Oct 28, 2020

Private Credit Comp

Would anyone be able to comment on comp ranges at private credit funds ranging from associate through partner, including for different strategies (i.e. direct lending, mezz, distressed, etc.) and fund sizes (mega fund, MM) if possible? Would also be interested in how they compare to PE at firms that do both.

 

Really dependent on locale. I have friends in decent sized cities(not NY but think Chicago/Boston/etc) at the associate level around 150-180k all in. I would assume it scales up from there at some of the bigger shops

 

I’m at one of the large more credit-oriented managers (Ares/HPS/GSO etc) and got ~$230-240 all in my first associate year, i.e. bonus paid 3.5 years out of college. Would definitely be interested in other data points here since it feels like there’s less out there than for PE/banking but I definitely think you’re generally taking at least a slight discount to what pay would be in either of those roles.

 
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Typical hours probably 9-9 Monday to Thursday and maybe 9-6 Friday so normally high 50s/low 60s per week. Normally very little if any weekend work but it does happen from time to time, and then if you’re under a tight timeframe on a deal hours can definitely creep up to or over 70. Background-wise I came from a debt-focused capital markets/banking role at an IB. I wish I could be more helpful on chances of or advice on making the switch from CB. Anecdotally I’ve heard it definitely happens and that your chances are much better at senior-focused direct lenders but can’t really give any thoughts based on personal experience.

 

I would say my pay has been more smooth than my immediate peers. It is an under $1B shop with less than 10 investment team members, so comp is bonus heavy and wildly volatile. My increases were a combination of my positions adding more PnL (hard to add PnL in first year with minimal investments sourced) and overall fund performance. It would not be unreasonable to get little to no bonus if we lost money in a year and didn't gather an incentive fee. Very volatile and risk/reward focused, which is what drew me to this firm.

 

I think this is broad misconception that has never made much sense to me - 

(1) Particularly in this interest rate environment, direct lenders are forced to turn over their book incredibly rapidly as loan duration is limited (i.e. loans generally NC-2 at best, and if you did a good deal you are getting refi'd out at Y2+1 day just about 100% of the time). This means more deals to invest the same amount of capital.

(2) Perhaps not at all shops, but many are doing something closer to PE-style diligence than I think most would guess - combined with (1), this means a lot of work to do. 

(3) Legal documentation is quite time consuming, and in a world where you are generally looking at a ~1.2x MoM in most of your deals (i.e. refi'd out per (1), you can't afford to have any leakage due to a loose doc) - this adds an incremental laborious workstream

 

is the comp in opportunistic credit generally the same as regular private credit?

 

Bump on the PC comp discussion and appreciate the insight. Can anyone elaborate on how comp evolves after the associate years? Also, any insight on how comp varies for different strategies, i.e. pure play CLO manager vs a mix with opportunistic and other credit strategies? Thanks

 

At the large shops HPS/AG/Ares/BX Credit Principal/ED is ~750k cash + cirri. MD is $800k-$1.5mm with $1mm/yr avg carry give or take. If you are running the team and the true head, MD can be $2+ cash and correspondingly carry. 
 

Hours are less than IB, less travel, less headache imo but carry is less than PE and if there’s a lot of deal churn, you can be working just as much as PE. I had a friend leave BX Cred to go to PE bc he despised this phenomenon. 

 
thecbbankinganalyst

Do you happen to know what the typical timeframe for carry payout is for PC? And are distribution frequencies different due to investment structure?

A senior lending fund (6 year life plus 2 year extension) will pay out faster than a Mezz fund (10 year life plus 2 year extension).  Yes you are collecting interest along the way which generates income but chunky payouts don’t start until about 3-4 years into a Senior fund about 7-8 years into a Mezz fund in my experience. 
 

for this reason, I always like my senior fund carry better bc it wouldn’t take as long, and even though lower returns if the funds are large like at my shop still paid competitively vs Mezz, the Mezz fund had higher returns and moic but took as long as PE timeline which sucks.

 

Our first year associates are at 275, stepping up to 325 next year and ~400 if promoted thereafter.

WLB varies but I'd say the effecient half is clocking 8-6/7 with some Sunday evenings and the less efficient half are close to banking hours.

 

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