Investment banking vs distressed debt trading for exit opps to value investing HF

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Comments (4)


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.


Investment banking. Trading usually has no place in value HFs. Most HH's told me they don't look at anyone but IBD for those kind of HFs.


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.

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