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Investment Banking vs Private Equity: Which Is The Best Career Choice?

Investment banking

For many students, Private Equity is the promised land. The career paradise they may be able to reach once they’ve “paid their dues” in the harsh battleground of investment banking. 

The appealing promise of higher pay, better hours, more intellectually stimulating work, makes PE the most obvious “exit opportunity” after a few years in investment banking. 

That being said, many young professionals have this opinion about PE just because they heard all those good things from other people. 

But since they’ve never actually worked in the industry, they don’t really know if all these glamorous aspects are true or not. 

If you’re considering a career in Private Equity, you may ask yourself: Is PE really better than IB? How much money will I make in PE? Is that a good move to go into PE straight out of the uni? We’ll address these questions in this article.

The big question: should you go into PE straight out of university?

The big question that we get very frequently from our readers is: instead of working in IB, can I and should I go straight into PE?

Usually, this question comes with the following underlying motivations: 

  • Hours are better on the PE side. You work hard but you don’t have to kill yourself at work to finish that 267-page pitch deck that John asked you to finish by tomorrow morning (before saying “don’t stay all night” with a half-benevolent, half-sadistic smile)

  • Pay is better. If gold can be found in IB, diamonds are raining in PE. Many students think: “Why should I work for $100k in IB if I can make three times that amount working less in PE?”

  • Work is more interesting. In PE, you have better, more noble things to do than correcting double spaces on slide 78 or changing the shade of gray of the subheadline for the 14th time. You actually work on analyzing potential investment opportunities, working with management of portfolio companies to unlock new avenues of growth, and be the trusted advisor who whispers in the ears of S&P 500 corporate titans… Or not. 

All these reasons have some elements of truth to them. But people who believe that often fail to understand this: in order to get access to PE spots that indeed provide all these benefits, you’ll need at least 2-3 years of deal-related IB experience in the vast majority of cases. 

Not all PE opportunities are created equal. If you’re joining as an analyst at a $200m fund straight out of uni, don’t expect to get paid $350k and enjoy the intellectually stimulating responsibilities that you have at Blackstone after 3 years of first-class M&A XP at Goldman. 

It’s not a cliche: if you want top-tier jobs in PE, you’ll have to “pay your dues”. And these dues are to be paid by working for several years in IB. 

Not just because it’s customary to do so. But because you need to have a comprehensive understanding of how deals work in order to be a functional and competent Private Equity professional. 

This deal-related experience can only be gained by working a few years in IB, ideally in M&A or Leveraged Finance. 

There are still exceptional cases where it may actually be a good idea to go into PE right out of uni, but in most cases, it’s a much smarter move to start in IB to build the skill set and credibility necessary to get access to top-tier PE spots.

What are the key differences between Investment Banking and Private Equity?
Key Difference

You may have heard already that IB is part of the “sell-side”, and PE is part of the “buy-side”. When you work in investment banking, your job is to represent companies to “sell” them better, that is, put them into a favorable light to help them achieve what they want to achieve. 

For example, if you’re advising a company to find a potential strategic buyer, you will likely create materials (e.g., PPT presentations, valuation models) that show that this company is an attractive target. Just like the pro marketer is good at selling a product, investment bankers are good at “selling” companies. 

On the other hand, when you work in PE, your job is to “sell” or “market” companies: it’s to buy them. As a PE professional, you will analyze potential companies to invest in, take an active part in helping them grow, before selling them at a profit a few years later. 

In PE, you’re not concerned with “marketing” companies, you’re focussed on selecting companies that provide the best possible long-term returns for your portfolio. 

Due to this fundamental difference between the two jobs, it is to be expected that the daily tasks are different. 

Examples of tasks you’ll do in investment banking:

  • Building various PowerPoint presentations for client meetings
  • Updating models on Excel
  • Taking notes on calls and meetings
  • Writing market news summaries
  • Printing documents 
  • Executing random admin tasks to make the lives of senior bankers easier

Examples of tasks you’ll do in private equity:

  • Screening for potential investment opportunities
  • Performing independent industry research
  • Building financial models 
  • Performing due diligence on potential investments
  • Doing period reviews of existing portfolio companies
  • Conducting industry research using insights from the sell-side and calls with industry experts
  • Working with the management of companies to discuss financial projections

For some reason, many young graduates seem to think that the moment they step foot into the promised land of private equity, they’ll finally be able to sleep 10 hours per night, leave the desk at 5, and play golf twice a week with their father in law. 

Unfortunately, it doesn’t work that way. It’s true that working hours are less brutal than in IB, but don’t expect a 9-to-5 job either. On average, you can expect to work 55-70 hours per week, which obviously varies by firm and location. If you’re working at PE mega-funds (e.g., Carlyle, TPG, KKR), hours can be just as brutal as in IB, if not worse. 

The key advantage of PE is that the workflow tends to be more predictable, less chaotic in nature. That means less stress, more flexibility, and an overall better work-life balance.


Just like IB, people don’t want to get into PE for humanitarian reasons. Money is one of the primary motivators at play here. When young graduates hear about PE, they often think that salaries are significantly higher than in banking. 

People making $300k-$400k before they hit 30. But what these numbers don’t reveal is that PE professionals are on average older, more experienced, and hence benefit from greater compensation. In other words, you don’t make $300k out of uni if you start at a top PE firm like Blackstone. 

You may make $300k after a few years of IB experience, and then make the switch to PE. If you start a PE job right after uni, numbers are much lower, pretty much on par with IB comp in fact (even lower in some cases, especially at analyst level). 

That being said, it is true that the pay you can have in PE after several years of experience is substantially higher than in IB – sometimes dozens of times higher. This is mainly due to the unique compensation structure that prevails in PE: senior PE professionals (principals and above) perceive carried interest based on the success of the deals they work on. 

It’s a long-term form of compensation that is only gained by staying at the same firm, and which can greatly vary depending on the success of the deals. In theory, it means there is unlimited upside in compensation. PE partners can make dozens of millions if they get carried interest on a multi-billion dollar deal. But you have to be aware that reaching that level of seniority takes years, if not decades, and not everyone makes it to this level.

So to summarize: the pay ceiling is indeed higher in private equity, but the difference in compensation at junior level is not significant, as you don’t get access to carried interest (where the “real money” is made) at this stage.

The case for Private Equity right out of university
  • You secured an offer at a top-tier private equity firm with a strong brand name and billions of AuM. Joining a start-up PE fund is risky at the beginning of your career, if your long term goal is to become a senior PE professional. 
  • You know with very high confidence that you want to work in PE for the long-term, after having completed several internships and talked to many PE professionals. You’re not worried by the fact that if you go this route straight from uni, your number of exit options will not be as great as in IB.
  • You really don’t like the nature of the work in IB (including the menial random tasks you’ll have to accomplish along the way), but have a sincere intellectual appreciation for the work you’ll do as a PE analyst.
  • You have excellent financial modeling skills, strong business acumen, and a solid understanding of deal-making in the PE space (all of which can be forged through internships, very high quality courses made by insiders, and spending time with veteran industry professionals).
  • You are ready to accept the idea that your senior colleague may not take you seriously in the early years of your career. Most of them will have several years of experience in M&A or related fields. If you come with zero IB experience, people may have doubts about your ability to do the job properly. If you decide to go into PE directly, you will have to prove them wrong. 
The case against Private Equity right out of university
  • You’re not 100% sure if you want to work in Private Equity for most of your career. You don’t have any experience in PE to decide if it’s a good fit for you. 
  • You have an offer from a $150m boutique PE fund with no brand name
  • You naively think that you will make more money in PE straight out of uni compared to IB (wrong)
  • You are weak on financial modeling, don’t understand how deals work, and have a poor financial culture
  • You want to do it for the “prestige”, but you’re not genuinely interested in the nature of the job
  • You have posters of Steven Swartzman in your bedroom that you worship every night before bed. In this case, you don’t need a career in PE, you need a psychologist.

A word about the author

Aurelian Tran is the founder of Alpha Lane and an ex-Goldman Sachs analyst who has spent 4+ years working in the investment banking industry.

He founded Alpha Lane to help students and young professionals achieve their highest professional ambitions, by securing offers at top-tier financial institutions.