IBD vs Distressed

Hi guys,

I'm a junior trying to narrow down my focus for the upcoming recruiting season. I currently intern as an analyst at a small long/short value fund. We are very fundamental oriented (Deep understanding of the business, barriers to entry, competitive advantages ect.) I do have some modeling skills as we use them for our analysis (although they are generally not really an integral part in the decision making). My goal is to work at a BB and move back to the hedge fund world. Until recently I was set on IBD but I am having second thoughts. I want to do something closer to what I am doing now. ER and distressed debt desks come to mind. With distressed debt there is focus on the fundamentals as well as debt/covenants and bankruptcy, you can really understand the whole picture when is comes to analysis of companies, and that can really come into play at a hedge fund later on. Can anyone that works/worked at a distress desk at a BB tell me what a summer is like there as well as if my reasoning is right, or if there is another position that fits my criteria? Thanks!

 
Best Response

Distressed debt desks at BB banks tend not to hire at the undergrad level much. You'll see a very top-heavy structure, with MDs, EDs, VPs, and often an Associate as the youngest on the desk. That associate didn't start as an analyst, he/she probably came in after b-school with relevant work experience or was a lateral hire from another bank or a relevant desk internally within the firm.

Of the people I know or have seen intern on a distressed desk, none came back full-time; all either got a full-time placement on a different desk (typically HY or IG trading or research) or no offer at all.

My advice to you would be to pursue a role in restructuring. Among the BBs, I know that MS has a very small restructuring team (8-10 guys) within its powerhouse M&A unit. Other than that, there are three powerhouse restructuring franchises on the street. Blackstone, Lazard, and Houlihan Lokey. Blackstone takes very few analysts a year but every single one enjoys top-notch placement afterward among the blue-chip PE shops, hedge funds, and business schools. Lazard is strong as well, and Houlihan is known for its presence on the creditor side. Blackstone and Lazard have historically dominated the debtor side.

Beyond those big three, there are a handful of boutiques: Miller Buckfire is prominent, while Rothschild, Moelis, Greenhill, PWP, and Evercore also come to mind.

Hope you find this helpful, happy to answer more questions if I can.

I am permanently behind on PMs, it's not personal.
 

While we're here , how common is it to get a job at a distressed fund without restructuring group experience? i.e is it something that you can go through the regular B school recruiting channels for?

 
<span class=keyword_link><a href=/company/goldman-sachs><abbr title=Goldman Sachs&#10;>GS</abbr></a></span>:
While we're here , how common is it to get a job at a distressed fund without restructuring group experience? i.e is it something that you can go through the regular B school recruiting channels for?

RX experience isn't a prerequisite by any means for DD.

"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
 
oreos
<span class=keyword_link><a href=/company/goldman-sachs><abbr title=Goldman Sachs&#10;>GS</abbr></a></span>:
While we're here , how common is it to get a job at a distressed fund without restructuring group experience? i.e is it something that you can go through the regular B school recruiting channels for?

RX experience isn't a prerequisite by any means for DD.

Hi, apologies for bumping up a very old thread. Any chance you can kindly elaborate on this. I have ~3 years of experience on the M&A side (pure product team generalist at one of the known names) but wondering how to start pivoting towards special situations or distressed.

 

Goldman- SSG or their Distressed Investing desk Morgan Stanley - Distressed debt / special situations group Deutsche Bank - Distressed products group BAML - Global Loans & Special Situations

Best training grounds outside of restructuring if you can break in. Goldman hire analysts but it's a very tough process. MS also hire on an ad hoc basis. DB's group is probably one of the largest undercover prop desks on the street, but I don't know how they hire. BAML are active in distressed as well but I don't know how they hire. Other banks have decent teams too but you may not get that much corporate investing experience there as they are either more flow driven, or focused on real estate and other stuff. Rest of the street (JPM, CS ...) are either very small, or pulled away from distressed entirely.

 
NewGuy:
CS ...) are either very small, or pulled away from distressed entirely.

gunna have to disagree on CS. spoke to a distressed guy there yesterday, their DD arm seems to be far less "affected" than other areas.

"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
 
Oreos:
NewGuy:
CS ...) are either very small, or pulled away from distressed entirely.

gunna have to disagree on CS. spoke to a distressed guy there yesterday, their DD arm seems to be far less "affected" than other areas.

Seeing who actually participates in situations > what some dude on a desk says. CS dismantled their team in 2009 and rebuilt it in recent years.

 

dont go to research.

try join the sponsor groups in BBs or the boutiques who have restructuring practices, or any good industry groups that deal a lot with debt (industrial, FIG sometimes, telecom, etc).

 

depends. both are good options and both have the potential to get you there. if i had to choose i'd say IB, just because I know a number of HFs that only recruit IB guys/won't even consider a trader. But I'm sure there are also HFs that are the opposite. FIgure out where you want to end up and see what they prefer. Sriously though, you cant go wrong either way.

 

As someone who went through literally the exact same decision, IBD.

For one, recruiting. It sucks to kind of gloss over the actual work you'll be doing as being of primary importance, but if you have proactively identified an end goal, it is naive and self-limiting to not be forward-thinking in terms of how you will actualize that goal. The best value funds rely almost exclusively upon headhunters to fill any vacancies or new positions. These recruiters have the perception that the technical skillset gained during a 2-year banking stint is rigorous and the deal experience is broad-based, whereas traders (even in illiquid, complex securities like distressed debt or high yield) are purely gamblers or market-makers. Also, half the time the top guys at these funds will expressly tell the headhunters to go pull former bankers, either because they also espouse that notion or because they are former bankers themselves.

Secondly then, the work itself. There's no question that distressed debt trading provides a quantitatively rigorous skill-set and demands an analytical, research-driven approach. However, that depth of expertise comes at the cost of breadth. You become a credit specialist, whereas in banking, you can become familiar not only with credit but also equity, mergers, acquisitions, and restructuring situations. For an event-driven fund, a role in sell-side distressed debt might be brilliant preparation. For a value fund, however, banking most likely prepares you best.

In short, you want to be Machiavellian in terms of getting yourself where you want to be. On that count, IBD certainly wins. On top of that, you want to prepare yourself as thoroughly as possible for the work in that new role, and IBD arguably wins as well. Given the choice between the two, banking is your best path.

I am permanently behind on PMs, it's not personal.
 

Corporis magni at a ut tempore. Ut sed aut ut aliquam. Corrupti et nulla est expedita. Neque veniam similique deleniti quo autem eaque.

Atque quibusdam est explicabo maxime. Illum ut commodi autem accusantium assumenda quia. Totam nisi similique facere et quia aut laudantium. Quos odio et inventore voluptatem fugit sapiente occaecati molestiae. Facilis suscipit aut saepe reprehenderit eum. Impedit ipsum dolores at aut sapiente.

Iste quis dolore qui aut impedit ut minus. Incidunt nobis aut vel architecto.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
dosk17's picture
dosk17
98.9
6
DrApeman's picture
DrApeman
98.9
7
kanon's picture
kanon
98.9
8
CompBanker's picture
CompBanker
98.9
9
GameTheory's picture
GameTheory
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”