AM- Credit analysis case for IG
Hi there, I have five years of experience in private credit investing and am currently interviewing for an investment-grade (IG) role at a large long-only asset manager. Given IG bonds' heightened sensitivity to interest rates, I’d love to learn what makes a strong pitch for IG corporate and municipal bonds.
I’d really appreciate any insights, including the fundamentals—best data sources, key Bloomberg shortcuts, and where to find rating reports. Also, if anyone is open to mentoring in this space, I’d be grateful for the opportunity to connect.
Thanks all!
For crafting a strong pitch for investment-grade (IG) corporate and municipal bonds, here’s what you need to focus on:
Key Fundamentals for IG Bonds:
Best Data Sources:
Bloomberg Shortcuts:
Where to Find Rating Reports:
Pitch Structure:
If you're looking for mentorship, consider reaching out to professionals on LinkedIn or forums like Wall Street Oasis. Networking with individuals in the IG space can provide tailored advice and guidance. Good luck with your interview!
Sources: Global Credit Rating Agency ---> Backdoor to High Finance, Global Credit Rating Agency ---> Backdoor to High Finance, Sources and Uses: How to Find and Use Information in IBD (EBITDA example), What are the different types of Credit?, Arbor just foreclosed on $230mm of multifamily in Houston
Why would you go from private credit to IG other than lifestyle?
You should have some views on rates for FI interviews but won't enter your day to day too much (most IG analysts pretty clueless on rates tbh). Reason is bc most IG are spread investors (i.e. pickup over US treasuries or credit risk). PM's will care about interest rates but mostly will match their rate exposure vs. the benchmark and analysts won't think much of it. Sure there is some interplay between rates and spreads but again beyond the scope of most analysts. The most they'd opine on is if 30 year spreads are attractive vs. 10 or 5 year for example.
As for a good pitch minus the esoteric/topical names (CA wildfire related, banks last year, Boeing, Intel etc) it honestly comes down to relative industry dynamics and ratings trajectory (i.e. getting upgraded or downgraded)...none of the fun HY covenant analysis. Fundamentals same as 3 statement modeling but outputs just leverage stats/interest coverage (trying to replicate/predict ratings actions). No magic BBG shortcuts but can find public guide online and ratings reports by subscription or via BBG sometimes. Like a lot of high grade spread fixed income honestly is this is the same spread as this but much worse quality (= underweight); this is 5 bps wide to this and could get upgraded (= overweight).
Does IG get comped well? If so, I don’t get why changing for lifestyle would be a bad thing. The way I see it, it would be a job with better hours and seemingly easier work (assumption) with more opportunities to consistently outperform with little effort. Sounds like a pretty good scenario to me.
Standalone agree no issues with changing for a better lifestyle- I was basically asking putting that aside is there any other reason why you would make this switch? The reason I asked is bc based on the level of questions I assume the poster is early career when one need to be cautious on optimizing for lifestyle earlier. And beyond that I see many more trying to move from IG towards something more private credit-y.
Reasonable people can disagree and while I agree with your point the job is easier/better lifestyle I disagree that means it is easier to outperform. I see this often in investment management where people think easier/more info/less intense means easier to outperform when in fact would argue this means lower barriers to entry so in fact harder to outperform.
But with regards to OP I think IG credit analysts are ripe to get AIed away or at least dramatically reduced whereas much less so the case for private credit. Beyond that in most cases the secret sauce is almost all the PMs in terms of rates/macro, curve, industry calls vs. the analysts (why I have seen most PMs come from PM team or trading) vs. the heavier contribution from analysts in private credit/high yield. Just my 2 cents.
Thank you for the insights! Actually, I’m also undecided on my career choice and would love to hear your advice. In my case, I worked in private credit before B school, and I just finished my MBA. I’m currently interviewing for:
Honestly, the 3rd job offers the best package, job security, and industry reputation, but it’s also the most unfamiliar to me. That’s why I’m posting this question. The position also involves structured credit investing, treasuries, and leveraged loans.
I’m trying not to overthink things for now before I receive offers. However, I feel that the fundamental equity side is too competitive and difficult to develop an edge in, while the L/O credit position gives me the potential to meet clients and gain perspectives outside of investment. The special situation firm I'm interviewing is relatively small compared to the L/O asset managers. In your case, which position would you spend more time and energy on?
Ah gotcha on private credit.
Agree re: fundamental equity but full disclosure while fixed income is behind equity in terms of being competed/automated away the first in line to suffer the same fate would be IG credit IMO.
There are no free lunches and of course if you’re talking about capital group vs $200 mn special sits fund then it’s a no brainer but just know you’ll have to pivot later (every 40 YO+ IG credit analyst is kinda stuck at their shop praying they don’t get cut and hoping they get the coveted head of research prize…an exaggeration but you know what I mean).
What peaks my interest is the structured credit/treasuries/loans…without giving it away is it a rotational? Do you have the skills to do that/is it that you’re the IG analyst on a multi sector fund (less good if siloed) or will you get to work on that stuff (better).
You can tell my view on IG credit analysts long term and I think surely one will be better placed going down the special sits path however if for example you’re married/kiddos/need the stability I get it just laying out the considerations down the road…(again assumes special sits not sub scale)
All IG Anlaysts will be replaced by AI within three years. It's a monkey job.
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