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?

 

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.

 
threescreen:
I don't think it's likely anyone is moving to lev fin after being on the buyside.
Why cant they go buyside to sellside?
 

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

 

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.

 

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.

 

"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…

 

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.

 

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