GS Hybrid Capital or DB Distressed Products Group
Got offers from both groups. Which one should I join out of undergrad if my long-term goal is to end up at a special situations hedge fund with a flexible mandate, investing across the capital structure in both public and private markets, and with the ability to do distressed when opportunities arise?
If I want to focus primarily on distressed, DB seems like the more natural choice. That said, I recognize that many special situations strategies lean heavily toward some sort of lending, and part of me feels that the experience at GS Hybrid Capital might prepare me better for that type of work. On top of that, the GS name carries a brand premium right out of undergrad, which makes the decision even tougher
Based on the most helpful WSO content, here's how you can think about your decision:
GS Hybrid Capital:
DB Distressed Products Group:
Key Considerations:
Recommendation:
If your primary focus is distressed investing, DB Distressed Products Group is likely the better choice. However, if you're open to a broader mandate and want to keep your options flexible, GS Hybrid Capital could be the way to go, especially given the brand premium.
Sources: Most academic style of investing that requires the most thought?, Best Investment Banks, Special Situations Investing (BX, Apollo, Ares), Distressed Debt Hedge Fund out of College - Prep Advice, Distressed debt / special sits investing - On the job
GS, no doubt
del
GS Hybrid strategy is mostly (1) deep holdco / mezz for sponsor deals (no eq upside; 13-15% PIK paper) and (2) growth / structured / minority equity (Soho House, Econic Partners). The mandate cannot pursue distressed / “vulture” investing with GS supporting equity holders / equity value. Key competitors and lot of ex-GS people have gone to Sixth St, Warburg etc. The strategy has shifted significantly from SSG days and there is minimal to none public mandate currently.
In terms of team structure and IC process, GS Hybrid is akin to MFPE with typical 3rd party DD advisors (FDD, CDD, LDD) + extensive IC memo documentation + regional & NY IC
If you want to pursue public / private distressed / value oriented investing in a hedge fund structure it feels like DB is a better role.
if theyre aiming to support equity value, why avoid equity kickers in sponsor deals? wouldn’t the optionality work in some scenarios
That comes down to competitive dynamics. Usually sponsors will never give away equity for free (ie. penny warrants) unless they are distressed.
What I’ve seen often is a HoldCo on top of unitranche attaching / detaching ~6x / ~9-10x. Whereby, PE sponsor is able to take out a dividend and in return pay mid teens fixed. They usually do this due to exit issues and fund life. Lot of the times it looks alot like mezz and no sophisticated structuring
Lot of equity-linked hybrid instruments (convertibles, warrants) are usually in non-sponsored corporates that are growing fast or require stretch leverage for M&A / founder liquidity / bridge to IPO. Or otherwise in stressed / distressed sponsor businesses
skills > brand
Are you 100% set on distressed. Or better question, would you 100% set on distressed if I told you there would be a five year period where the average distressed fund returned like 5-6% because opportunity set was terrible? If the answer is less than 85% for either of the two, I'd go to hybrid capital given PE buyout exits should be clean out of that group.
If its 85-100% yes, DB will set you up a bit better for liquid distressed, though in all fairness not sure how much DB trains its juniors which has been an issue with people hired from other desks.
Also alot harder to train privates at a certain level than publics given elements of sourcing and doc negotiation which you learn alot less of in normalway credit analyst seats.
I wanted to ask: my summer internship this year has been in the private side in origination and structuring of mandates in the private markets, with some public market exposure. This is for a smaller boutique.
I am considering pursuing this at a BB. What are your thoughts on the culture and type of work undertaken in a BB for private-side credit advisory?
What do you mean private side advisory? In IBD, there is leveraged finance (underwriting LBO debt raise, refinancing - usually performing credit & capital markets role) and restructuring (distressed / capital structure advisory). Naturally restructuring is good starting point for special sits / distressed investing and leveraged finance for direct lending / capital markets at sponsor. For graduate role whether you start in leveraged finance / rx / m&a advisory doesnt matter too much. As long as good bank / group + smart enough
Doesn’t DB desk also participate in illiquid / private credit (e.g. Marelli DIP) alongside public trading book?
Agreed on PE point, if you want to pursue a career at a large cap PE fund then Hybrid will give more chances. Take DB if you know you want to do credit (ie. credit HF, distressed etc)
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