Which job is least likely to be impacted by recession: IB, PE, HF, or MBB?
Can someone please rank - 1 (most affected) to 4 (least affected)will take a stab at it -------------
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That is a very broad question. There are pockets in each group that will fare well during recessions maybe aside from MBB. In IB, RX bankers will be busier than ever during recessions while M&A bankers will likely see less activity. Macro HFs will probably due really well while Long only funds will perform poorly. L/S fund should in theory not be impacted by downturns but given that "50%" of SM L/S are long tech, no one knows how they will fare. The large established buyout shops will be fine but the emerging tech focused PE shops will face headwinds.
HF is hard to catalog; there's so many strategies that you can't just lump them together and say its likely or unlikely to be affected.
Agree with the above answers - hard to generalize. each of these has areas that will do well or won't do well in a downtown.
if you want a very rough ranking, I'd think about it like this
PE - assuming at a well-funded shop and not one on its first or second fund about to hit terrible timing on exits. long return cycle means you can hold stuff a bit longer without massive realized losses
IB - RX and lev fin will be busy, rest of the groups will have diminished M&A activity
MBB - guessing some groups will be busy during a recession, but firms will look hard at discretionary spending and $$$$ consultants will be hard to justify unless on an absolutely critical project
HF - some HFs will do very well in a recession and volatility, but can be harder to generate alpha when the market is down and as choppy as it is now. in addition, a lot of hedge funds earn fees based on high water marks (i.e. their peak) and many of them did extremely well with the bull markets in last few years. hard to outperform high water mark these days
Prospect here, can you please explain how lev fin will fare better in this downturn? I've only heard the opposite (HY markets closed, levfin m&a down, etc). Would this only be for banks that have both levfin and rx groups in house?
Yeah agree with you in that the current rate environment makes it a little interesting for lev fin - traditionally the rates go to 0 in a downturn so this could be an unusual environment if they are committed to maintaining the hikes. either way though, companies will need liquidity in a downturn even if it means issuing a very high coupon bond. more companies will fall into the HY credit rating as earnings drop and DSCR gets tight. Lev fin inherently works on credit / stressed companies and even in a high rate environment those are likely busy enough in a recession
I don't work in lev fin, maybe someone in that group has a different opinion. just my 2 cents
PE is the worst in a recession, followed by IB, MBB, HFs
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