MFPE to Distressed Debt / Special Situations?
Hi all,
I’m currently a second year analyst at MFPE in Europe and am considering making the move to a cross cap stack DD / SS HF.
Some firms that come to mind are Attestor, Elliott DD (even though its shrinking), SVP, Mudrick, Blantyre, Davidson Kempner, Fitzwalter and the usual US names like Third Point, Silver Point, Redwood, Owl Creek, Castle Knight (can move to US). I’m also considering places like Ares Special Opps and APO Hybrid Value/HF.
Is this move possible from Vanilla MFPE? Most of the guys that I’ve seen at these funds come from RX or LevFin so am unsure if I’ll be able to land a role given the lack of credit exposure.
i had internships at L/S eq HFs, IB and a brief internship in RX before my current stint.
Thanks in advance.
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For people joining the industry for the first time, MFPE is the strongest candidate for SM distressed - buyside is always preferred over sellside experience. Your sample size of backgrounds is just biased by the fact that a) most MFPE prefer L/S equity since upside is 5x higher for same work and b) there are just more sellside than buyside guys looking to begin with.
Also, the funds you listed encompass a huge range of strategies, from distressed PE to guys who buy safe bank debt to guys who buy tons of equities. Probably best to figure out what you want first.
thanks a lot for the reply! I’m still figuring out what I want, but I wanted to make sure I’m not wasting time doing this when they might not hire someone with my background. Thats why I listed a lot of different funds within the space to not narrow down myself initially.
as of now, my thoughts are of a fund that can invest across the cap stack (public and private) and also plays across the smorgasbord of distressed
Thoughts on BX TacOpps in this space? Who are the main recruiters for these sorts of funds - Hinton Rose?
Don't really play in distressed debt tbh.
I agree with the other poster that you should narrow the range of strategies as while most of these funds rhyme, Attestor =/= Castleknight =/= ASOF etc
thanks a lot for the reply. See my comment above on why theres a wide range of funds.
would you say initially that my background for those type of funds would be considered / fine?
From a pure credit HF perspective you are at a disadvantage by not knowing the bankruptcy court process and potential outcomes.
You’re probably good technically but the mindset is a bit different than traditional buyout where you’re just trying to put on the least amount of equity possible and maintain/grow cash flow.
thanks for the reply! I did an internship in rx at a great boutique so understand the basics as i supported on 2 live deals (debtor and creditor sides). I didnt spend a lot of time there which is the only issue + it was only an internship
would you say with my background I would still be given a shot / taken seriously?
You’re going to need a bit more time than that. Can’t say too much on EU bankruptcy law as I am in US. You’ll be spending alot of time reading credit docs.
Ares Special Opps‘ returns speak for themselves. They barely recruit in Europe but would definitely recommend them if they do.
the last Ares Special Sits fund is doing badly - last mark from Ares is -2.1 nirr
2019 vintage is the one which had great returns
re recruiting, believe its mostly from PJT
Its a 2022 fund, i.e not developed enough to make meaningful conclusions.
Also the team is so small and 1-2 people are from pjt. Again not enough to make conclusions.
what returns are you speaking to?
Probably returns of the newer Scott Graves group (special opportunities) after their old special sits funds got torched by energy bets. Savers is probably in the top 5 highest distressed P&L trades made in the last 10 years.
European distressed is very crowded. Unless you really think PE is done for the next few years, I’d think twice about moving to distressed. You can bucket the strategies as follows:
special situation: 10-high teen IRR private lending effectively, sometimes with warrants / equity components + stressed loans / bonds Apollo Hybrid Value would be an example
trading oriented: diameter (tho the head just joined millennium in Europe), varde, goldentree
True distressed / loan to own: arguably a dying strategy as so few ‘good’ businesses enter restructurings with lenders taking the keys (outside periods of severe market stress). PE has so much dry powder they won’t hand in the keys for a good asset and there’s enough special situation capital which can keep funding the business. Centerbridge and SVP fall in this category.
then there are go anywhere funds with broad mandates doing everything from liquidations to stressed credit / CDS - this is probably the most interesting category and includes the likes of Attestor, Elliott, Cyrus
I’d generally say private opportunities are most interesting in Europe as direct lending is less mature in the US and the public bond stuff is crowded.
hope this helps
Thank you so much for all the info!
I’m leaning more towards your last bucket and perhaps places like Ares Special Sits
as for as I know, Elliott only hires from buyside for their Public Equities team, but am unsure for the DD team. Have heard from quite a few people that the team is shrinking aswell (I believe DD now makes only 10% of their deployed aum).
attestor & the others are very interesting, but the backgrounds of people there are generally not from pe, hence why I’m unsure if I can get a shot at it. Would appreciate any help on whether this is possible or not.
.
Thank you for your comment!
When you were saying private opportunities, do you mean like Family Office or some combination of PE and credit solutions? Will IBD be a possible candidate for there?
I would recommend you reach out and speak to the guys at Hinton Rose. They are by far the major headhunter in london covering the space and will be able to answer questions and connect you with opportunities. I think a lot of replies are US centric but london is quite a different market (eg I think the 2 main players in london for across the cap structure investing have not even been mentioned..). And in any case to your question, PE background is not a problem at all. I used to work in a UMM and recruited with a number of the funds you mention.
Thanks a lot for the reply. I was waiting to get some more insight into the industry and narrow down what I want before speaking to Hinton. Thought it would be a bad look to speak to them and be somewhat confused about what I want.
would you mind naming those 2 largest players that were missed in my original list? Are you referring to places like Alchemy or Albacore?
They may be thinking of oaktree who are quite active in Europe
Ah noticed now you did mention DK. The other is King Street. They seem to be the best seats for pure HF investing across the cap structure. Not talking / separate to the other strategies eg direct lending shops and the distressed mid market PE shops
Yes, it is possible to transition from a vanilla MFPE role to a cross-cap stack DD/SS hedge fund. While many professionals in these funds come from RX or LevFin backgrounds, your experiences in L/S equity HFs, IB, and RX internships can still be valuable. Highlight your skills in analyzing investments, assessing risk, and understanding sectors. Expand your knowledge in credit-related areas and network with professionals in the cross-cap stack DD/SS space. Be persistent, patient, and proactive in your job search. Good luck!
Does anyone have any insight to Alchemy and their investment performance and strategy? Thanks
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