Why do you like credit
What do you like about working in credit. Starting a job in credit soon and always hoped to work in a more equities focused role. Still very happy to have the job though and would love to hear why people chose credit
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IMO it just makes way more common sense to me. My first foray was into some of the more challenging legacy CDOs/RMBS and it got me hooked, it showed me that there can be lots of creativity with financial engineering and your asset class knowledge is significant because ABS can run any type of recurring cashflow
In credit I am just buying a contract and if it isn't fulfilled you have plenty of rights and remedies to seek payment which is pretty straight forward
Credit is a crucial financial tool that allows individuals and businesses to access funds for various purposes, such as investments, purchases, or emergencies. It enables economic growth by facilitating borrowing and lending, encouraging entrepreneurship, and stimulating consumer spending. Responsible credit usage can build a positive credit history, leading to better interest rates and financial opportunities. Additionally, credit cards offer convenience and rewards, while credit reporting fosters transparency and accountability. Overall, credit plays a pivotal role in modern economies, providing flexibility and opportunities for those who manage it wisely.
ChatGPT over here
But so brilliant.
I always thought having a definitive outcome in credit vs the unlimited upside potential in equities made a little bit more sense to me. Felt like there were less variables and not many other outside forces pushing and pulling on my analysis.
Funny that that’s how it started for me as well. I frantically applied for internships in my second year. Heard back from a private credit shop but had no idea what PC was. For a lack of resources at the time, I prepared using a commercial banking recruitment guide. Made it to the final round of the interview but they picked someone else due to “fit”, got frustrated and mass emailed boutique private credit shops in my city and ended up with an internship at another private credit fund. Went on to then really like credit due to it making more logical sense to me. Focus on downside protection seemed more tangible compared to what equity folks present in their analysis. Went on to then intern at another larger shop doing credit work (public sector coverage, structured products, private placements) which then turned into a full time offer at the same shop.
Several reasons, in no particular order.
1. The credit market is several times the size of the equity market and debt is the vehicle through which most economic activity is financed. So there's a huge depth and breadth to the industry that means you can always find ways to sling loans here, there, or anywhere. That depth and breadth also makes it much more relatable and accessible to what I and the circle of humans that I interact with see/feel in the real world.
2. Credit (at least traditional bank credit which is my background) is the fuel system of the economy. It's cool to see that providing this or that loan actually erects that building or that facility and creates those jobs.
3. There's a lot more "what if" involved in credit. Equity financing is you pays your money and you takes your chances. Debt financing, by and large and over a long period of time experiences remarkably low levels of loss due to varying levels of risk management and recovery efforts. I've learned more about law, contracts, human behavior, credit theory, and negotiation working through bad loans than I ever have originating good loans.
4. To my brain, its just easier to think about that equity analysis.
5. Because you can lend money at all levels (small business and corporate lending) you get to experience a much wider range of transactions and "impacts" than you otherwise would. In my career, I've lent publicly traded companies huge amounts of syndicated debts, underwritten huge muni bond offerings to support economic development, and pure start up food trucks for people who want to launch their dream of self-employment.
Not to suggest equities don't enjoy any of these same features, just at the "small and medium size business" end of the spectrum where I've always worked... there is no (real) equity market so its debt or bust.
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What are the most interesting roles in the credit universe? From the comments above, seems like credit is a very interesting place to be but not every credit job is created equal
Credit is a great way to learn how money moves. It's probably the clearest example of how money is made in this industry.
Because losing money feels infinitely worse than making money feels good.
No more comments. Agree.
As a student who has experienced both Munis and HY/LL to me credit just makes more sense. To me, equity is most about what could be to the upside while credit is more about what is there focused on the downside. Being somewhat of a skeptical person, credit seems to align more with how I think.
More intellectually challenging, learn more about macro investing, less market transparency, more critical thinking & scenario analysis, get to pick up rock solid fundamental modeling skills, learn about capital structures, more variety of product (IG, HY, Distressed, Loans, Munis, Preferreds, Private Credit, ABS, Mortgages, CLOs, Rates, CDS, etc.). More fun to think about conceptually. Oh, and you'll still have a job in 10-15 years b/c credit is still very human and not as algo-friendly. Bid/ask is still ridiculously wide. I'd rather be the guy sending out three-point markets on a stressed name ($70 / $73) than the guy buying/selling a stock for pennies apart.
Not to mention, there's 1 AAPL stock but there's 25+ AAPL bonds. That means you can put on curve trades, trade around a capital structure, pitch rel val ideas, or put on a carry trade. Also worth nothing: If you understand credit, you fundamentally also understand equities. Can't really say the same for the other way around.
Thinking about downsides is also much, much more fun than upside. The downside forces you to get creative and use your brain. You also find out if you're right or wrong very, very soon. I'd rather do that, than be an equities analyst rambling about how AI and ESG will magically save us from climate change and make the world full of flowers and rainbows.
are you a bb credit trader?
The honest answer is that I am an incredibly cynical person.
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