Buy Side Credit - Seats / Guide

This is quite an interesting question so let me give my 2c

I think both can be true at the same time: these seats can be toxic and work you incredibly hard AND they can also be great learning experiences that sets you up for a career in the industry

I think the reason some of these seats are considered “poor” is particularly concentrated around at the junior to mid levels. As these type of credit products and strategies have grown and matured, these funds and seats have largely moved away from the very nimble and lean teams that have the flexibility and, crucially, uncapped upside and upward mobility that they use to have.

Part of it is the market - grinding it out type restructurings are unpopular because the return on effort isn’t great, and so a lot of firms have now moved into “capital solution / opportunistic credit” where teams are much bigger and deeper (could get 3-4 IPs on a single deal). This not only layers you, but also restricts the type of trades/deals you look at (the fairy dust of 15% yielding, 1L secured paper that has super low LTV).

This is then linked with where LPs are looking to put capital or, in other words, follow the money. While performance is important, oftentimes for the real economics holder at these firms, clipping your management fee on a big denominator usually gets you paid more and then eventually lets you get sold or IPO at a higher valuation (ala HPS). That’s why Scott Goodwin, Hamza at Arini have all been so aggressively growing AUM.

So really outsized outperformance will not help you as much as consistent moderate underperformance will hurt you on the fund raising side. Remember, LPs that put money in Pine Tree or White Pebble Credit Fund 7 are not looking for the upside - they have allocation elsewhere for that. This again comes around and favours bigger teams given the firm will be able to go to LPs and say, “look at all the industry verticals I have that can deploy the gajillion of dollars you’re going to entrust me with for our next fund”. Therefore, again, as a junior/mid level person who is not participating in the economics (not in the true sense), your experience and mandate is more narrow, you have very little autonomy, and you are not incentivised economically the same way the firm is.   

To summarise, i think what people are typically triangulating for are: autonomy (I can look at what I want and decide how I want to spend my time), upward mobility, and uncapped (maybe even formulaic) compensation. Most firms nowadays will offer you 1 and maybe 2 if you’re lucky. But the reality is also that compensation and path to running risk doesn’t have to be tied to the seat you are sitting in today. So my suggestion is always to look for the best deal and learning experience you can get today. Look directly at the people you will be interfacing with day to day, and look at the trajectory of the platform itself (is it stable, is it raising capital). This is why I still believe all the firms you stated are great platforms (maybe stepping stones) notwithstanding their reputation.

This isn’t to say firms that offer all 3 and even more don’t exist - but those firms are typically leaner and therefore don’t hire as often. When those seats do tend to open up, they also tend to hire from people who are already in some of these aforementioned firms as well (if they didn’t already have people in mind).

Ultimately, it’s a tough industry and we all work incredibly hard. But careers are not linear, you don’t have to stay at the one firm forever and people frequently move. There are no seats that will promise you immediate path to PM/running your own risk PLUS crazy money. But if there are, you should let me know.