How Miserable Is Investment Banking?

I read an article recently by the Economist where they showed a decline in students from top MBA’s going into IB and instead going into consulting, buy-side, and/or PE. The main reasoning seemed to be IB has the worst work/life balance of any and the work seems to be meaningless. In other words, Millennials from top MBAs are preferring better work/life and meaning of work over money than previous generations.

To any of you that worked or work in IB, is it really that bad? Are you dying to go into buy-side or PE? Do you enjoy what you do? I am personally only interested in equity research but I was just curious to your opinions on this.

12-15 hour days, 6 days a week.

The 2 best days of IB are the day you get hired and the day you quit.

^ do you still work in IB?

I never did. Just quoting people I know that did.

Once you get to MD I bet life is great. Not sure the torture you go through to get there is worth it however.

12 hours a day? that’s funny.

14-15 hours is more right

Just curious itera, why did you do IB?

This was a good, entertaining read on the topic:

Young Money: Inside the Hidden World of Wall Street’s Post-Crash Recruits

by Kevin Roose

http://www.amazon.com/Young-Money-Streets-Post-Crash-Recruits/dp/0446583251

Yes, IB is bad, and yes I was itching to get to the buy-side, but now that I’m there I realize all the hard work was worth it. I worked in equity research as well and while the hours were better, certain aspects of the job were as intense and as grueling as IB. There is nothing I would change about my career though, as having had various stints in a variety of front-office roles - IB, ER, AM, PE, HF, and a slew of contacts in VC (even though I myself never worked in VC) - has really helped me develop my investment acumen and a huge network of contacts.

Markets aren’t efficient and life isn’t fair but I worked my a$$ off to get where a good spot in my life now, and I’m glad I did.

My view is that IB is largely a waste of time if your ultimate goal is to get into a hedge fund because the skills are not transferrable. If you want to work in PE, IB is probably required.

Some of the people I know were recruited by BB IBs, right from college, and their collective experience has unanimously been horrible. 16 hours a day was sort of minimum, it often extended to 18 hours, or even sleepless nights at times. If this wasn’t enough, they worked 6 days a week, leaving sunday, but they were often called on Sundays too. One of them worked 7 days a week for three continous months before quitting. Although most of them eventually called it quit, except just a couple of them who found exit in corp dev or PE before burning out. This is the case in India where 12 hours is a norm at most of the places, I think it’s a little bit better in west but if the competition increases to Indian levels, the situation will be similiar. There will always be many people who can even sell their soul for money, all you can wish for is that the number of jobs in industry far exceed number of such people, otherwise you are signed up for hell if you aren’t that kind of person.

Where are you working at the moment?

Hedge fund

Care to offer any comments on bromion’s quote regarding IB experience transferring to hedge funds? I tend to agree with him, but for people that worked in M&A or restructurings, I imagine there are at least SOME skills that would apply to certain HF strategies, such as event driven.

I know of 3 people who have stayed in IB longer than the 2-3 year analyst/associate gig:

  1. Has been on a rollercoaster of adderall and xanax for at least 10 years now. Great guy, works at a top shop, and gets to travel the world now that he’s a VP. Total mess mentally though. Patrick Bateman without the murders.

  2. Arguably the dorkiest kid I’ve ever met with a huge inferiority complex. Stays in IB just to tell people he’s a banker.

  3. A relatively normal guy that enjoys putting deals together but has been looking for exit opportunities.

I knew a guy who was an analyst from 2004-2006 at Lehman. Great timing. He once worked 127 days straight without a single day or night off. He’s subsequently done well, leaving NY for a top AM firm on the West Coast and buying a $3.5 million dollar house at age 30.

Keep in mind that IB used to be a lot more glamourous job than it is now. In the mid 2000’s you could make $200k a year as a 21-23 year old. Now, with some European banks especially, you’re lucky to get half that. The difference between getting a $100,000 bonus check and a $10,000 bonus check is huge for one’s mental well being.

If I read the OP’s post right, college kids are eschewing IB for roles on the buy-side and PE as well as consulting.

At least half the people who go into IB are doing it to get to the buy side and PE as an exit opportunity (the other half probably don’t know why they are doing IB, they just like the smell of money). Wow, if one can get there directly, without doing the IB stint in the middle, that seems like a pretty sweet deal in any environment.

These kids… they sure have it easy these days. :-p

Let me clarify and say “good hedge funds”. There are, in my opinion, crappy hedge funds that do extensive modeling that like to hire M&A analysts out of top IBs. That is a crappy way to invest in the stock market, IMO. You can model all you want, but you will always be limited on how much true insight you can get it. Good hedge funds don’t do it like that. There is one hedge fund in particular that does extensive modeling and just presided over an epic fail bankruptcy where they were long and got completely wiped out (well, to be fair, it’s only down about 95% right now, do you believe in miracles?). They had a really amazing model that helped them make this investment. I’ve now added that hedge fund to my list of “crappy hedge funds” that I follow in order to identify short opportunities. Interestingly, some of the other “wouldn’t get long their names with a 10 foot pole” funds I follow also found their way into this huge cluster as longs. I wonder if they also built pointless models or hired IB analysts.

Bromion the way you invest sounds awesome. I know you talked about hiring private eyes, etc. It makes you sound like Sam Rothstein from Casino, but stocks. Pretty epic if you ask me. Do you do any modeling or read research reports? I’m curious if you had to break down your investment strategy would you say it’s over 50% due diligence on people/entities associated with the business?

The allure of investment banking is all but gone. The great days of getting your bonus and then buying a house are over. banks getting charged with fraud left and right + the huge negative headlines + new regs have curbed pay way down, and people are waking up to the fact that if you’re doing it for the year -end money, it just ain’t worth it.

exit opps are still a legit argument for IB. but then it becomes a personal preference. are you willing to slave it for a “maybe” shot at something better later.

I “model” most of my investments but we’re talking about 30 minutes in a quick and dirty excel sheet with no formatting. I think epic 12 tab excel models where everything is linked and you are forecasting very granular things are a waste of time. My “models” (I don’t even really use that word) are things like what the sum of parts looks like under various scenarios, how much operating leverage there is, getting to normalized earnings, etc. If it can’t be done in 30-60 minutes, it’s too hard for me and probably not a good idea.

I read sell side reports but most of the companies I look at are too small for the sell side to cover in detail or at all. The only reports I’m likely to be really interested in are initiation of coverage reports because I like the background and industry perspective. Quarterly reports are not of great interest.

The people / entities could be 30-80%, it depends on the stock. With small caps you have to be careful who you are getting involved with because there are a lot of charlatans. Business due diligence is also key though and not to be ignored. Usually if I think a stock might be a good short, I will start with the people. If I think it might be a good long, I will start with the business and then research the people after I’m convinced I like the business at the current price.