Investment banking vs Private equity
Investment banking advises on transactions and is paid a fee for doing so. Private equity buys companies with its own fund and is paid on what those companies are eventually worth. On the usual path you spend two years as a banking analyst and then join private equity as an associate, roughly doubling your cash. The larger difference is carried interest, which banking does not have at all.
Almost nobody chooses between these two at the same moment. Banking is the entry point and private equity is the exit, so the real question is usually whether to leave after two years or stay. That makes the comparison less about which job is better and more about which set of trade-offs you want for the decade after.
Side by side
| Investment banking | Private equity | |
|---|---|---|
| What you actually do | Execute transactions for clients. Pitch books, models, diligence coordination, and the process management that gets a deal signed. You advise; the client decides. | Find, price and own businesses. The same modelling, then diligence you commission yourself, then years of sitting on the other side of it with the management team. |
| Hours | Roughly 70 to 90 a week as an analyst, spiking far higher on live deals. The work arrives when the client sends it, which is the part people underestimate. | Roughly 60 to 70, with less of it reactive. The peaks are as bad during a live process, but the troughs are real troughs. |
| What you are judged on | Reliability and output. An analyst who turns work around cleanly and never lets an error through is a good analyst. | Judgement. You are expected to have a view on every deal and to defend it, from the first year. |
| How you get in | Spring week, then summer internship, then a full-time offer. The pipeline is almost entirely undergraduate and it starts early. | Mostly from banking, through headhunters, on a cycle that now starts within months of an analyst starting their job. |
| Where people go next | Private equity, hedge funds, corporate development, business school, or a start-up. The optionality is the strongest argument for the job. | Up the same ladder, to a hedge fund, or to operate at a portfolio company. Fewer doors than banking, but the ones that remain are better ones. |
| Bottom of the ladder (total, midpoint) | $100k (Analyst 1) | $135k (Analyst) |
| Top of the ladder (total, midpoint) | $1.5m (Managing Director) | $1.2m (Partner) |
| What the cash leaves out | Bonus is the whole story above analyst level and it is discretionary: two people at the same level and the same firm can be a year of base apart on total. Names vary at the top. What is shown here as Director is Executive Director at JP Morgan, Morgan Stanley and Barclays, and Director at Goldman Sachs and Citi. | Carried interest is not in these numbers and is the reason people take the job. It typically starts around VP, vests over several years, and pays only when a fund returns capital, so a principal at a fund that underperforms can earn less over a decade than the bands suggest. |
Pay figures are midpoints of aggregated, rounded bands. Full ladders: investment banking and private equity.
Which one to pick
Investment banking
Take banking if you are early, unsure what you want, and value optionality over everything else. Two years of it opens more doors than any other job in finance, and you can decide what you actually want with far better information than you have now.
Private equity
Take private equity if you would rather own a decision than execute someone else's, and you can wait for the money. Carry is where the real upside sits, and it typically starts around VP and pays only when a fund returns capital.
Other comparisons
For live application windows across every one of these, see the opportunity tracker.