analysis, assist managing portfolio firms utilizing PE software, execute exit strategies, and help raise capital.

Best Learning Resource for Those Seeking a Career in Finance

Getting your foot in the door would require you to be highly knowledgeable in the domain, which can be realized opting for online investment banking certifications.

Compensation Comparison Among the Two

Median Remuneration Investment BankersCollect

As an investment banking professional, your first-year earnings would be somewhere in between USD130k and USD 140k yearly. During the second year, it could rise up to USD 155k to USD 165k p.a. You can expect your 3rd-year earnings to shot up to $195k approximately.

Statistics provided above indicates the compensation range of investment banking analysts. However, if you start as an investment banking associate, you will be making more in the first year in comparison to what the analysts get. It would range in between USD 150k and 185k yearly.

Salaries PE Professionals Earn

As PE associates, you earn considerably more in comparison to your counterparts in investment banking. However, there are variables that affect your salary range. If a PE firm happens to be just starting out, it will pay you less than what an established PE firm would have paid.

In the very first year, one can expect in between USD 100k and USD 220k yearly as an associate. 2nd year earnings would range between USD 120k and 250k, while in the 3rd year, one can soar up their earnings to USD 150k and 300k.

Career Pros & Cons Associated with PE & Investment Banking Professionals

Investment Banking

The Pros:

  • The job prepares you for big opportunities in the future.
  • The profession makes you realize the importance of hard-workand the perks associated with it.
  • You get handsomely paid. Apart from the fixed salary, one gets performance-based bonuses, that too, are considerably big.
  • Making connections with the most influential people in the financial markets would become easy.
  • Incomparable friendships will be made with colleagues with whom you will spend your days and nights seizing deals after deals.

The Cons:

  • Intense hard-work awaits you as an Investment Banker. You might need to put in 16 hours a day, besides working on the weekends. Expect no work-life balance.
  • Investment banking mostly boils down to two things that are not always under your control – model building and pitch-book presentation.

Private Equity

The Pros:

  • You will be part of a team of highly-learned individuals as an associate in a PE firm.
  • Work-life balance is sorted in this profession. If nothing goes wrong, then you are free to enjoy your weekends while working only 10 hours a day during the weekdays.
  • Monetarily too, you will get paid huge sums of money as remunerations.

The Cons:

  • There are fewer consequences associated with being a PE associate. However, the one thing, a PE firm would not comprise with, is your knowledge of the financial markets.
  • Fame and limelight will be gone which you did enjoy as an investment banker.

Concluding Words

The career is supremely rewarding, both as an investment banker, or a PE associate. It’s just that if you are serious about getting into the industry, be ready to work long days, and prepare yourself for a lifelong learning program.


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