Back on this site after a multiple year absence. AMA. Will try to respond as quickly as I can but it's earnings season so forgive me.
My Background
Target school
2 years RX banking at HL / PJT / Laz
3 years associate at $100bn+ asset manager in HY
1+ year at smaller LO asset manager which does all things credit, I'm doing HY / LL / opportunistic
Big traditional AMs: Blackrock, T Rowe, Capital Group, Lord Abbett
Alternative AMs: Oaktree, Ares, PIMCO, Apollo, Blackstone
Smaller independent credit-focused AMs: Beach Point, Octagon, Golub (there are a ton of good ones in this tier so I'm sure others will have names too)
Hedge funds (distressed guys will play in performing credit a lot depending on distressed market, some have dedicated performing teams): Anchorage, Sculptor, King St
As I mentioned above, comp varies a lot with AUM. Performing credit generally just charges a management fee in the range of 50 bps so pretty easy to back into how much is available for comp, but some general ranges...
Associate - $225-400k
VP - $400-600k
MD - $600k-1.5m
PM - $800k-5m+
At most firms I've seen, VP/SVP/MD are all really the same job, just different levels of seniority, so it just kind of scales up subject to your performance and firm AUM. I know somebody will ask this but no, there's no set timeline for promotion, at least at my firm. Generally speaking if you came on as a VP as I did, it's probably 8-12 years before you start getting looks for PM. I'm in my mid/late 20s, will probably be in consideration for PM sometime around 35-37. But PM seats are obviously hard to come by so it may take longer.
No problem. RX and LevFin are both super common. You'll also see industry coverage bankers and some sell side HY analysts transition to the buyside. To be clear I'm talking about HY "desk analyst" type seats, not traders or salespeople, at least for credit analyst roles. Other backgrounds definitely happen but as far as I can tell it's super ad hoc and hard to draw more general conclusions about those.
The two main differences are process and liquidity. In terms of process, a bank will syndicate public credit to a broad array of buyers whereas in private, they'll negotiate directly with the company or sponsor and you'll only have one or a few buyers in each deal. On the public side, the time from announcement to closing can be anything from a few hours for a HY drive-by issuance to maybe 2 weeks for a not well know loan issuer. In private markets, they do way more PE style diligence so it takes longer. And private negotiates price, whereas in public it's more like the bank saying "this is gonna be 7% area, take it or leave it." And then in terms of liquidity, I know what I can buy or sell any security for at all times on the public side since these things trade. Maybe for some super small distressed tranche there's a 3-5 point bid/ask but overall it's relatively liquid. In private, they generally don't trade barring some distress or a fund issue or something like that; you have to be prepared to hold the deal all the way to maturity. And if they do trade, it'll be subject to the same diligence and negotiation process as with the initial underwriting.
I know this is contradictory to what I mentioned above, but honestly a CFA or MBA might be your best bet. I don't think I've seen anybody make the equity -> credit transition directly. The only other thing I can think of is to try to get coverage of an industry that has a lot of HY issuers. If you know the industry you can learn the bond math. I would think it'd be easier for IG but I'm not as familiar with people's backgrounds there.
I think pretty well insulated from automation. The calculation of credit metrics can be done by a computer but I think it'll be a while before computers become competent judges of relative value and "known unknown" risk. Automation (as with algo trading) will happen in more liquid markets first, so HY credit definitely won't be the first domino to fall. Also, a broader comment which applies to equity as well, I think firms are really underestimating the importance of grooming juniors for eventual senior seats w/r/t AI. Yeah, a computer can calculate leverage and build you a three statement model, but you still need a senior to process that output and develop a view along with more intangible stuff that computers have a hard time analyzing. But if you completely automate the junior end, eventually your seniors will retire and then what're you gonna do, promote the computer?
I mean, yeah, pretty much. It is relatively simplistic, at least in terms of the level of analysis going into an individual buy/sell decision, as compared to the private side. I once had a discussion with a PE friend when we were both covering the same industry and we talked about how he can build a 10k line revenue model, I can slap a growth rate on mine, and we'll probably come out at about the same answer. Being that close to the numbers and having worked on portco synergy achievement and the like, he would be infinitely more prepared than me to start a business in that industry, but that's not a goal of mine so I don't really care.
As for "being more stimulating / closer to investing," I think that's actually two separate questions. Level of stimulation is very individual; I mentioned before that I just have 0 interest in the more mundane and process-oriented work that comes with the private side, so for me the mark to market and understanding of public market dynamics plenty stimulating. I don't feel the need to iterate a receivables aging analysis or negotiate the minutiae of an Adjusted EBITDA definition. For the record, I can do and have done both, but I left banking for a reason.
"Closer to investing" is also individual in that everyone has their own perception of investing, but it's also not. Fundamentally, I view investing as the search for adequate risk-adjusted returns. Using an ad absurdum example, GME YOLO calls / wallstreetbets does not qualify as investing to me because there's no concept of risk there, just vibes. You in PE and I in public credit are both addressing risk, just in different ways. You're addressing it via deal-level financial engineering and analysis, I'm addressing it by a combination of credit selection, diversification, and portfolio construction. I would argue that neither is better, it's just the tools available in our respective markets. You can't possibly construct a properly diversified PE portfolio with, what, 15-20 names in a fund? So you make each deal the best it can be. I (for the most part) can't change the specifics of a public credit deal, so I choose multiple to construct a well-positioned portfolio. I don't think that means either isn't investing. Also, going back to the stimulation thing above, I'm perfectly satisfied, so if somebody thinks what I'm doing isn't investing, that's fine by me.
Great question. To me, you can't properly evaluate comp without taking into account 1) the WLB necessary to achieve that comp and 2) the stability/predictability of both comp and WLB. I don't think college students CAN evaluate either because they've never done it. Banking makes a ton of sense out of college because you'll be in the 99th percentile of earners at that age and at 22, putting in crazy hours with little notice is manageable. And for most people, a PE associate gig will still make sense because the hours are still manageable at 25 and you're still picking up a ton of skills. At 30, the trade-off is more like 98th percentile / 50 hour weeks vs. 99th percentile / 80 hour weeks (on average, with some 60 and some 100), and you'll get more people hopping off the hardo train. So to actually answer the question, I don't think I'd actually think about it any differently as a college senior, but I'd encourage those just entering the workforce to periodically take some time to think about how that trade-off works for them and to observe senior people across different roles to get a sense of whether you see yourself in their shoes.
Skill set, PE wins hands down. My skill set is not particularly portable, but that's ok with me because I don't really see myself doing anything else. If you're worried about optionality, PE is the significantly better route. Private credit is somewhere in the middle and depends on the specifics of the strategy.
I think my broadest piece of advice would be to allow your priorities to change. Starting out, everyone's top priorities will probably be comp and skills. Those will shift over time. When you meet your first miserable 3x divorced banking MD, you'll find yourself wondering how they got themselves in that position. It'll make sense eventually. And the key to avoiding it is constantly evaluating your priorities and finding the right spot for you. For some people who love the grind, that means PE or banking all the way to the top. For some people like me, it'll mean going to the public side at the first opportunity and finding your niche. And for some people, it'll mean leaving the rat race altogether. "Prestige" or external validation is not a sustainable motivator for most people, so finding out what works for YOU should be your overarching decision point in your first few professional moves.