Zooming Out: PE AUM Grew ~8x Over the Past 20 Yrs (Source FT & Pitchbook)
https://www.ft.com/content/806034f0-9914-44c7-9065-9e5fd32e8eca?shareType=nongift
From ~$1trillion to ~$8trillion.
I see a lot of posts on this board around how the industry has changed over time. Flagging this article from the FT which includes some data to back that up for kids who have not been in the business for the past 5, 10, 15yrs. Hopefully, it may help re-enforce the comments people here make. 8x is not just investment returns, it is returns and inflows. A couple concepts...
(1) It created a lot of jobs (both bankers and PE associates). There are a lot more PE chairs today than there were back then (yes this makes it harder to stand out on your MBA application as a PE associate, and on the flip side when hiring, it makes it harder to find good help).
(2) The industry is mature & competitive. There is competition among the mega funds for large deals and its now tough for them to grow in traditional PE, which is why you're hearing more about them integrating into credit, etc. There are also countless middle market PE firms now. Maturation and competition lowers risk, but also reduces upside. Fee compression is real in many pockets. Every deal is a bake-off. Every firm has qualified associates that want to make VP and MDs/partners that never leave.
It is hard to get 'truly wealthy' working for somebody else (which for purposes of this comment I'm defining as the top 0.1% as measured by the Fed, https://fred.stlouisfed.org/series/WFRBLTP1311 below, but whether that's your goal or how you would define those words is not the point). In order to do that, you typically need to take more risk (start your own business, join as partner, etc.), or grind your butt off until you are in the C-suite of something that somebody else built.
However, there are many, many happy and successful people in the Top 1%-0.11% percentile on Wall Street. It's a great career, if you can find some enjoyment/fulfillment in it. I would hate being a doctor, lawyer or engineer. I like this.
Lots of people want these jobs. When you break in, and you work hard, it's a very low risk path to a pretty high number. Which is why it is so hard to get one, and why it's so hard the first 5 years of your career to prove yourself and make it into a more permanent seat. It does get better. Maybe you don't see yourself as an M&A MD, or a partner at an MF. But there are many, many places it gets better in your late 20s/ early 30s. And if you don't royally screw up, it keeps getting better.
Side note: the internet is a catch-22. You simply could not get the info on this board (and provided at target schools now) in 2005. It didn't exist, other than MAYBE the vault guide (which was an incredibly niche thing only a few people knew about). Now its easy to look all this up. But that raises the stakes and makes it harder to stand out.
(3) Private credit is new because it didn't need to exist back then. Demand was tiny. And first there was the HY bond market (any Mike Milken fans in the house?). Then CLOs (1.0 and 2.0) which continued to absorb growing demand for sponsor finance. Now, PC is the next flavor of that (in addition to taking loans off of bank balance sheets, which is a secular trend ever since the great financial crisis). They will all coexist as competing financing alternatives.
Just a few thoughts on a Friday. I hope somebody finds this helpful. There's a lot more in that article. I don't subscribe to all of the author's points. But good data.
