Pay and working hours in private equity vs investment banking
If you're lucky enough to get onto the bottom rung of the investment banking ladder through the analyst program of a major bank, you'll have to decide very quickly whether you want to stay in banking, or seek an exit opportunity on the buy side. Is it really worth making the switch?
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A recent podcast featuring finance influencer High Yield Harry has unveiled figures for compensation in both banking and private equity/private credit, looking at pay for top quartile workers, and breaking down average weekly working hours. In banking, while hourly pay rises the longer that you're in the role, your working hours stay high all the way to VP, were top performers earn half a million dollars per year.
As for private equity or private credit, it's notable that private capital analysts in the top quartile actually earn less money per hour than analysts in banks. This swiftly changes as you progress up the ranks; there's a particular pay disparity for the highest performers at assistant vice president level.
Whether you should leave banking for private markets ultimately comes down to what you want out of your career. Private equity offers lower hours and better hourly pay, but banking seems to offer the most total compensation to high performers.
The reasons to stay in either industry diverge once you're promoted beyond VP. In banking, you can make MD or even partner if you work for a bank like Goldman Sachs. These roles of course pay very well, but they also open you up to various high-paying executive roles outside of finance.
If you get promoted to partner in a private equity firm, meanwhile, the biggest benefit is an increased opportunity to earn carried interest (a percentage of the sale of a company if it makes a certain amount of profit). These opportunities have been hard to come by in recent years, but innovations in the secondaries market have increased opportunities to earn carried interest.
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