JD or CFA for Distressed Debt/Activism?

I am non-traditional student from a relative target school. I am currently working as a paralegal at an RE/Transaction Law firm. I recently have developed a strong interest in distressed debt and activism investing. I have two roads that could potentially lead in that direction, and am seeking advice on which of the two would be most effective.

I could study and sit for the CFA and try to leverage it to recruit for a boutique IB (I have deal experience on the legal side) or Equity/Debt Research analyst position with the hopes of moving to an HF at some point.

I could also work towards a JD program (and work on financial technicals during my paralegal tenure) and hopefully recruit for an IB restructuring internship for 1L and 2L with the hopes of moving to distressed and litigation-heavy activist investing. I realize an MBA is probably more efficient, however, as a prelaw during undergrad and having paralegal pre-MBA experience, it seems I would be less competitive for Top MBAs in comparison to Top JD programs.

Any advice or insight would be greatly appreciated!

 

Based on the most helpful WSO content, here are some insights and advice for your situation:

JD vs. CFA for Distressed Debt/Activism

JD Path:

  • Pros:

    • Legal Expertise: Distressed debt and activism often involve complex legal negotiations and restructuring processes. A JD can provide a strong foundation in understanding legal rights and negotiation strategies, which are crucial in these fields.
    • Recruitment Opportunities: You can leverage your legal background to secure internships in IB restructuring during your 1L and 2L years, which can be a direct pathway to distressed investing roles.
    • Litigation-Heavy Activism: If you are interested in activism investing, having a JD can be particularly beneficial as it often involves litigation and legal confrontations.
  • Cons:

    • Time and Cost: Pursuing a JD is time-consuming and expensive. It requires a significant commitment of three years of study and substantial financial investment.
    • Less Financial Focus: While a JD provides strong legal training, it may not cover financial technicals as comprehensively as a CFA or MBA.

CFA Path:

  • Pros:

    • Financial Expertise: The CFA program is highly regarded in the finance industry and provides in-depth knowledge of financial analysis, which is essential for roles in equity/debt research and hedge funds.
    • Flexibility: The CFA can be pursued while working, allowing you to gain practical experience simultaneously.
    • Recruitment Opportunities: A CFA can help you transition into boutique IB or equity/debt research analyst positions, which are stepping stones to hedge fund roles.
  • Cons:

    • Competitive Field: The finance industry is highly competitive, and while the CFA is valuable, it may not provide the same level of differentiation as a JD in legal-heavy roles.
    • Less Legal Focus: The CFA does not cover legal aspects, which are important in distressed debt and activism investing.

Recommendations:

  • Evaluate Your Interests: Consider whether you are more interested in the legal aspects of distressed debt and activism or the financial analysis side. This will help you decide which path aligns better with your career goals.
  • Leverage Your Background: Given your experience as a paralegal, the JD path might provide a more seamless transition and leverage your existing skills. However, if you are passionate about financial analysis, the CFA could be a better fit.
  • Consider Hybrid Approaches: Some professionals pursue both a JD and CFA to gain a comprehensive skill set. While this is a significant commitment, it can provide a strong competitive edge in the distressed debt and activism fields.

Conclusion:

Both paths have their merits, and the best choice depends on your career aspirations and interests. If you are inclined towards legal negotiations and restructuring, the JD path might be more suitable. If you prefer financial analysis and investment strategies, the CFA could be the way to go. Consider your long-term goals and choose the path that aligns best with your interests and strengths.

Sources: Q&A: distressed debt hedge fund analyst & top 3 MBA, Focusing on Investment Style Fit, What do you love/hate/regret about public credit/HY/Distressed?, Distressed debt / special sits investing - On the job, Distressed Debt Hedge Fund out of College - Prep Advice

I'm an AI bot trained on the most helpful WSO content across 17+ years.
 

From what I know CFA is more for LO, CFA won’t help much for IB or HF roles. You may be better off doing an MBA or something? Again anecdotal but what i’ve seen and heard

 
Most Helpful

going on a slight tangent b/c you're contemplating serious choices/time commitments. distressed debt and equity activism are both very small investment universes. each tends to have reasonably well defined profiles for desired candidates, and the potential talent pool is more than saturated.

public distress is quite mature as an asset class. the people earning outsized returns in distressed debt work at kirkland + ellis, not at XYZ opportunistic hedge fund. the value prop has changed, making capital a commodity today.

and activism is a tool, not a strategy. the # of competent / of-scale activist funds is quite small. there simply aren't many seats

ive worked at firms across both investment universes -- no single credential will get you what you want per se. that said, you will see JDs, CFAs, MBAs, JD/MBAs, and people with no postgrad credentials. all are smart / well trained.

if i were in your shoes, i would ask myself what i (think i) like about these types of roles. activism is more akin to PE in many ways (why not just go for that? it's the route many people take to activism anyway). distress can be very much like PE, but some funds take more of a trading approach. 

assuming you truly want to be in these fields, would suggest starting by looking into a traditional ib program or join a special sits desk. make yourself the real estate or real assets person (not a ton of seats but would argue the best bet, given your background. you can pivot from there later). could entertain law as a means to participate in those games as well -- less competition / lower barriers to entry, although there are true differences in what you would be doing with your career

 

Thank you for taking the time to write out such a well thought out response, I really appreciate it. I am personally (I think) more interested in the PE investment style more so then trading, so I will narrow my research and focus around this understanding. Also when talking about the true career differences between IB/Special Sit route and Law route, I am assuming you mean between law as the career and not going to law school to break into IB/Special Situations. Do you think its dumb to go to law school just to try break  into IB when I could do an MBA instead even if I'm "less" competitive on paper as a candidate? 

 

don't overcomplicate this. learn the technical stuff. plenty of material online for free or reasonable expense. and network hard to figure out what these jobs are / how to break in. don't waste 3 years in law school if it's just a stepping stone. a reasonably motivated person can probably crack in w/o any of the extra credentials, but idk your full bio obvi. a final point, consider what you're good at... if you can get into harvard law but couldn't crack top-10 mba, you might be better suited for a career in law - not intended to deter you from choosing finance but direct you toward efforts that can bring highest returns. so many lucrative career paths out there which aren't just investing

 

Going to partially hijack this to weigh in a bit from the distressed side of the equation - I came from a pretty similar background to OP, so what I’d say is having prior legal skill and acumen is additive but not critical to getting roles. You end up picking up most of the important legal stuff on the job, and unless you’re a RX/Chapter 11 lawyer, the other legal skills are helpful but not directly translatable in a lot of instances. Also, a lot of distressed funds, certainly all the places I’ve been and our competitors, have desk lawyers now who are former senior lawyers who exist solely to opine on and structure distressed investments. These folks will be miles better and more experienced than most investment people (bar the most senior and experienced folks) as they lived and breathed Chapter/other out of court RX but are also senior enough to opine on commerciality and other strategic aspects. 
 

I think gone are the days where you see a lot of lawyers move directly into an investment seat, as people tend to specialise a lot earlier and the market is a lot more mature and saturated. So if you want to do distressed, it would make more sense to go directly into the finance side. What I would say though is that you can leverage your legal background during your interviews as a differentiating motivation to why you want to be in distressed (or even other parts of investment, ie going from supporting investment to actually doing it). 

 

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