Good or bad time to join Private Credit
Hey guys,
while I was looking for a private equity analyst position, the fund I've interned at last year offered me a private credit analyst position. The team is super nice, pay is significantly more than expected, fund has a good brand. However, I'm just not super knowledgeable about the market and read plenty of negative news regarding the credit market.
What's your view on the private credit space, will it recover quickly? Would you join that industry right now if it's the option with by the far the best brand and pay? Or is right now not the time to be in that space?
Any insights are appreciated, thanks!
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A recessionary environment is generally worse for credit investments that have already been made and could have limited covenants. You should be somewhat protected on increased rates as pricing is a margin on top of some base rate (although the margin for that same credit profile would probably be bigger today).
For new credit that you are deploying you can charge more and get more protection as the general sense I have is that credit is tighter.
While the role doesn’t sound like exactly what you were after, it ticks a lot of boxes.
Private credit has a ton of tailwinds. You’ll do fine.
Worked at top EU MM PC fund this summer - would advise against joining currently due to negative exposures in the pipeline as a result of past shitty deals. If economy doesn't tank, you'll do fine.
This. Comes down to how deeply deployed the fund already is vs. available dry powder. New money issuances now should be priced and structured appropriately but existing deals with this done poorly may be in a world of hurt.
In my view, most funds had deployed as much as possible given the euphoria / return profiles in the last couple of years - would struggle to think of a fund that genuinely has good fundraising commitments coming in the current climate. Only a couple of funds who have somewhat good structuring / cov protections I can think of.
If you stick it out though, LP allocations are moving into PCs favour - you'll be fine in mid-term.
can you DM me?
Capital allocation has been growing exponentially, and most people expect it to continue. Direct lenders are also trying to build out an ecosystem where they can syndicate their underwrite, will be interesting to see how this plays out over time. If you're interested in the equity piece this can be a very different role, but one worth exploring imo. Since this is an entry level position you can also recruit your way down the capital structure over time (can move to junior capital/capital solutions and then PE if you're still dead set on it)
You will find it tough to move down the cap structure when you start out at vanilla DL. Unless the fund does some exotic / subordinated structurings, finding the link will be tough for the move.
Actually quite a lot of precedent to suggest the move is doable - seen people spend time doing boring unitranche type deals, then move to “special sits” platforms where they did 10-12% credit instead of 6-8%. From that point on you can definitely recruit for hybrid type funds or if you’ve accumulated enough sector experience just go for PE.
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Market observer rather than credit investor, but my two cents: the private credit markets are serving as a backstop to the public LevFin markets, which effectively remain shut. HT to the poster that mentioned that recessionary environment is bad for credit investments. You'll probably get some workout/restructuring experience, but those can be some of the most fun deals. Life is a lot more interesting if you're having to figure out how to stop a loan moving from PIK interest to non-accrual than direct lending. These are the type of situations where you separate the wheat from the chaff.
If you were at a good private credit fund that was prudent with capital and didn’t underwrite shit docs you’ll do great. If you aren’t, expect to have a bunch of envision type deals done at your names and watch your positions get primed
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