LMM PE vs. MF PE?
MF investors, would you say you’ve learned more than your MM counter parts? I had some interviews with some MFs and some MM firms and it seemed like the MFs are a little harder interviews asking more conceptual questions that tie financial concepts from school to like our work vs. modeling/market/trad tech questions. For example, in my last MF interview, I was asked what beta and alpha strategies exist in PE for our sector? And in my last MM interview, I was asked more about the market, who the most active publics are in M&A. I just am curious to know from either side or those that have made a transition on how they feel about where they learned more. I’m really passionate about this stuff and don’t want to sacrifice extra learning going to a shop with a better life style or if that’s really a concern.
One quote from a director at our shop that has done quite a range of deals that I really liked was:
In the upper market you are trying to figure out what industries you like and figuring out how to deploy capital into those industries. In the LMM you are trying to find companies and management teams you can support and grow.
I’ve worked at both. All else equal, you’ll probably learn more at large funds than small funds. This is because large funds do large deals that require more involved diligence and execution. Rolling up regional HVAC companies is very different from carving out a $5B business segment from a conglomerate. There is just more complexity when you’re working with global businesses.
However, this incremental learning should not determine whether you target MF or MM. I would focus on whether you prefer large funds that have a lot of structure (more like an investment bank) or small funds where junior employees play an outsized role by necessity. The organizational structure is the largest difference in my opinion - not the amount you learn. You will learn a ton at all types of funds.
(not op but curious) having worked at both, would you choose both over IB? curious because from what I've seen on LinkedIn LMM roles often pigeonhole you to LMM/MM PE or c suite at small companies, while MF opens up other avenues. Have still seen some people choose lmm over top ib spots (know a guy who chose lmm pe <1bn over MS menlo TMT). maybe I'm looking at it the wrong way..
Good rule of thumb in PE is it's always easier to move down vs upmarket. You'll see more guys from MF move down to smaller funds for better carry economics than you will see the reverse. Whether or not it's better than IB depends on the bank and what you'd want to do long-term. Banking doesn't cut you off from PE but PE can cut you off (depending on where and what style) from other types of investing (e.g. probably won't see a LMM industrials investor moving into VC). If you know you want to do PE then MF > than most IBs, LMM it depends on what/where/with who vs what bank.
Yes. I like investing, so PE is a better fit for me than IB (whether that be MF or LMM).
I would advise you to not worry about post-PE exits. We don’t have clarity into what our lives will look like a year from now let alone 5-10 years. Things change all the time. Find a job that you think is the best fit for you and take it from there. Nobody should be choosing MF vs. MM PE based on the exit opportunities in the future. Your interests will likely change multiple times between now and then.
It's kind of a silly premise to begin with because people with the CV for a MF offer will most likely not be recruiting for LMMs unless they're getting pushed out w/o room to promote. It's not an either or, you're either good enough for MF or something's not clicking/other things are driving the decision unrelated to your qualifications (e.g. family, health, etc.). Exceptions to the rule exist of course, but these are two different worlds.
See I personally would have recruited for MF, but a strong pipeline of sheet metal manufacturing and power coating business in the Midwest was calling my name.
Gotta follow your passion. I for one have a deep love for dry cleaner remediation services and garbage collection.
I know plenty of people with an “MF qualified” resume that choose MM for a variety of reasons (some outlined earlier in post), so this is just patently false
For MM/UMM, absolutely there's candidate overlap, but that's not what the question was. OP wasn't asking "hey what's different between KKR vs TA vs Summit vs PSG". There's a very distinct separation between "midmarket" firms like say an AKKR or someone with several billion AUM across multiple funds (with some individual funds approaching $1b+), where the GPs come from more traditional backgrounds vs the regional LMM firm with often <$1b AUM with individual funds say <$300m and whose GPs are either from within industry or came from LMM/MM banks. The former is capable of taking down deals in the 200m-400m+ EV range and getting exits as large as 500m-1b+ (will participate in a lot more auctions too) vs the latter is doing the buy & build roll ups of <$50m EV businesses or acquiring companies that are venture-sized in scale but lack the growth rate for VC $$$ (more likely to be proprietary sourcing heavy), then selling to an upmarket fund or a strategic in the aforementioned entry range.
There's different experiences and skill sets between the two, the type & quality of mgmt teams you're interacting with (MMs will start to have more sophisticated back office whereas LMM sometimes won't even have a CFO/head of X and it's just the founder using QuickBooks) not to mention wider variance in comp, hours, and backgrounds of the typical candidates. I've done both (MM now) and currently work for a ex-MF partner that has shared what they see as different between LMM and MF. They do not typically attract the same types of candidates and certainly won't cross pollinate unless, as I said, someone is being pushed out (whether literally or due to lack of space at the Principal+-level) and they instead see a clearer path to partner carry economics at the LMM. Quicker to get to 2-4% of a $300m pie at a LMM vs 0.25-1% of a $1b-5b+ one at MM/UMM/MF.
If people have a post-banking resume that could've qualified them to interview for MF but they go LMM, more often than not they either struck out in interviews or have other personal reasons for choosing the different geo/work environment. The guy from Goldman TMT/JPM HC/PJT RX/EVR M&A did not choose to go work for the $150m fund in south Philly because he was "excited to be working with smaller founders in a cozy regional setting" lol, that's just asinine. They more often than not got filtered out for whatever reason (it's not a knock, it's literally what all these funds do during hiring for sometimes completely arbitrary reasons) and have had to come up with a justification. Because no one smart & ambitious enough to work in PE at any half-decent firm is going to just say "yeah I fucked up interviewing at the bigger better funds and this was all I could get" when they get asked why they work at fund A vs B.
Would disagree with this as it's very much a personal decision on what you want - it's not like the simple BB > MM > regional boutique math in IB (I think you or someone else noted this above, as well).
Anecdotally, I went to a LMM fund because I really liked the people there and was sick of dealing with tougher personalities (went from a top BB -> top EB before my LMM fund) after turning down offers from KKR's Americas Fund and Apollo's Hybrid Value). Others I worked with had similar progressions, so I know my story is not unique - it's not the "not able to make it in MF PE" and it's more what personal style / type of investing do you want to pursue and less "let me fawn over MF PE" - not everyone is an "optimize career progression and retain optionality" drone.
Totally agree. I was tired of being a fish in a pond and dealing with politics on the daily. Plus bureaucracy of the bigger bank IB life is absurd, nothing actually gets done outside of deals because everything requires sign offs from multiple committees/people. We had an ice machine out in our break room for over a month because the “regional head of facilities had to approve”. Not Peter principal level work there but getting close.
To someone else’s point, being is LMM is great IMO because of the outsized role you play from the start. Underwriting investments, working directly with PortCo management, just taking a broader set of responsibilities off the bat. Admittedly, I’m no longer touching large EV names looking to sell or working around levfin to finance a transaction, but am getting very in the weeds from the start while being mentored directly by a director and partners. I beat out guys from bulge brackets, smaller boutiques and Corp Dev because my resume showed a wider range of skills / experiences, rather than doing the same thing every single day. I think that selection process alone should pretty well describe what a role in the LMM is and what (at least at my fund) is expected of associates.
It’s really choose your poison.
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