Hybrid capital exit opportunities

Proliferation of structured equity groups out there — Blackstone Tactical Ops is the original, but seeing these hybrid groups proliferate (Apollo, Warburg, Coatue, Viking, Harvest, Ares SSOF all have groups that fit this bucket).

What do associates do after 2-3 years in this type of role? What are common exit opportunities available to this group?

6 Comments
 

Yes I think the strategy becomes more relevant as PE matures/goes through a challenging period. I also think its very relevant in the global economy going forward. There will be so much large scale financing into inovative capital intensive businesses driven by AI. Alot of these businesses will not have positive cash flow for long periods. PIK preferred sits at a nice spot of no cash coupon / not diluting the common stakeholders. 

 
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I think you have a pretty broad range of exit opportunities. 

If you stay at one of the funds you mention for a few years you will likely get very broad exposure including providing junior capital (structured equity, junior debt plus warrants, etc), investing in public stressed/distressed debt and being involved in restructurings + post-reorg equity and operational turnaround (quite possibly as a majority shareholder). 

There’s higher deal velocity than in PE and you get to see both private and some public investing.

So depending on what your experience ends up being and what you’re most interested in, you’ll be able to go to

  • Hedge funds, in particular Distressed / Special Situations / Event Driven (i.e looking at similar companies but more focused on publics). You can also apply to L/S if you really want, particularly if you have prior banking experience
  • Private Equity, maybe more buyout than growth. The DD processes are relatively similar (even though shorter and more focused), except you’ll have more deal experience. The only real shortcoming is value creation but you get to see (a lot of) that if you restructure one of your portcos. 
  • Private Credit, Secondaries, CLOs and back to banking should all be relatively straightforward

    But frankly these funds offer a good mix of 1) decent pay with funds that actually have carry 2) continued learning and interesting variety of deals across sectors 3) good fundraising and growth outlook for the strategy 4) flexible mandate ensuring deals across the cycle
     
 

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