Wharton kids favor restructuring/distressed investing?
I was talking to a few friends who are currently there and learned most of the top kids (current junior/senior) are going to restructuring shops (whether it be PJT Rx, Millstein, Houlihan Lokey Rx, Evercore Rx, Moelis...) or distressed funds. Of course, you have a few at silver lake and such but overall that seems to be the trend. If you look at the profiles of the kids running Wharton's main investment club or search for the people who participate and win pitch competitions you also find a similar trend. You also see people leaving GS/MS/JPM for these restructuring groups. Is there a reason why Wharton kids like restructuring/distressed so much?
If I were to venture my guess, it might be because:
Working with companies in distressed situations is interesting to say the least, since they face risks of defaults, bankruptcy, job loss and business disruption / existential crises. Stakes are infinitely higher here than in traditional M&A.
Whereas some M&A deals can be executed without bankers (I have seen it before), I doubt anyone would want to go forward with filing for bankruptcies without hiring a financial advisor. Opens up to litigation and negligence suit against management to say the least (corp dev team can only do M&A and should only do M&A).
Restructuring allows you to work in M&A and capital markets advisory as well (i.e. distressed sale, capital raisings can be pretty common) so the skills can be applied and transferred successfully. M&A bankers usually don't do RX mandates but RX bankers work on M&A and cap transactions a lot.
This one is pretty theoretical and economic-theory related but your job security and comp is very high and stable against market condition. Take a stock that is not correlated or negatively correlated with the market. Investors are willing to pay more for that diversification. Working in restructuring can be thought of as that asset, secured in downturn yet generate higher payoff (RX analysts get paid top of the street). And it's not like in upswing cycle they do nothing either.
Overall, I think it's a lot more of a generalist experience than people think, with the added bonus of higher comp, security, prestige and exclusivity that attracts a lot of people.
I personally work in M&A but am intrigued by the RX practice as well, have been doing a lot of research and thinking to see whether a move or brief rotation into that team would be feasible and beneficial for professional development.
Hello current Wharton senior here (not going to RX but have plenty of friends going to the shops you mentioned). I would generally agree that there's a trend where Rx shops are garnering more interest but let me qualify this with a couple of things:
The absolute top-tier of Wharton (top 5%) usually go the top buyside programs (Silverlake, BainCap, Ares, Bx), PJT-Rx, or on the rare occasion where there's an absolute superstar, a HF like Silverpoint or Samlyn. By top-tier I not only mean Summa cum laude/Beta Gamma Sigma/ academic achievement, but also someone who dominates the prominent investing competitions such as Silverlakes LBO competition, Silverpoint's Special Sits, Farallon or Samlyn. Furthermore, these students usually have some leadership positions in the most competitive Wharton clubs (WITG, Penn Investment Alliance) or in competitive inter-collegiate programs like Global Platinum Securities.
The rest of the competitive Wharton students who are still solid academically (think 3.7+ GPA), usually fill the other BB/EB M&A and RX positions. It's not uncommon to see these students recruit for both M&A and RX positions during OCR, usually since they want to keep their options open and apply to as many places as possible since OCR is so competitive. For example, I know a kid who was deep in the process for Centerview and ended up accepting an offer with Millstein. Another friend of mine had superdays with Greenhill and Houlihan Rx. I think it's rare to find a student in this pool who solely fixated on Rx during recruiting.
I believe the trend of more students interested in Rx is actually a subset of a larger trend: In general, I've noticed Wharton students are favoring EBs more than BBs, for a variety of reasons that have been discussed at length in these forums in EB vs. BB threads.
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There are a ton of summa cum laude wharton kids (many in jerome fisher m&t) in GS classic and MS m&a/menlo tech, which kind of contradicts the top 5% comment.
Would be curious if this is a Wharton-only trend or is a trend in most upper tier targets? I wonder if the top tier Harvard kids are also going to restructuring?
I go to Harvard and have friends at W, and I get the feeling the trend is more pronounced at W, if only because kids there feel they have a better grasp of finance (I don't believe that's true but it's their perspective). Here my view is a lot of kids are either going into traditional M&A banking or straight to buyside if they can get it.
As someone in London with no connection to either Harvard or Wharton, I personally believe that Wharton students really have the best placement in finance. Quite similar to sort of EB vs BB argument actually: Harvard is a more recognised name globally but within finance circle, Wharton still trumps them (at least in undergrad, not discussing MBAs here). Similarly with LSE vs Oxbridge in the UK.
Probably more self-selection than anything else, where students there are very focused on a specific career path and know what they want very early on. Top firms like Silver Lake hire almost exclusively from them for entry level.
I think one thing to consider is the amount of complex, technical exposure you gain so early on when you go into RX/special situations/tactical opportunities/distressed investing.
As a 23-26 year old, you have a really nice window to absorb so much knowledge through these complicated transactions and investments that it really sets up how you view the world and how you view businesses for the rest of your career.
I think once you get older, it's a bit harder to grasp the complexities, especially when you're coming from a more traditional background. People will argue that it's easier to learn qualitative aspects, which I generally agree with.
Agreed with many of the points above. Rx also often leads to distressed buyside exits, especially if you're coming from the top Rx groups: Lazard, PJT, HL, Moelis
Not much love for Millstein, which is more in the Jefferies, GLC, and Miller Buckfire tier
I'm a Wharton alum from within the past 3 years - I went straight to one of the credit buyside firms (think GSO, KKR Credit, BainCap Credit, Silverpoint, Ares credit, etc). From my class, the top students went to firms like the above, as well as Warburg, GS SSG, Bx PE, Silver Lake, etc. Most of these did either OCR or unofficial OCR. The Rx shops trend is a bit more recent (last year or two), not sure why that's happening, though I'm sure exit opps are excellent. My class clearly preferred going straight to buyside - exit opps are strong, and the work is extremely interesting.
While I agree with most of the comments saying that top folks are going direct to HFs or Rx shops, I'd say the "top" tier is looser definition than is being suggested. The HFs are way more focused on prior internships, taking tough classes, and being truly interested in investing. Yes, one way to get internships is through top grades, or to show an interest in investing is to participate in the investment clubs, but my point is that those are not the only way. I know this well given I was OCR for us and are definitely attainable if you can demonstrate the three items I mentioned, which can be demonstrated in a number of ways. The only true cut-off I'd say (now that I'm on the other side recruiting Wharton kids to the HF I work at) is around a 3.5 cumulative GPA but nothing less than a B+ (maybe B) in the core finance and accounting classes.