Jan 29, 2021

Private Credit / Direct Lending Comp

I'm a 2nd year associate at one of the big DL firms (Ares/Golub/Owl Rock) and bonus season is around the corner. Seeing as most people on this site are always talking about PE/IB comp, I would love to hear any data points for people in the private credit space (DL/Mezz etc). To start - I'm hearing $130k/$85k for my year (associate 2). Any input appreciated.

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Skillset is very similar (credit is credit). From another thread that summarizes it pretty well: "The primary difference is regulatory, driven by the different sources of capital. Banks hold deposits, so risk-taking is restricted in a number of ways in order to protect depositors. Direct lenders are raising funds from investors who want the lender to put that capital at risk in exchange for returns. Regulators take a much more hands off approach; they're not nearly as concerned with a fund blowing up as they are with a bank going under.

Banks still dominate the investment grade large corporate syndicated loan space because i) they're low-risk borrowers, so capital requirements aren't as onerous, ii) banks have balance sheets large enough to support the biggest borrowers, and iii) there's a lot of cross-sell opportunities with large corporations, so it's a worthwhile use of capital for big banks. As the borrower size goes down into the middle market and lower-middle market, banks have less cross sell to pursue and higher capital requirements for riskier borrowers. Direct lenders have taken share in this space because they can be as risky as they like, so long as they provide investor returns."

With the additional risk on the DL side, usually more intensive underwriting / analysis, and thus the good ones hire more from IB/LevFin backgrounds, and comp is far better than on commercial banking side. 

Corporate Banking is totally different. You are the point of contact for your client to the whole bank, much more client oriented. IMO you touch a lot of parts/products, but specialize in nothing. Comp is somewhere in between Commercial and Investment banking, but i think its a snooze.

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