Exiting to a Distressed Fund from S&T
Is it possible to exit to a distressed fund from a role in S&T, specifically trading within a distressed emerging markets desk at a BB?
And if you do choose to go the S&T route in this area does anyone have any tips for it, along with books to read or courses to do if this is of interest?
Thank you
interested as well
Yes, it's very possible. Most common for the desk analysts, but I know some distressed traders who have moved from S&T to a distressed fund. I'm sure it happens with sales guys from time to time, but I haven't seen that and would expect it to be less common just due to the perception that sales has less in-depth technical knowledge than the analysts/traders. If you want to make the transition, you just build a strong relationship with the account, prove your competence, and leverage your network from the bank's cohort of counterparties. A track record of making good calls and providing valuable insights will set you apart from the rest of the traders/analysts on the street.
If you're asking how to succeed at S&T...you can just use the nifty "search" feature. Books have been listed several times, but if you don't know about Moyer then my recommendation to succeed at distress investing/analysis is to be a bit more proactive with your research.
Thank you. I should have rephrased my second question.
Let's say one does choose the S&T route. What I've noticed is that S&T gets a bad rep vs IB in the skills analysts develop. Is this fair? Specifically for distressed trading analysts, they seem to be serving more research oriented roles, looking at financials and working with models. Do buy-side employers understand there may be differences within S&T in that certain desks (in this case distressed) are more technical/ research oriented and not just plug and chug work?
Lastly, so many people talk about S&T as a dying industry and how it has lost prestige. Why do so many talented young professionals still pursue this path then? I know this may sound like a stupid question but its disappointing to see S&T get so much heat when it still attracts so much talent.
I'd like to see more people play up the positives of S&T and give advice to those interested in the field on how to play up this career.
I know this is a lot. Appreciate the advice and time.
You need to keep in mind that we're not talking about S&T at large -- a desk analyst on a credit desk is honing very different skills from a cash equity trader or derivatives salesman. (This includes when folks discuss whether the S&T floor is "dying"). So continuing to lump all of these entirely disparate groups together perpetuates what you seem to be saying is an unfair reputation. The distressed firm is dealing with the sell side on a daily basis -- if you're in a credit role, then that means they're dealing with YOU on a daily basis. So if they can't tell you're better qualified than an equity trader, it's probably time for some self-reflection.
As for whether S&T or IB is better, I think that's not a useful question. Each role, candidate, and firm is different. Contemplate the skills that a distressed desk teaches versus what IB teaches, either in a lev/fin desk or in RX. While lev/fin and RX will teach you granularity and get you very comfortable from the issuer side of things, what it doesn't even begin to build are skills related to the evaluation of an investment from an investor's perspective. That is the entire job of a desk analyst: evaluating a potential opportunity from the perspective of the desk taking Volcker-compliant proprietary risks as well as evaluating what the buy side will perceive in the deal. There are still in-depth financial models, but the difference is that instead of just asking management "what will capex be next year?" like a banker can, you're forced to do the leg work of an investor to determine that for yourself. On the credit desk you won't get exposed to as much of the restructuring process, so a distressed shop that likes to drive the process will probably prefer someone from a Houlihan background to even a top-notch credit desk. But one firm's preference for RX hardly precludes your ability to demonstrate a knowledge of the restructuring mechanics and how to approach an opportunity from an investor's perspective. At the end of the day, knowing how the process works is only meaningful if you know how to exploit that to generate alpha.
Yeah I don't get why people talk about breaking into S&T in general instead of focusing on a particular product/area to cover that they find fascinating. I want to pursue something related to rates and fx and I don't really get how you can compare that to IB because it requires you have to have a really different skill set and set of topics you're interested in. The only banking job where you're meaningfully exposed to that would be like those DCM people who advise governments and swfs on issuing sovereign debt lol. Obv things are linked together and M&A transactions bring all sorts of rates hedging work that S&T is brought in to handle by the bankers from what I've heard.
I was talking to a FX spot trader yesterday who's been a trader since the early '90s and he outright told me to not go into spot FX and that he'll put me in contact with a forwards trader. What I've gathered is that traders in liquid, not structured areas that also aren't developing coding and IT skills are those who are really at risk because they don't have applicable skills for other jobs. Also, those liquid products have always been low margin and were ripe for electronic platforms that have already really taken hold with clients. I don't know what part of s&t you're in but I'm interested in your view of my thought process. If I manage to get a role in a pretty structured and illiquid FX or rates product and also achieve a significant level in C/C++, Python and certain IT stuff etc, what exactly is the risk of me bombing out of trading and not being able to find a solid different job? Wouldn't the absolute worst be that I end up as some software engineer outside of markets? There are a lot of tech related markets stuff that's growing and interesting. I saw a post in a linkedin group advertising an vp level trading compliance IT job at a bank with base salary of 210k and 25%+ bonus. That job is boring but that's unbelievably far from being unemployed. I don't see the downside of trying to eventually become a HF PM from trading or even have a career in complex hedging solutions if I have solid backups if things don't work out. Thanks so much for any guidance!
You're asking me to quantify the 'exact' level of risk you'll face and I'm not even sure what your plan is. You're going to get a structured rates job and learn how to code? You'll probably be no worse off than other other structured rates trader. You should probably focus on getting the role first. Given the liquidity in rates/FX it's likely that even non-spot areas of those markets will be transformed by technology going forward. But your back up plan to being a portfolio manager at a hedge fund is to work in IT compliance at a bank? It strikes me that there's not really a coherent thought process here to criticize. Those are entirely unrelated roles that will require vastly different kinds of training and skills.
Turnover on the street is elevated, but my observation is that flow products have lower turnover. Gun to my head, I'd say that's because there are too many traders/sales and not enough roles, so banks are letting attrition do the heavy lifting in terms of right-sizing. Whatever the cause, a major reason the pay for S&T is as high as it is relative to the work is that there is an intense level of competition for each opening and it can be tough to find a new role if you're let go. It's the same in banking -- if you get fired for being sub-par it could take you a full year or more to find employment in a commensurate role. The solution (at least in my perspective) isn't to learn how to code in 25 languages 'just in case' and learn IT compliance regulations on the side -- the solution is to be above par. Then when you're let go, you'll have an easier time finding a new role. (Being above par does not mean knowing 25 languages just in case -- it means, among many other things, being particularly competent in the one or two languages the desk uses.)
Thanks for the above input. How much busier are things on the HY/Distressed desks these days? Should we expect headcount increases on these desks?
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