Exit opps: Best way to maximize chances at distressed debt / distressed PE?

Hi guys, I am a first year analyst at a BB, and I have grown more interested in distressed securities hedge funds and distressed private equity. It looks like the work would involve both value investing style analysis and dealing with, at times, complicated problems. I was hoping to get some advice from those in that industry or second year IB analysts who have interviewed on whether I should focus solely on recruiting for distressed funds or tell the headhunters I am more than willing to start at any PE / HF. Also, which is more relevant for distressed investing: traditional LBO PE or L/S equity HF (if I couldn't find a job in distressed debt / distressed PE to begin with)??

I am afraid of coming off as someone who doesn't know what he/she wants if I tell headhunters "I'm interested in distressed debt and distressed PE investing, but I don't want to narrow my options so I'm willing to work at a L/S hedge fund or traditional LBO PE fund" - since this does nothing to narrow down the opportunities I'm looking at. I really am open to starting off at a L/S hedge fund or traditional LBO fund since I would be gaining the foundational skills there anyway, but obviously if I could start at an Oaktree or another distressed debt fund then that would be ideal.

Any discussion would be appreciated. Happy to answer any questions.

 

Based on what I've heard/read on the site, IB associates have a tough time going to the buy-side - might not be true given your background in your specific case, but if your end goal is to work at a distressed debt fund and some funds clearly think you're already qualified enough to work there, why not skip intermediate steps and go straight to what you really want to be doing (esp. if the funds are reputable - not so much if they are risky places to be)? Seems logical to go straight there rather than take intermediate steps that may not be necessary

 

Hi,

I am in the same situation than you. I have been working 2 years as equity sales in an investment bank and I am on the way to take a tax & law degree. I was wondering if tax & law was suitable if i want to work in the distressed funds industry? What degree are you going to get?

Thanks in advance

 
kidflash:

headhunters aren't contacting you?

If they were, his post would read: "headhunters are offering me interviews at funds I want to work at, what shall I do? Accept, and go interview?"
"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 

fixed it

Clever got me this far Then tricky got me in Eye on what i'm after I don't need another friend Smile and drop the cliche 'Till you think I'm listening I take just what I came for Then I'm out the door again
 

What about getting an entry level job? where would one start?

Clever got me this far Then tricky got me in Eye on what i'm after I don't need another friend Smile and drop the cliche 'Till you think I'm listening I take just what I came for Then I'm out the door again
 

Unfortunately, I'm not in restructuring - I am in M&A (I'm not at GS as my name suggests). I have heard that I am disadvantaged compared to the kids who do restructuring all day full time, but hopefully I can learn enough to not be clueless in interviews and try to convince my interviewers that I'm a quick learner...

 

agree with ^i^, a top restructuring firm like BX, HLHZ or LAZ will give you the necessary skill set that will be transferable to Distressed HFs. You will also learn a lot about bankruptcy law as it is the nature of the business.

On another note, there are a good amount of top restructuring guys that came from law school. 20 is pretty young so you should definitely start off in the restructuring route.

 

Thank you for your response!

The issue is that while I have interviewed at several funds, I have not yet received a hard offer from any, and have already contacted the headhunters that I know of. Several of the headhunters told me I should get a finance job to increase my candidacy. I could wait where I am in hopes of more interview offers trickling in, but I have been told that my weakness is my lack of on-the-job financial modeling, and have been advised that trying to get some would make me much more marketable.

 

i have seen a couple lawyers who came into the distress space. However, the main focus is still recruitment from people have previous finance experience.

IBD in sponsor groups, restructuring / M&A, industries with heavy debt exposure (industrials, telecoms, etc.) is the best background to break into distress besides being in the SSG in different banks

Then you have others such as high yield research, but in general people still prefer bankers.

I am not sure what specific stuff you want to learn about distress

 

What about getting an entry level job? where would one start?

Clever got me this far Then tricky got me in Eye on what i'm after I don't need another friend Smile and drop the cliche 'Till you think I'm listening I take just what I came for Then I'm out the door again
 

Probably fair advice then - I was assuming you had/are expecting offers. I have definitely heard there isn't much room for IB associates on the buy-side, although some definitely make the jump and your background sounds like it would make you much more relevant/a much stronger candidate.

That being said, take any advice I have with a grain of salt - I am just beginning a career in IB and have no real knowledge of law and limited knowledge of investment management.

@"SSits" (who I pull into conversations often, and hopefully not so much it's getting annoying) was a lawyer who moved to finance - might have some more relevant advice.

 

I know some folks who went to distressed investing path after IBD, but they all have restructuring background, like guys from Moelis/LAZ/EVR, so I assume it is difficult without the background, because it is quite different from your normal banking knowledge.

Maybe you can talk to headhunters and check with their feedback?

 

Yeah I have heard that too. I was reading a book called "Alpha Masters" and one of the people who ran a DF started in trade claims. So I am wondering if that is the bottom level?

Clever got me this far Then tricky got me in Eye on what i'm after I don't need another friend Smile and drop the cliche 'Till you think I'm listening I take just what I came for Then I'm out the door again
 
oracle:

Yeah I have heard that too. I was reading a book called "Alpha Masters" and one of the people who ran a DF started in trade claims. So I am wondering if that is the bottom level?

Dude, there are very few set paths in this industry. Read about the industry, do some LinkedIn stalking. A few months later you'll have a much better view than we can succinctly provide here.
"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 

StayingAwakeetc - I'm on the road this week and next. Send me a PM next Wednesday to remind me and I'll give you what advice I can.

Those who can, do. Those who can't, post threads about how to do it on WSO.
 

i would lateral to a pure play restructuring group at a boutique like HL, MB, PWP, LAZ, etc. There are also strong lower tier boutiques out there like imperial (although I wouldn't call them low tier exactly), GLC Advisors, Gugg just started a RX practice this summer. With a BB on your resume, and pure RX experience should set you up well for distressed buyside interviews.

 

restructuring/bankruptcy/turnaround consulting as well.


We're about to enter a Great Depression. Don't you want a president who's already dressed for it?

------------ I'm making it up as I go along.
 

Firstly, restructuring experience is definitely preferable if you want to go down the distressed path, but M&A is not too bad as an alternative. Certainly beats being in an industry coverage group. I've seen BB M&A analysts go to Oaktree. Not sure it's worth trying to lateral to restructuring, because that will add at least another year to your search, and you get perilously close to associate-land...where your chances dwindle materially.

Secondly, on the topic of approach to headhunters, you absolutely want to be focused in your approach to EACH GIVEN headhunter. That does not mean you need to take the same approach with EVERY headhunter. For every headhunter that reaches out to you for a meeting, you should be going online and talking to friends to figure out who that headhunter's typical client set is. Tailor your focus based on that. At least until you've performed well on a few interviews, headhunters will be reluctant to put you in front of employers unless they think you will come across as 100% enthusiastic and will take the job if it's offered to you. If you nail a couple interviews but are just short of converting to full-time offers, headhunters will see you as a fee just around the corner, and will get more willing to expand their offerings to you if you say you want to see more.

Finally, as for whether or not you should err to the side of straight LBO PE or straight L/S HF if you can't do distressed, the right answer is probably to take the one you are most happy staying in indefinitely, as the odds of switching tracks gets slimmer and slimmer as you progress in the world of finance. Switching costs are just too high, and there are enough candidates with perfect backgrounds that there's generally no need to hire a guy with an off-perfect background. Having said that, I'd say the balance tilts slightly in favor of PE. I see more (distressed) hedge funds hire (distressed) PE guys than the other way around. Perhaps an overly simplified explanation, but investing is investing, whereas PE is distinct because it usually adds the element of investing for control.

 

Obviously RX is the preferred experience at these distressed shops, but I was wondering how much weight an leverage finance experience has? LevFin provides the analytical skills in being able to understand the firm's cap structure, and would that be a favorable experience as well?

 

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