Private Credit - Golden Age?
BX, GS... C-suites keep talking about the golden age for PC ahead of us.
However, to a junior who is trying to break into the high finance, should I set my career as Private Credit instead of Buyout PE? Heard a lot of voices saying that PCs are just loan sharks and you don't get any quality skill sets. You should only focus on Buyout/growth coz it brings you useful skills.
Do what you enjoy and find more interesting. While buyout / GE is going to be hit for a bit, it’s not gone. It’s not like you’re picking between two ultra specific areas and one could be permanently impaired - e.g. crypto VC. Not trying to start a debate on the future of crypto, more as an example of a space that could theoretically disappear vs a general space like buyouts
Thanks! Do you agree that special sits/distressed credit and Asset-based are only two PC strategies can be compared with GE/Buyout?
I don’t know enough on PC strategies to say absolutely. I’d also say that it’s worth knowing that fee structures in PC are different than buyouts with some funds not charging carry
Private equity will suck this decade. Stay away from it
Lol
What do you think?
Do you mean all private capital? So is there any job still ok in the primary market lol?
What do you think about special sits groups with flexible capital (some PE, some mezzanine, some debt)?
You should do what you find most interesting - PC is a valuable skillset (underwriting, sourcing, etc). However, I always get a bit hesitant when industry scions say an asset class is entering its golden age... feels very toppy...
Cannot comment on skill set you will learn but be aware the risk return profiles are very different.
PC is about scale and collecting fees. Especially for senior strategies there is little performance upside, only downside risk. That helps understand the current competition for scale, consolidation, and turnover at shops with funds that dropped out of the carry.
Now that more funds are doing restructuring work, ask around how much PC investments teams enjoy that part of the role.
PE has much more upside. A small shop with a homerun fund can make the team wealthy.
PE brings you "useful skills"? for what ?
Like modeling and opportunities of get into companies?
I went that route and I don't regret it yet - better WLB, very good pay on junior level (equal / above comparable PE funds) and apparently fine on senior level. Obviously, if your fund is performing exteremly well, PE has way more upside - but this only applies to a handful of funds and I think funds will perform worse in the coming years.
Yet, I see an issue for Credit Funds as there is virtually no differentiation - you may have a bigger fund and can do things alone other can't, maybe you have some good relationships with sponsors - but at the end, you offer exactly the same product and service as any other Credit Fund. While many PEs fail to generate value, they at least have the chance to perform well and do better than others.
Since PC is still in a emerging process, maybe we can have hopes for their future differences?
Don't really see a way - its an homogenous product. We don't create any value. It will likely be a race to the bottom in terms of pricing / race to the top in terms of leverage.
Golden age of secondaries too
These firms say this because they're raising a stupid amount of money. Almost all PC is tied back to PE so they're fairly correlated. If one thinks PE port co's could have a lot of issues and these companies are asset light (i.e. if they go belly up there are no assets to pay back to debtholders) it'll all blow up. Just because you're senior secured means nothing when there is no money to pay you back...
As others have said, do what appeals to you and don't worry so much about the long-term outlook. PE and PC will continue to ebb and flow in their popularity. It's all gambling anyway and you might as well have fun while you're doing it. When all the megafund CEOs hail this as a "golden era" for private credit, that's when you know you should sprint the hell out of this space. There's dwindling differentiation on the private equity side and none to begin with on the private credit side. You're going to see lots of firms go belly up in the coming years. It's going to be a wild time is my 2 cents.
PC is kind of shitty imo
Performs when PE performs, but less well
What? They’re two different products (debt vs. equity) with two vastly different risk/return profiles.
Yes I know
But in practice the return profiles are heavily correlated given how it depends on PE deals performing. You can see how this plays out historically
Also you're already in an illiquid structure that's not marked to market that hides high vol, PC doesn't make much sense to me as a "low vol" product
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