As someone who's broadly interested in exits into a credit HF (ideally something in high-yield, CLOs, or distressed) after a stint as an analyst, what are the paths like into this field from IBD, particularly comparing something in capital markets (levfin/DCM) to a role in RX or straight-up credit research?
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HY, CLO and Distressed are very different but it’s very likely you can get into all of them with an RX background. LevFin as well except a little tougher for distressed, still doable. DCM you can’t really get into any
Would RX still be easier if it's from a smaller place (Rothschild/Ducera/Gugg) vs. EVR/PJT/HL/LAZ relative to BB Levfin?
Depends on your BB LevFin team. Some are CapMarkets and some mode. The latter would be more or less on par to a smaller shop, the former take the small Rx shop.
can you touch on how they’re highly different? any insight is appreciated!
High Yield focuses on investing in HY bonds, mostly performing and some stressy. mainly new issues and opportunistic secondary buys that are focused on beating the benchmark indices. because of this, you generally aren’t overweight or underweight by much since you have to keep close to the index performance
CLOs - investing in a diversified pool of leveraged loans. basically you spend your time covering 80-100 credits and buying $1-2mil positions in each new deal that comes to market if you like it. diversification rules prevent you from being concentrated and making bets on any one name.
distressed - looking at stressed bonds and loans and distressed credits that are about to go bankrupt. it’s more of a HF role where you do deeper diligence and take concentrated positions. you end up looking at Reorg equities as well and probably owning Reorg equities through the Rx process. the role is more valuation and process driven and requires generally more work. there’s no benchmark or anything, it’s just make as much money as you can.
This might be a stupid question but given the fact that distressed tends to be more process driven/involve bankruptcy cases that are drawn out, does the lifestyle tend to be a bit more PE/banking like with regards to hours spiking up while involved in a process? I'm guessing HY and CLO based roles are more so timed around markets so was wondering if there was any difference there.
Really depends on the strategy. If you're a fund that takes big concentrated positions and does stuff like rescue loans you could definitely see PE-like hours around deals. If you have a more diversified strategy focused mainly on public credits then your hours will be more markets focused, with work getting heavy when markets are tanking.
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