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Difference Between Investment Banking vs Private Equity

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Head to Head Comparison Between Investment Banking vs Private Equity (Infographics)

Key Differences Between Investment Banking vs Private Equity

The key differences between investment banking and private equity funds are discussed below:

The three basic tasks of an associate or analyst in investment banking are the creation of pitch books, modeling and administration related works, whereas the associates or analysts in private equity funds are concerned with fundraising, screening and generating investments, managing investments, managing the company’s portfolios and designing exit strategies.

The purpose of investment banking is to connect business groups to evaluate the best mechanisms for leveraging capital in a capital market, whereas the purpose of private equity funds is to find funds that have a high net worth and then find such business groups that offer better investment-related opportunities.

The work lifestyle is erratic in investment banking as compared to a private equity firm. The required number of working hours that needs to be dedicated in investment banking is way greater than as compared to private equity funds

Investment Banking vs Private Equity Comparison Table

Basis of Comparison Investment Banking Private Equity Funds

Definition Private equity funds can be defined as a composition of investors and funds that invest directly in private limited companies.

Purpose The purpose of investment banking is concerned with getting connected with businesses in order to find the best possible ways of enhancing capital in the capital market. The purpose of private equity funds is to find funds that are high in net worth and then accordingly look for other businesses that offer better investment opportunities.

Form Private equity funds are in the form of investment business.

Services The services offered by investment banking are-

Underwriting

Capital restructuring

Capital raising

Research

Asset management services.

Sales, trading and corporate broking.

The services offered by private equity funds are concerned with the investors collecting capital from different sources like insurance companies, pension funds, endowments, etc. solely for the purpose of investing in business groups.

Participant status

Analyst/ associates job roles An analyst or associate in investment banking will mainly need to accomplish three tasks like modeling, administrative work, and pitch book creation. An analyst or associate in private equity funds will mainly need to work in areas like fundraising, management of investments, management of portfolio businesses, screening investments, initiating investments, and designing appropriate exit strategies.

The purpose behind building models Private equity firms tend to build models for confirming an investment thesis.

Number of hours dedicated/ work lifestyle In investment banking, the required dedicated number of working hours is greater in comparison to private equity funds. The required number of working hours is lesser in comparison to investment banking.

Conclusion

The type of work in an investment banking takes place is concerned with pitching for better deals, their execution and random tasks like procuring information, delivery of packages and assisting Managing Directors to prepare for calls are the primary tasks in investment banking whereas the types of work in a private equity fund takes place is concerned with a screening of upcoming investments, execution of deals for initiating investments, management of portfolio entities, fundraising, and designing of exit strategies.