Going from l/s equity to special sits/event driven
Recieved an offer from a top special sits single manager but am still on the fence. Anybody else make the jump from l/s equity have any advice? I have limited credit exposure but showed a willingness to learn. Ended up going through a pretty ad-hoc interview process a month ago and now have to decide soon. I like the idea of investing in some more opportunistic areas as opposed to just more levered growth, but would like to learn more before making the jump.
Would help to know a little more about what you are currently doing, and what is on offer at the new shop. But without knowing much:
Event driven equity investing is ‘same-thing-only-different’. That is , same analysis toolkit for valuation, same thought about strategic value , etc.
The big difference is that the driver becomes process and probability rather than operational improvement, growth, etc. The most extreme example is merger arbitrage, where your investment thesis boils down to document analysis and probability trees. Similarly bankruptcy/ distressed credit is all about extracting value through the legal process.
Generally in event-driven investments long you’ll see more iterations more quickly and it is a great place to learn about value (or lack thereof), management behavior (companies don’t make decisions; people do), the impact capital allocation can have. You also get to learn a lot about the many parties that touch these things: courts, lawyers, regulators, boards, and on and on.
But if your disposition is long-term value oriented or not particularly well suited to a process- and probability-driven world it can be a frustrating path to walk.
Good luck!
Not sure where in the special sits spectrum you sit but I’m currently an event guy and I can assure you outside of merger arbitrage and maybe some credit slates, its pretty terrible of a mandate compared to being a sector specialist in l/s equity where you have a repeatable skillset instead of dabbling in silly events over and over again.
After speaking with them again, it's more of a distressed fund than events. Does that change anything
Not really. Except that equity investors get to worry about how much something might be worth if it all goes right. Distressed guys get to worry about how they could get screwed into losing money ... and about how much less than par they can carve out of finite enterprise value. Less fun imho, but that's me.
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