Private vs. Public Credit (CLO manager, HY/IG shops)
Could people provide some thoughts on private vs. public credit (CLO manager, HY/IG shops), including pay, work-life-balance, career progression and long term trajectory/exit opportunities, level of interest when it comes to actual work, etc.
Pay will generally be higher on the private side given the fact that the return profile is higher and the funds will often be levered so you can get to ~10% net returns on a levered basis in private credit lending to MM companies at least historically.
Given it's deal based/transaction driven WLB will be worse on the private side. Long term trajectory is to basically continue progressing on the private side up the normal standard IB-like ranks (i.e go from associate doing all the lower level tasks to driving a process as the mid level guy and then sourcing/driving the investment thesis at the senior level). Public is a bit different in that usually everyone is either an analyst or a PM. At some places they may have senior/junior analyst structure where the senior is in charge of coverage over an industry and has 1-2 juniors helping him/her. Exit opps not really worth discussing because this isn't IB, generally people in these teams are looking to just move upwards within the organization.
Level of interest depends on the person. Typically CLOs (especially very scaled ones) will be more agnostic across buying whatever loans get syndicated, though this depends on the firm and some even bigger ones are much more stringent on what they buy vs don't. Typically in privates you get to structure the credit agreement more (though less so in these massive clubbed up deals) and there's the potential to underwrite some hairier situations depending on the platform so that may be more interesting but comes at the cost of better work life balance. My own preference is for secondary trading in bonds/loans given the market dynamics and trying to figure out if something is priced correctly at the current price, but everyone will have their own preferences. Long term privates are the safer career bet because there's no quarterly/annual benchmarking and the asset class is seeing massive inflows because nothing gets marked accurately so there's no volatility.
very helpful
I wouldn't say a move from public to private is impossible 4-5 years in just because everything is on a case by case basis, but there will be more hurdles to overcome the longer you are in publics. If you're coming from a CLO background the stigma will be that you don't have experience doing deep enough diligence. If you're coming from a more mutual fund/hy background looking at the vp level the issue will be lack of deal experience given your role will need to be running a process smoothly across the deal team. I'd say anything over 3-4 years starts making it somewhat tough although this can be counteracted in ways like having an IB background, being willing to go to a smaller/lesser known fund, etc.
Makes a lot of sense. And how would you look at portfolio vs. underwriting side of a private credit fund?
What would be the best way into public credit from MBA if I don't have any prior finance background? I'll be going to a T10 MBA but not one that is known for buyside finance recruiting.
You might need to network but I think going into credit at a mutual fund shouldn't be that difficult from a top 10 MBA. As far as I know generally the M7 are shooting for top equity mutual funds like Wellington, D&C, etc so there is less outright interest in HY or leveraged loan funds which should give you an opportunity to stand out if you display interest from the start of your program. Would just search for alumni from your school at places like Lord Abbett, Artisan, Eaton Vance, Wellington, and the like on LinkedIn and if there are none then just cold reach out to people that are there.
Curious what kind of comp CLO management yields at the higher levels? Particularly interested in unique strategies like liquid credit, CLO equity, or even the CLO Primary/structuring front (sell-side)
Has been covered before but generally for top tier liquid credit shops, ~1mm+ for PMs, 650+ Principals/MDs, ~400-600 for VPs, ~250-350 for Associates/Sr. Associates. Would also add there's quite a bit of career stability/low turnover in these seats as well given the sticky nature of the underlying capital base and lower performance risk. There's also seemingly many of these types of liquid credit/HY related seats out there so that would be the likely exit if not upward mobility or liquid distressed if you have the right experience. Exits outside of the credit realm are fairly limited however, so I would caution against this kind of a role if you are not interested in credit longer term. Less familiar with the CLO/structured credit side and would defer to someone more knowledgeable
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