MM PC to MF PC? Direct Lending to more junior investments?
Hi all,
I’m based in London and have an opportunity to potentially join a MM Private Credit (Direct Lending) platform (think Eurazeo, Barings, Arcmont, Pemberton, Muzinich, ICG) straight out of undergrad after interning with them. The platform mostly focuses on plain vanilla Direct Lending deals.
I’d be happy starting my career there, but I also value optionality. Ideally, I’d like the flexibility to move either upmarket (MF PC) or across/down the capital structure in 4–5 years if I feel like I’ve seen most of what Direct Lending has to offer.
I know that the more junior parts of the capital structure you work on, the better your optionality usually is. That said, does starting in Direct Lending pigeonhole you into that segment for your whole career, or is it still possible to make those moves later on?
Starting your career at a MM Private Credit (Direct Lending) platform like Eurazeo, Barings, Arcmont, Pemberton, Muzinich, or ICG is a solid foundation, especially straight out of undergrad. However, your concerns about optionality and potential moves to MF PC or across/down the capital structure are valid. Here's what you need to know:
Optionality from Direct Lending:
While Direct Lending is a great entry point, it can sometimes limit your flexibility compared to roles that involve more junior investments (e.g., mezzanine, distressed debt, or equity co-investments). Direct Lending tends to focus on capital preservation and lower-risk investments, which may not fully develop the risk-taking mindset or skillset required for roles farther down the capital structure.
Moving to MF PC:
Transitioning from MM PC to MF PC is possible, but it often depends on the deals you've worked on and the reputation of your platform. MF PC firms typically look for candidates with experience in larger, more complex transactions or those who have demonstrated strong analytical and deal execution skills. Networking and leveraging your platform's alumni network can also play a significant role in making this move.
Shifting Across/Down the Capital Structure:
Moving into mezzanine, distressed debt, or special situations is feasible but may require you to demonstrate your ability to think like an investor in riskier parts of the capital structure. Working on sub-debt or equity co-investments during your time in Direct Lending can help build this skillset. Additionally, pursuing an MBA or transitioning through a role in investment banking could provide a pathway to these areas.
Pigeonholing Risk:
While starting in Direct Lending doesn't necessarily pigeonhole you, it does mean you'll need to be proactive in seeking opportunities to broaden your experience. For example, some MM platforms offer flexibility to work on mezzanine or equity co-investments, which can enhance your optionality. If your current platform doesn't provide this exposure, you may need to consider lateral moves to firms that do.
Lifestyle and Long-Term Considerations:
Many professionals in private credit choose to stay in the space due to the attractive compensation, better work-life balance compared to PE, and the growing demand for private credit as an asset class. However, if you're set on exploring other areas, it's crucial to plan your moves early and strategically.
In summary, starting in MM Direct Lending is a strong launchpad, but to maximize your optionality, focus on gaining exposure to more complex or junior investments, build a strong network, and consider further education or lateral moves if needed.
Sources: Golub Capital type direct lending fund, Private Credit / Direct Lending Comp, PE Lateral Recruiting Advice/Stories/Help?, Alternative Lenders & the End of Risk Taking for Banks - Opportunity or Risk?, Q&A: Credit Analyst (Multi-Strat Credit Fund) >$5bn Fund
nay
can you provide a little more colour on why? Would be great if you could PM me as well. Thanks!
Could you provide a little bit more colour on why? Thanks!
MM to MF PC is a tried and tested route. Cross cap less common but within 2-3 of ft stint possible if clued up enough on how to approach mez type underwriting
It really comes down to the types of deals you end up doing. But even if it is mostly vanilla unitranche stuff, I don't think you'd have a ton of trouble moving across the cap stack. The biggest reach would be traditional buyout PE, restructuring, and special situations but I think that would even still be doable. It maybe becomes a bit harder once you reach SA/VP but through 2-4 years you should be fine. I am at a ~$2B DL firm and have seen co workers exit to a bunch of different roles (MM-UMM DL, Buyout PE, ARR Lending, etc.).
Thanks for the insight! Would MF PC be doable, given from what I can see they mostly hire out of IB, at least in London?
I am US-based so I don't have any London-specific advice to give you. I have read elsewhere on this website that they mostly hire from IB though. Personally, I have had a few recruiters for MF PC reach out to me so I don't think it is impossible. At the junior level your experience should still be just as applicable. I have always thought that the biggest difference between skillsets in the MM versus a MF are some of the legal complexities / nuances of the structuring but I wouldn't think that's a huge deal 2-4 years into your career. The number of seats available in PC is obviously growing much faster than IB, so I feel like time is on your side from that perspective. Regardless, I think PC is one of the best jobs to learn early in your career. I also started in PC right out of college and always felt like I was ahead of my IB peers who joined after their analyst stints.
I agree with one of the posters above. It really depends on the type of work you are doing. Sponsor direct lending in the middle market will be literally the same as sponsor direct lending in the larger part of the market, except you may have more cowboys in the system in the lower end of the middle market and in the larger part of the market, sponsors will demand extremely unreasonable terms in the credit agreement that you will have no choice but to accept. Besides that, it is pretty much the exact same day job.
That being said, if you are doing non-sponsored, special sits, or structured capital, that would be a much different experience (and work life balance), likely giving you max optionality to lateral to any seat at the cost of your health and free time.
Can you give an example of how significant the difference in health/free time cost is between sponsor DL vs. non-sponsor/special sits/structured cap? Curious about what trade-offs would look like from pros/cons standpoint
Imagine trying to comb through financials pulled from QuickBooks and talking to a founder who literally does not know what his gross margin is. Imagine having no CIM, and literally having to do every piece of analysis, data aggregation, ppt creation yourself. Imagine working with a CFO who has never paid interest expense before and doesn't track any KPIs. You can pretty quickly see why this would be a massive time sink to analyze these opportunities.
Use my example above versus a well-run, well-oiled process with an investment bank and a Sponsor. The CIM is clean and has 80% of what you need to understand whether the opportunity is a fit or not. your diligence request list is typically data they expected you to ask for and they have it off-shelf, the financial packages are clean, concise and accurate. The investment banks are actually providing a valuable service creating all of the materials to prepare a company to go to market. It is night and day running a process through non-sponsored vs. sponsored.
On opportunistic and special situations side, now think about the analysis you need to do assuming that your downside is owning this business. There is a tremendous amount that goes into the tougher opportunities to get comfortable with the business.
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