Exiting Is a Decision, Not a Default: Rethinking the Banker’s Exit in the Year of the Bank

That assumption deserves a second look in 2026. Investment banks across the Street, from the bulge brackets to the middle market banks and elite boutiques, are having one of their strongest years in memory, while much of the buy side is working through slower exits, uneven fundraising and, in parts of private credit, a difficult stretch with investors. And as of this month, the Federal Reserve is raising rates again, which adds a new variable to both sides of the decision.

None of this makes the answer obvious in either direction. But it does change the questions worth asking before deciding to stay or go.

What You’d Be Leaving

As we covered in What Investment Bankers Can Actually Expect to Earn in 2026, Johnson Associates raised its bonus forecast in August and is calling this the “Year of the Bank.” It projects bonuses rising 20% to 30% for equity traders and ECM bankers and 15% to 20% for M&A bankers, according to Reuters.

The strength isn’t limited to the largest banks. Middle market banks and elite boutiques have shared in it too, though not evenly. Evercore’s second-quarter underwriting fees rose 201% year over year, according to its earnings release. PJT Partners grew second-quarter revenue 20% and first-half revenue 24%, both records, and Moelis reported record second-quarter revenue, up 12%. Houlihan Lokey went the other way, reporting revenue of $511 million for the quarter ended June 30, down from $605 million a year earlier. Its CEO attributed the decline mainly to Corporate Finance headwinds, including instability in the Middle East and disruption in software, and described them as temporary rather than a cyclical downturn. The pattern across bulge brackets, middle market banks and elite boutiques alike is that platforms converting deal flow into revenue are having an exceptional year, while others are waiting on delayed transactions.

That distinction matters for anyone weighing a move. The case for staying depends heavily on which platform you’re on and how much of its pipeline is actually closing. For senior bankers in particular, the question is often less about leaving banking and more about which platform to be on. In a strong year, the difference between a firm converting its pipeline and one waiting on delayed deals can matter more than the title.

It also matters what the headline numbers leave out. A bonus projection is not a paycheck, and the gap widens with seniority. Our 2025 data showed a VP 1 with a $500K headline total taking home roughly $447K in year-one cash, and 67% to 70% of MDs defer more than 25% of their bonus. A 15% to 20% bonus increase won’t show up as 15% to 20% more cash in the first quarter of 2027. The further along you are in your career, the more unvested deferred compensation, and whether a new employer will buy it out, shapes the real cost of leaving.

Where You’d Be Going

The projections for the most common exit destinations are more modest. Johnson Associates expects private credit bonuses to come in flat to 10% lower, after fraud cases led to large redemption requests from retail clients. It expects large private equity firms to see increases of 2.5% to 7.5%, and mid-sized PE and real estate to stay flat.

Johnson Associates’ 2026 projections as reported by Reuters, August 2026.

Johnson Associates described this as a reversal of the past decade, when alternatives such as private equity, credit and hedge funds were considered the most attractive corners of Wall Street, according to Yahoo Finance. This year, the sell side is leading.

The challenge for private equity in 2026 is less about finding deals and more about returning capital to investors. According to S&P Global Market Intelligence, global PE and VC firms announced 1,504 exits in the first half of the year, down 6% from the same period in 2025, as buyers and sellers continued to struggle to agree on valuations. S&P Global notes that low distributions have made fundraising harder, since limited partners who aren’t receiving cash back have less to commit to new funds.

The fundraising data is mixed. With Intelligence reports that managers raised roughly $312 billion in the first half of 2026, its strongest first half on record, but the 20 largest funds accounted for $171 billion of it, according to InvestmentNews. PitchBook’s broader data shows private capital fundraising on pace for a fifth straight annual decline, with private credit the one strategy still growing.

Private credit deserves a more careful read than the headlines suggest. As we wrote in Blue Owl and Private Credit’s Stress Test, the pressure has been concentrated in retail-facing, non-traded BDC vehicles rather than across private credit as a whole. Citing Fitch Ratings data, one analysis found investors requested $15.6 billion back from private credit funds in the second quarter, and 10 of the 16 BDCs Fitch tracks could not meet those requests within their quarterly caps. That is a real stress test, but it is not a verdict on every private credit career. A seat at an institutionally funded direct lender looks very different from one tied to a retail vehicle facing redemptions.

None of this means the buy side is in trouble across the board. The largest, most established managers continue to raise capital and hire. But below that top tier, many firms are holding assets longer and raising smaller funds, and that affects what a buy-side seat is actually worth over time, whether it’s an associate role or a senior one. For anyone evaluating an offer, the health of the specific firm matters far more than the reputation of the asset class.

How Rising Rates Change the Math

On September 16, the Fed raised rates by a quarter point to a range of 3.75% to 4%, its first increase since 2023, with Chair Kevin Warsh saying inflation had been too high for too long, according to CNBC. More may follow. The Fed’s projections showed 16 of 18 members expecting at least one more hike this year, according to Charles Schwab.

For private equity, higher rates work against the exit problem. PitchBook analyst Kyle Walters called the hike “directionally negative for PE exit activity,” though unlikely to cause major damage on its own. The bigger question, he noted, is whether more hikes follow, because most LBO debt is floating rate, so rising rates increase portfolio companies’ interest expense and weaken the financials that prospective buyers review. Hold periods were already stretching before the hike, with the median US PE holding period reaching 4.5 years at the end of the second quarter, the longest in about two decades.

Higher rates also change what buy-side work looks like. When leverage is more expensive, returns depend more on operational improvement and revenue growth than on financial engineering. That shifts more of the job, at every level, toward portfolio monitoring and value creation rather than new deals. An operating partner or corporate development role at a firm with stretched hold periods is a very different job than advising on the next transaction.

Private credit sits in a more complicated position. Floating-rate loans pay lenders more as rates rise, which supports yields. But the same higher payments strain borrowers, particularly companies already relying on payment-in-kind interest, and our Blue Owl piece noted that covenant renegotiations were likely to increase as lenders came under pressure.

Investment banks are not immune either. Higher rates can slow M&A and cool leveraged finance activity, and if hikes continue, the strong bonus pools projected in August could narrow before they are paid. At the same time, a tighter credit environment tends to create work in restructuring, liability management and debt advisory. As we noted in the Blue Owl piece, the broadly syndicated loan market may also regain ground for deals where execution certainty matters, which would benefit bank leveraged finance teams.

Rates don’t favor one side cleanly. They make the buy side’s exit problem harder, but they also introduce risk into the banking bonus story. The skills that hold value in either scenario are the ones tied to capital structure: leveraged finance, restructuring, private credit underwriting and sponsor coverage. Bankers with that experience carry skills that are in demand on both sides of the table in a tighter credit environment.

Timing: Waiting Has Value, and Limits

Timing is one of the hardest parts of the decision, because waiting cuts both ways.

On one side, leaving now can mean walking away from a strong bonus cycle. The on-cycle private equity process is the clearest example. After JPMorgan’s warning to incoming analysts last summer, Apollo, General Atlantic and TPG paused on-cycle recruiting until 2026, according to Business Insider. When the process resumed in January after roughly six months, it was as intense as ever. A seat accepted this year often starts in 2027 or 2028, which can mean leaving before what may be one of the strongest banking bonus cycles since 2021, for a firm where pay growth is modest, carry depends on a still-recovering exit market, and rising rates may extend hold periods further.

On-cycle is also only one route in. An Apollo spokesperson told Business Insider the firm generally fills less than half of its associate class through on-cycle recruiting. The rest are hired off-cycle, often from bankers with more deal experience.

On the other side, some doors narrow with time, and bankers should be clear-eyed about that. Moving into private equity remains considerably harder at the associate and post-MBA level than it is out of the analyst class. Mega-funds recruit primarily through structured on-cycle processes aimed at analysts, with a smaller number of seats for first-year post-MBA associates. Upper-middle-market and middle-market funds remain accessible to more experienced bankers, but getting there typically requires months of proactive networking, genuine sector expertise and a willingness to join a smaller platform without a household name. Relocation is often part of the trade. These funds can afford to be selective, and many hire only when a specific need arises.

For associates without strong sponsor deal flow or existing buy-side relationships, the path takes much more effort than a lateral banking move, and the outcome is less certain. A banker who wants to end up in private equity should recognize that the easiest window is usually the earliest one. For many, other exits, such as private credit, growth equity or corporate development, remain more open at later stages.

By the VP and Director level, the traditional associate-track PE exit is largely closed, and the realistic options look different: corporate development, strategy and finance roles at operating companies, capital markets roles inside sponsors, private credit origination, and senior seats at competing banks. The right timing depends less on the calendar than on what you want to end up doing and which doors you need to keep open to get there.

Where You Stand

It would be easy to conclude that staying in banking is the low-risk option. That isn’t quite right.

As we wrote in Rolling Layoffs and Talent Upgrades, banks have moved toward rolling, manager-driven performance cuts rather than a once-a-year review. That model rewards clear producers and is hardest on solid but undifferentiated performers, who no longer have a review season to plan around. The Year of the Bank is a strong year for bankers who stand out, not necessarily for everyone who stays. For someone in the middle of the pack, a good exit offer may be the better choice.

The same logic applies to anyone planning a move. Demand remains strong for proven talent. As we reported in August, Evercore had added 19 new senior managing directors year to date, and PJT cited senior hiring as part of its rising compensation expense. But hiring firms on both sides are selective. As we noted in The Great Poach, banks are looking closely at exactly who did what on which deals, with particular demand for proven A2s, A3s and junior VPs with public-to-public M&A experience. A clear specialization and a record of closed transactions are the strongest leverage in any move, whether it’s to the buy side, to a corporate role or to another bank. A generalist with a thin deal sheet has fewer options.

AI is also changing the seat itself. As we covered in Rogo Was Supposed to Shrink the Junior Class, new tools are shifting more work up to associates and VPs. For anyone deciding whether to stay through the next promotion, that is worth factoring in.

Interest in moving is widespread. In our 2025 compensation survey, 64% of respondents said they were open to or actively considering a move, rising to 78% to 82% at MD and Group Head. The question for most bankers isn’t whether they’ve thought about leaving. It’s whether leaving now is the right call.

Moving in the Other Direction

The same forces are prompting some on the buy side to consider the reverse move. Associates and VPs at mid-sized funds, and particularly at private credit firms working through redemption pressure, are watching peers in banking have their strongest year in some time.

Banks have historically been open to boomerang hires, bankers who left for the buy side or a corporate role and want to return. Some firms have long cultivated relationships with alumni, recognizing that a banker who leaves may later return as a colleague, a client or a deal partner. That openness is showing up in current searches. Some of our clients’ mandates now explicitly welcome boomerang candidates alongside bankers affected by recent reductions in force.

The window, however, is limited. In the mandates we’re seeing, banks open to boomerang hires typically want candidates who have been out of banking for no more than a year to a year and a half. The longer someone has been away, the harder it becomes to show that their technical skills, deal knowledge and relationships are current, and the more a bank will question whether the candidate is returning to banking or simply leaving a role that didn’t work out.

A move back can be a smart one if it’s positioned well. Sponsor experience is valued in sponsor coverage, leveraged finance, restructuring and private capital advisory, where banks want people who understand how investors underwrite a deal and what a credit committee will accept. As with any lateral move, though, banks will look closely at the specific transactions a candidate worked on, and the strongest cases are built on closed deals, a clear specialty and a credible reason for coming back.

For anyone considering leaving banking now, this cuts both ways. A boomerang path offers some reassurance that an exit isn’t necessarily permanent. But it is a narrow door, open mainly to those who move back quickly and return with experience that makes them more valuable than when they left.

The Question Behind the Question

Before comparing bonus projections, it’s worth asking something more basic. As we wrote earlier this year, private equity professionals spend much of their time after a deal closes on portfolio monitoring, board meetings and operational work, not on new transactions. Corporate development and in-house roles have a similar trade-off: fewer, deeper deals and a single employer’s priorities, in place of variety, pace and client work. These are genuinely different jobs, and neither is better. They suit different people.

Many bankers pursue an exit because it’s the expected next step, without asking whether they’d enjoy the day-to-day work on the other side. In a year when the financial case is less clear-cut, and when higher rates push the buy side further toward operational value creation, that question matters more than ever.

Questions Worth Asking Before You Decide

• What does the offer actually pay? Compare year-one cash, deferrals, buyout terms and how carry or long-term incentives vest, not headline numbers. For senior bankers, unvested deferrals are often the deciding factor.
• How healthy is the firm you’d be joining? When did it last make meaningful distributions? Has its next fund closed? How is its portfolio positioned for higher rates?
• How strong is the platform you’d be leaving? Is your firm converting its pipeline, or waiting on delayed deals?
• Where do you stand today? Are you a clear producer, or in the middle of the pack? Under rolling reviews, that answer changes the risk of staying.
• Which doors do you need to keep open? If private equity is the goal, the earliest window is usually the easiest. If you’re further along, focus on middle-market and upper-middle-market funds, build sector depth, start networking well before you plan to move, and consider private credit, growth equity and corporate development alongside PE.
• Could you come back? A boomerang move is possible, but the window is usually short, and it favors those who return with stronger experience than when they left.
• What makes you marketable? Specialization, closed deals and capital structure experience travel best, in either direction and in a rising-rate environment.
• Would you enjoy the work? Not the title or the pay, but the day-to-day job on the other side.

The Caveats

Bonus projections are finalized against full-year results, and Johnson Associates’ forecast has already moved during the year. If the Fed continues raising rates, a slowdown in M&A and leveraged finance could narrow the gap between investment banks and the buy side before bonuses are paid. On the other side, private equity exits could pick up if valuations settle, which would help distributions, fundraising and carry, although higher rates make that recovery harder in the near term.

The broader point still holds. The buy side and corporate roles remain great destinations for many bankers, and the best firms will continue to hire strong talent. But in a year when investment banks are leading on pay, rates are rising and the traditional exits are working through a slower cycle, the decision to leave is worth making on its own merits rather than as a default.

Weighing a move in either direction? Prospect Rock Partners works confidentially with bankers and buy-side professionals navigating these decisions. Contact meridith@prospectrockpartners.com.

Sources

Johnson Associates 2026 compensation projections as reported by Reuters/WTVB and Yahoo Finance (August 2026); Evercore Q2 2026 earnings release (July 2026); PJT Partners Q2 2026 results (July 2026); Moelis & Company Q2 and first half 2026 results (July 2026); Houlihan Lokey Q1 fiscal 2027 earnings release (July 2026); S&P Global Market Intelligence, “Pace of private equity exits slows in H1 2026” (July 2026); With Intelligence, Private Equity Trends Report 2026, as reported by InvestmentNews (August 2026); PitchBook, Q2 2026 Global Private Market Fundraising Report (September 2026); Fitch Ratings BDC redemption data as reported by Angel Investors Network (August 2026); CNBC and Charles Schwab coverage of the September 16, 2026 FOMC decision; PitchBook via Morningstar, “Why the Fed Rate Hike Spells Bad News for Private Equity Exits” (September 2026); Business Insider on PE on-cycle recruiting (December 2025–January 2026); Prospect Rock Partners, 2025 Investment Banking Compensation Report (March 2026, N=866), “What Investment Bankers Can Actually Expect to Earn in 2026” (August 2026), “Rolling Layoffs and Talent Upgrades” (September 2026), “Rogo Was Supposed to Shrink the Junior Class” (August 2026), “Blue Owl and Private Credit’s Stress Test” (March 2026), and “The Great Poach” (November 2025).