Capital Varsity

Is Private Equity better than investment banking?


Capital VarsityMany people often think that there is not much difference between investment banking and private equity as both deal with raising capital for investment purposes, but they are entirely different if you look closer. Investment banking is finding businesses and looking out for ways for raising capital from the capital market. Whereas, private equity is about finding high net worth funds and finding investment opportunities in other businesses. Both have the opposite process to reach the same goal. Let’s assume X as a private equity firm and Y as an investment banking firm. Firm X is a pool of investors who come together to invest in worthy businesses. They would use their funds, pension funds and will invest the lump-sum money in the companies that would generate a greater return on investments for them. Now, Firm Y is completely different. Firm Y is a service of capital-raising for businesses. Firm Y advises clients on different transactions like mergers and acquisitions, asset allocation, and any other service that facilitates capital-raising for clients.

Who earns more Investment Banker or Private Equity Associate? 

If you compare the pay for both professions, surprisingly you would see that an investment banking professional earns less than private equity associates. If you want to be apart of a great team and would like to facilitate in making your businesses shine, you would be part of a private equity team. If you are a private equity associate, you have a much better work-life balance than an investment banker.

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