Private Credit Funds
Can anyone discuss their experience working at a private credit fund (senior loan fund, BDC, etc.)?
In terms of exits, I've read that most people tend to stay in industry, but what other opportunities are possible with private credit investing experience?
Usually, people just join another fund. That said, some switch to lev finance. A few people also go on to become CFOs. A very small number ends up working for PE funds.
I don't think it's likely anyone is moving to lev fin after being on the buyside. I would expect a possible next role to be a different kind of credit investing.
I agree that it's not likely. It's just something I have seen here an there.
Most people definitely just move to a different kind of credit investing.
I assume they are referring to that sellside is less desirable work compared to buyside? I could be wrong.
On the topic I know someone who went from Private Credit to Lev Fin at a BB at around the VP level in London.
Almost all private credit shops require sell-side experience first, and most if not all of the big ones recruit exclusively out of BB Lev Fin groups. So that is why you will rarely see the opposite move
I kinda meant why cant you go sellside ---> buyside ----> sellside?
Because why would you want to? Most people who hop to the buyside use the sellside as a feeder. Wouldnt really make sense
Is credit trading, or doing credit research on a desk at a BB and then moving to a direct lender / BDC a realistic option? I’m sure it would be possible seeing as the focus would be credit, but I get why they would primarily recruit lev fin analysts.
It depends on when you jump. If it's early on and you have some reasonably relevant experience then yes, I think its possible. If you're too senior then no. The skillsets begin to diverge the longer you spend doing either and your network is completely different as well.
It's weird that people tend to think of equity investment superior than credit investment.
Why's that? Intuitively I would think it's much easier to generate high fees investing in equities than lending at par.
In my experience (limited to Real Estate), debt doesn't pay as well across the board as return profiles are generally far more conservative. Obviously with distressed debt or mezz debt it can be a bit different but by and large equity generates higher returns and pays out better.
why is private debt so big in the us and not elsewhere?
Bank regulation.
and bank regulation isnt big elsewhere?
Bank regulation and disintermediation sounds right. I'll expand a little on why I think this is the right answer:
In a lot of countries banks are the primary means of extending credit into the economy. When they extend to companies, that's effectively private credit but it exists within the banking system.
In the US, a lot more institutions extend credit allowing for non-bank lenders (BDCs, private credit funds, etc). I think the big PE/private credit funds exist due to regulation on what loans banks can extend and also lending to weaker credits (or structuring unique deals rather than vanilla loans).
Basically its a function of how easy it is to be a non-bank lender in the US vs ROW. Hope that makes sense.
Currently on sell-side and looking to read up on the private credit/HY landscape as I am starting to interact with these guys a ton and want to know more about how their world looks. Any good recommendations out there? TIA.
I like Fitch's Annual Leveraged Loan Primer; Fabozzi is good if you need an overview of the Asset Class. For LevFin Primers I like BAML and Jefferies.
All the major banks usually put out HY Outlook reports every year which covers the primary market moving topics / industry trends. I would try to obtain one of those (maybe your HY research team put one together and can send).
& gryphus mucias gracias
"Lending money is easy, the hard part is getting it back."
In addition to the reasons previously mentioned ie US private equity and bank regulation (leveraged lending guidance was a major catalyst of the boom we're seeing in the private credit), a lot of it also comes down to just lack of creditor protections in some foreign jurisdictions.
Anyways, my general sense is the leveraged loan market is overheating, just too much money out there structuring shitty deals with 5x+ stretch 1st lien structures for mid-market companies which won't bode well for recoveries. Not that the BSL space is any better though, record CLO new issuances just feeding the demand for new shitty paper.
https://www.bloomberg.com/news/articles/2018-06-01/public-pensions-gorg…
As others have mentioned, most stay in credit at similar funds. I've seen them move to mezz funds, but less commonly equity funds.
Another route could be Rx or distressed investing. Guys that understand credit and creditor rights tend to do well with hairy or bankrupt capital structures.
If someone wants to transition from commercial banking at a BB (w/ 2 yrs experience) to a credit/mezz fund (also, is 'credit' vs. 'mezz' fund just semantics?) in NY/Chicago/LA, what's a reasonable comp package to expect?
Not sure on comp, but typically credit funds will do a wider array of lending (senior, unitranche, first out, ABL, TLB, second lien, sub) while mezz focuses on sub debt tranches. The lines get somewhat blurred because some mezz groups will decide to do TLB or unitranche in certain situations, while others won't deviate from a mid-teens target return.
Who would you say are the more prominent credit funds? Would starting off within the credit fund space be a good career starter?
There are too many to name. You have some at large BBs (e.g. MS, GS), some at large PE (e.g. Apollo, Blackstone/GSO, Carlyle), some at large financial institutions (e.g. Prudential, AB Credit Investors, Antares), tons of BDCs (Ares, Prospect Street, Gladstone) and plenty of private MM funds.
I'm curious about comp as well if anybody has any data points to share.
Same here. If can indicate the location (i.e. NYC, ATL, etc.) and size of the fund, position (analyst/associate) as well, that'd be helpful.
Most private credit funds that I know (not BDCs) pay around $200-$225k all in for Associates with 1-2 years of banking experience. Typically consists of a base of $110-$120k and the remainder is bonus. Hope that helps.
Any possibility to move internally from the private credit side to PE or PE operations - thinking about a fund that has all three rn.
Bump, very interested as well
BDC 2nd Year Analyst - 100-110K Base, 50-70K bonus. (Ares, Golub, Owl Rock)
Bump. Is this 2nd year out of undergrad?
No. Post IB
Nice - what are hours like?
Depends on the fund, but generally I've seen 50-65 hours / week. Much less than banking or PE. Lifestyle is better (but likely paid less than PE counterpart).
People with 2-3 years of banking experience and 2-3 years of investing experience (senior associate level) comp around $250k - $375k.
Can anyone explain what types of debt / funding a BDC can offer? acquisition financing, expansion capex, working capital, or anything else?
All of it, depending on their mandate.
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