High Yield Research - Questions
Hey Guys,
Long time reader of WSO, first time poster. Was fortunate enough to secure a FT offer from my internship and recently accepted a FT offer for Fixed Income Research (as opposed to Equity), specifically High Yield (HY). It's at a BB, and all analysts are ranked very highly in II (don't know if that means much--HY is a much smaller universe in terms of coverage).
I've searched the forums pretty extensively for answers to my questions but answers seem to be either A) nonexistent or B) stale (pre-Lehman)
Anyways, my questions pertain to a Buyside move (shocking) to a HY fund or distressed investing fund. Questions below:
1) How much poaching is seen on this desk? Do clients (talking hedge funds and mutual funds here) contact you directly at a very junior level if they think you are a good analyst and you've been working with them for some time? How long does this usually take- ~1-2 years, more?
2)Would I have to do most of the leg work here if I would want to make a buyside move? AN example,Sr. Analyst is buddies with a PM at a prominent HY fund, and I do the bitchwork for him (aka send the PM and his analyst assumptions, get him up to speed on a certain piece of litigation, etc.). So I would know the PM/Analyst on a very basic level here. Would I push from my side, or is this really frowned upon if they are not dropping hints at all(remember, the PM is buddies with my Sr here so he could easily say something)?
disclaimer: so I'm totally fine doing legwork--I just want to get a sense for the aggressiveness I should be displaying from day 1. If I don't need to focus that much on doing this legwork, I can spend more of my time getting up to speed on my industry and its names rather then schmoozing on the phone
3)How important is it to understand CDS here? I saw my Analyst looking at their spreads in the summer, although I do know this is a volatile environment. Would this just be a 'sweetener' with any distressed fund, or would they expect you to understand why a spread on a certain tranche is blowing out all of a sudden (so you can then start doing some leg work on the security, etc)?
I appreciate all the help here guys. I'm sure this will open up other questions, but it's a good place to start. Thank you.
Remember that a lot of the big mutual funds are going to have 1st year RA classes of their own, so it wouldn't make much sense to go outside to get someone that early in normal circumstances. A lot either start out of UG or come after going to a top B-school. That might be the more typical career path to get in, but networking never hurts and can open a lot of doors too. Sorry I can't be of more help.
Thanks for the info. Not sure of how many Mutual Funds have HY or distressed funds, but that doesn't sound unreasonable. Targeting a smaller fund might not be the worst way to break in I'm guessing. B-School is expensive and kind of unnecessary if I know I want to head to a fund (networking can bring me similar results).
Any other input here? Thanks again.
There are a lot of funds that will only invest in HY or Distressed. If you try to break in without an MBA, then your options could be narrowed to a list of your buy side clients. The more idea generation you can get early on, the better.
The MBA route is obviously expensive, but if you can go to HBS/Wharton/other top school and Fidelity, Wellington, Putnam all recruit directly from there, then that can be your ticket in as well. I think it's better to see what your experience is like, how much idea generation you have, and your relationship with clients before making a decision.
Tough. Sounds brutal (in terms of breaking in).
I think the problem is going to lie in idea generation---not as much the idea generation I actually have, but having any part of my name stamped on it....a Senior Analyst is going to take credit for any homeruns. I guess as long as ideas are sound though, both of us would be getting credit, even if I only get 10% of it. Probably helps that they are only 2 man (or woman) teams.
Moreover, IDK how widely ideas are circulated compared to being kept internally on the HY/Distress trading desk. Book isn't huge anymore obviously (
http://howtogetahedgefundjob.com/blog
Written by the guy who also writes Distressed Debt Investing.
Distressed/high yield research (Originally Posted: 05/02/2014)
Can someone help me to distinguish the difference between a publishing high yield credit research analyst and a high yield credit desk analyst does?
Also, which would you say is better in terms of developing skills for a HF focused on distressed assets?
Desk analyst don't publish. Desk analyst is better as you're more situation focused, advise on balance sheet positions, effectively have your own book in some places, wider remit etx. you literally sit on the desk and have a lot more involvement with traders, whereas research are separated by Chinese walls hence less technical know how is imparted. Also publishing is a ball ache and having to provide quarterly updates on a name where there is no longer a compelling trade is a waste of time.
You need to delineate between the subsets of distressed. Loan to own is best learned trough RXing advisory, liquid distressed best through a desk analyst, claims I'd say desk analyst but thorough analysis is best through RXing / IBD.
I've done a bit of digging and it seems that BB banks don't have RX desks. Would you say Lev Fin/Fin Sponsors is a good substitute?
High Yield Research Exit Opportunities (Originally Posted: 02/18/2016)
You can try Operations at a Hedge Fund
not advisable to think of Research Exit or any Career Exit options in terms of "yield" like an investment .. because it is not only a matter of effort/time for learning and doing the work [(it is not as simple as "I work so many hours and get paid this much" -- this usually turns out to be very frustrating in the medium/long run because we always want more either money or something else)] but also about being suitable in terms of the required temperament for the job and the organization where you will go and the country where you work since the working culture varies from country to country, industry to industry, firm to firm, department to department and also what the job market is like at a particular point in time .. first, find out the job descriptions and the daily routine for the level you will enter at and routine of lets say 7 years down the road, 10 years down the road, etc, find out about career progressions, pay-scales, additional academic requirements you might need and then decide if it is really what you want to do, learn to differentiate between Fact and Opinions with every piece of information you will get..., Generally for Sell Side ER exit options:- 1.ER Sell Side Analysts move to the Buyside as analysts and try to become portfolio managers, 2. some move to Investment Banking, 3. some move to the sectors they cover, 4. some go to S&T or Treasury, 5. corporate finance it varies.. depends upon what you are looking for and what you can get, many people never really know what they are looking for and always keep on hopping from one job to the next hoping it will be what they truly want .. try personality assessment tests like the Big 5 Trait Test (for Employee Selection) and MBTI (for career development) to get any insights about yourself
........He's talking about high yield debt.......
Getting Interested in High Yield/Distressed Credit + Research Report Help (Originally Posted: 04/15/2013)
Hi all,
I've been recently reading "Distressed Debt" by Moyer and following the "Distressed Debt Investing" blog and am getting pretty interested in this space. It seems as though it's a better fit for my personality than equities for a couple of reasons. The first is that I seem to always look more toward downside analysis than the upside potential when valuing securities (as you can imagine, I'm usually the life of a party) and the second is that I'm actually pretty interested in how it seems to be a gigantic legal puzzle (i.e. analyzing who has the rights to capital first, etc.).
I have a few questions regarding distressed/high-yield debt and was wondering if anyone could help me out:
Is there good literature/blogs I should follow besides the ones I mentioned above? I hate to ask such a basic question, but my search function isn't working (keep getting a validation error) and a google search for old threads on WSO either kept mentioning distressed debt or the author Fabbozi (but no specific works by him).
Do I need an extremely quantitative background to work in the high yield/distressed arena? I've heard that fixed income is much more quantitative typically than equity work and I'm wondering if my lack of upper-level math will hurt me. I will have a strong background in accounting/finance and am generally comfortable with numbers, but will not having classes like linear algebra or something like that hurt me if I chose to pursue this as a career?
The other question I have is a bit of a radical turn given I just stated that I'm getting interested in debt, but I was thinking about creating a research report on an equity security and was wondering if any one would be willing to take a look at it after I work on it to get feedback on it. I've done a few in the past, but they were really bad and I want to have a good one for interviews, etc. I was thinking about doing this on a high-yield bond, but I'm completely new to this space and it will take a long time before I can turn out any thing, so that's why I'm leaning more toward equities for now.
I have to warn you that my first one is probably going to be atrocious because I'm still learning about all this, but I hope to use it as motivation to get better and eventually churn out something that would at the very least warrant a second look from someone.
Thanks
Because I laughed at your username:
1) those are the best starting point. You should also get a guest login to distressed debt investors club and read through some ideas. When you think you're ready you can start going through old dockets as well.
2) Nah not really. The math-heavy areas of fixed income are more focused in structured credit and IG where a lot of the complexity comes from the structural complexities and interest rate factors like duration. Fundamentally driven HY and distressed shouldn't really require anything beyond calc/stats though people often view higher-level math curriculum as a signifier of intelligence/aptitude.
PM me on the write up.
I might also recommend Credit Bubble Stocks. Its not 100% distress 100% of the time like DDIC is - but it has some decent coverage. I particularly enjoyed their Suntech commentary.
Agreed with Kenny on the quant questions. All you need is accounting/finance/modeling to get started - experience with legal docs would be helpful as well. A lot of credit/distressed is structural (aka, reading credit agreements and indentures)
HY / Distressed research (Originally Posted: 10/31/2014)
Hi,
Is anyone working in the HY / distressed research space?
Seems most banks have small teams consisting of mainly VPs and above. Wonder how positions are being filled as I have not come across any headhunter working on processes.
Thanks
I do and, at least at my firm, there's very little turnover. A couple of senior/junior pairs. Filled generally when someone leaves.
Huh, how did I end up logged in as OP?
Interesting one - anyone else?
I'm in distressed. Love it. Very few spots. Best hope is RXin advisory to buyside and M&A.
Do any headhunters place or via network? Hours seem v good - do many make transition to hedge funds?
Ive seen a few over the last year simply posted on the banks' websites & bberg. I was also headhunted for 2.
I agree there are very few of them. Most places differentiate between HY and distressed research. Many HY guys dont have jr analysts supporting them. They just cover their industry by themselves.
For HY specifically, bid/ask spreads have slimmed significantly, so there is less money to be made. Therefore, HY staffing is very lean. I would say you have very little chance unless you have direct HY experience already - likely from an asset manager.
For distressed, there are even fewer positions. I would say you either need to network in or have direct experience already.
Distressed can be quite easy if you have an army of lawyers doing all the work for you.
Technically, you can just identify distressed situations, run a waterfall, and pay some lawyers to read all the documents. YMMV lol
But seriously, it all depends on the individual fund's strategy. Many places dont dig too deep & try to be directional investors (I personally like this method a lot, and think it works very well for equities). Not time intensive at all.
The market stress is another issue, because even though you clock out at 6pm everyday, you are worrying about price flux 24/7.
Thanks for the color - can you expand on what you said about equities? Don't dig too deep or put on directional positions - do you just mean a pairs trading or equity long short strategy?
A ton of headhunters, almost all the big ones, place folks into credit shops
Try deep value funds. Funds like mine add 3-4 long positions a year and invest for 5-7 years, day to day price fluctuations aren't as important. It can be annoying at times though since you do a lot of work and none of your ideas ever make it into the portfolio. Hours 830-7, never work over time / weekends
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