Q&A: Direct Lending to Associate at $5bn Distressed Hedge Fund

Question

Open to any questions from people curious about the switch and my path to a distressed hedge fund. Background: graduated with a 3.7 from a semi-target state school, spent 2 years in direct lending then 1 year in restructuring before joining a public markets distressed debt fund.

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fastbreak · Accepted Answer

I like it, let's get into it:

1) Public is different. You have much less information than on the private side, so a lot of your thesis is built through conversations across the street, unconventional analysis, assumption building, etc. You also generally act quicker to avoid missing opportunities which may only be around for a short time, and it feels exciting being able to screen and act on publicly traded stuff. Private side is also interesting, I just spent the first few years of my career on that side so wanted to try something new.

fastbreak · Answer

It depends on your role. When I worked in DL, I helped negotiate the credit agreements with the lawyers and read all of the many drafts of those documents as they were being argued and created. It was boring, but I understand a credit agreement very well and this is something most bankers don't do. I also read Debtwire articles for different concepts in current public bankruptcy stories (for example, priming transactions are hot topic right now). Have you done either of these yet?

fastbreak · Answer

Sounds like a great seat. I don't think it's the most straightforward exit in the world going from credit to equity, but at the junior level I've seen people do it. I'm sure people do it at the senior level as well, I just think it becomes a little harder. You'll need a good story on why you're moving from one type of investing to another, because the mindsets are different between credit and equity investors, but the work at the junior level isn't overly different and you'll be working with those sponsors in your DL deals. I would move to RX if you want to do distressed investing.

fastbreak · Answer

I was always interested in bankruptcies from my internship onward. I would say I just gradually found myself gravitating towards those stories, deals, etc. I had similar thoughts as you. Direct lending is a great career with great salaries and, usually, work life balance. I started feeling like all of the deals were similar and staying at the top of the cap structure doesn't leave a lot of room for creativity. I would think the NPL stuff could be interesting, but don't have a lot of experience with consumer loans. Name brand of hedge fund could be something to think about.

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Q&A: Direct Lending to Associate at $5bn Distressed Hedge Fund

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Q&A: Direct Lending to Associate at $5bn Distressed Hedge Fund

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