Should I Stay in Investment Banking or Move to Private Equity?
by
McCarthy95 on March 22nd 2025
Should I Stay in Investment Banking or Move to Private Equity?
Whether to stay in Investment Banking or attempt a move to potentially greener pastures in Private Equity is an important question that will cross the mind of most young bankers. Both career paths are very well paid and will offer fantastic experiences both personally and professionally.
In this article I’ll set out some of the key reasons for staying in either Investment Banking or Private Equity.
Investment Banking:
Deal making. An integral part of being a top senior banker is building a first-rate network of connections with c-suite figures across the industry. This deep-relationship side of Investment Banking deal making can be a very appealing and fulfilling part of the role. Many of the successful senior bankers I observed built close and lasting friendships with CEOs / Chairs etc. and would frequently spend time out of the office with them. From holidaying together to simple dinners, ongoing building of your network is vital. It is a matter of personal preference whether you would truly enjoy this side of the job or prefer the technical side.
Broad range of experiences and deals. Private equity deals are bound by what constitutes a good investment and what aligns with the fund’s typical ticket size and risk criteria etc. Therefore, in Investment Banking you may get to experience a broader range of deals / situations. Working at a full-service Investment Bank will provide a great range of experiences, from activism campaigns, to large IPOs to industry defining M&A.
Private Equity has declined in the current higher interest rate environment. The Private Equity industry has struggled to grapple with the impact of higher interest rates, which has put a microscope on their ability to generate returns without access to super low interest financing. Exits have proven difficult, especially with a stagnant IPO market and LPs have been growing increasingly impatient with respect to liquidity. However, the sector has proven generally resilient in a difficult market and will undoubtedly continue to flourish in the future but fundraising momentum and pay may struggle to return to the levels previously observed.
Private Equity:
You are the client. One of the most attractive aspects of switching to Private Equity is being the ‘client’. Instead of offering advice, you have to put your money where your mouth is and make the final decision. In Investment Banking you may spend months modelling and creating papers just for the client to want to move in a different direction. There may be a greater level of stress over the responsibility but having control of the final decision will certainly be more fulfilling.
Carried interest. Switching to Private Equity may incur a slight initial pay hit as a junior but there is considerable upside potential in carried interest. There is plenty of detailed information out there on pay in Investment Banking vs. Private Equity but carried interest is certainly a swing factor for many.
Less tedious process work. In Investment Banking the work at times can be relatively more tedious. Dependent on the firm you’re working on, you may spend a considerable amount of time working on pitches and general coverage packs. These are often not great learning experiences and can be more boring than executing the deals themselves. Additionally, even when executing deals an Investment Banker may spend a lot of time on tedious tasks such as general project management and VDRs etc. In Private Equity you may get to spend a higher proportion of your time on the more exciting / interesting parts of a deal.
Job fulfilment. Whether you find working in Investment Banking or Private Equity more fulfilling is again down to personal preference. It may also depend on where you work. For example, working at a growth investor that focuses on driving returns from scaling its portfolio businesses and improving efficiency may be considered very fulfilling, both intellectually and morally. Whereas a buyout fund that generates its returns through financial engineering (i.e. employing large proportions of debt and using dividend recaps) may be less fulfilling. Private equity has increasingly shifted away from the latter strategy of generating returns but there are at times question marks over their decision making.
