Have a superday coming up for a Subscription Secured Finance Group at SMBC. Thought I applied for structured finance. Can someone please tell me what exactly this is and what I need to know for the interview?
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Can you drop the job description?
Subscription lines for private equity funds (or any private fund really) are credit lines secured by uncalled LP capital commitments. Its a tool for managers to smooth capital calls and/or manipulate the IRR on their funds.
Depends on the bank, but normally falls under ABF. I think SMBC only does subscription facilities (also called fund finance) in that group, but could be wrong.
Essentially you’re providing a PE Fund liquidity based on the Fund’s commitments. For example, If a Fund raises $1.0B in capital commitments from LPs, they simply have “commitments”, not the cold hard cash. Funds call the capital from limited partners when they want to make investments. However, if the PE firm has 100 investments at $10MM each, they would have to call capital pro rata many times (leading to operational issues). Instead they get Facility from a bank, let’s say 50% advance rate, so $500MM Facility. The bank is basically lending on the LPs’ commitments to the fund (the securitization part). The Facility allows the Fund to make 50 investments and then call capital once to pay down the line. Also it increases IRR because that’s what debt does.
Hope this helps and let me know if you have any other questions.
Great, thanks for the rundown. In terms of technicals, then, do you have any idea what kind of stuff they're looking for at the entry level? I have a pretty good handle of ABS transactions from my current gig.
Thanks. How does it increase IRR? Still considered equity for investments.
The LP can still hold their original investment while also deploying the capital with the PE group for a low interest rate
You calc IRR based LP capital activity. Sub line activity doesn’t hit the fund IRR calc and serves to delay the calling of LP capital. You wind up with much shorter duration and slightly lower MOIC.
Just Google fund finance. You’re basically a short term liquidity facility to private equity funds. Super boring and niche, so good hours and work/life balance, and average pay.
It’s a similar lifestyle if you worked in rcf loan syndications at a bank.
Great type of role to finish the last ten years of your career, zero stress.
Totally agree with this. Also going to point out at the analyst level, comp is pretty comparable to IB M&A (~160K). WLB is great - normally 50-60hrs with a few weeks at 80 hrs.
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