If you want to maximize your earnings in a first job in financial services, the ideal course of action is clear. After attending a top university for your bachelor’s degree, you spend a few years working in your chosen area of focus (eg. Directly in medicine/pharma/FMCG or in a consulting team with an industry specialism). After that you go to Harvard Business School and study an MBA. Then you get a job in private equity, or maybe a hedge fund.
These are the learnings from the new employment report for the Harvard MBA class of 2021. Like their counterparts at Wharton and MIT, fresh Harvard MBAs are only 29 years old on average. However, some of them seem to be far better paid.
The chart below shows the going rate for the best fresh Harvard MBAs going into various jobs in financial services and elsewhere. They’re all paid well, but Harvard MBAs going into hedge funds/investment management and private equity are paid the most. – In 2021, the median MBA starting salary for both industries when signing and performance bonuses are added-in is $360k.
These amounts are not guaranteed. – While everyone graduating from Harvard gets a salary, the signing and performance bonuses are allocated with more circumspection. In private equity, for example, only 22% of new Harvard MBAs got the signing bonus this year, although 78% got the performance bonus. In hedge funds and investment management, 50% got the signing bonus and 62% got the performance bonus. $360k is what you can get if the buy-side firms really want you.
Will private equity funds and hedge funds really want you if you’ve never worked in finance before, though? It’s true that most tend to hire heaviest from the subset of people who’ve completed a Harvard MBA and who’ve worked for an investment bank in their pre-MBA existence. It’s also true that hedge funds mostly hire people with markets knowledge. But if you’re adept at financial modelling and have deep knowledge of a sector they’re investing in, PE funds will hire you. So will hedge funds, which are increasingly engaging in direct lending and stepping on private equity and credit funds’ toes.
The second chart below shows how Harvard MBAs’ enthusiasm for different careers and areas of finance has changed over time. Investment banks are not a desirable destination, although they’ve experienced a slight rehabilitation this year. Along with private equity, consulting and tech are popular. Venture capital funds are going up in the MBAs’ estimation.