Recession tailwinds?
Thought I'd post in the PE forum to see if anyone has any thoughts for tailwinds a recession could cause. Could be demand for specific services, start-ups that benefit from volatility, certain sectors, targeted search funds, etc. Keeping it very open.
A2A... have saved up a decent war chest. Was very burnt out and was going to take some time off to travel and do some introspection. However, the macro backdrop seems increasingly bleak. It's giving me pause... a lot of pause actually... over my quarter life crisis, gap year plans.
Perhaps it's time to buckle down the hatch and carry on in banking... or are there any tailwinds to capitalize on? Surely there are going to be some winners coming out of this... I feel my youth dwindling away. The timing is not great, but I fear if I do not take risk now, I will end up a career banker... a career consultant... something I do not want to end up being.
Based on the most insightful WSO discussions, here are some potential tailwinds and opportunities to consider during a recession:
Distressed Investing: Recessions often create opportunities in distressed credit and special situations. Many funds focus on acquiring undervalued or distressed assets, especially in sectors hit hardest by the downturn. If you have a "war chest," this could be a prime time to explore these areas.
Private Equity Opportunities: Opportunistic PE funds with dry powder can benefit from lower valuations and motivated sellers. As mentioned in WSO threads, funds often look for recession-proof, asset-light, high-cash-flow businesses. If you're considering a move to the buy-side, this could be a strategic time to enter.
Direct Lending/Private Credit: With traditional financing markets tightening, direct lending and private credit strategies often gain traction. These areas can provide stable returns and are less correlated with public market volatility.
Sector-Specific Tailwinds:
US Treasuries and Safe-Haven Assets: If you're looking to preserve capital and maintain liquidity, US Treasuries are a classic recession play. They benefit from the "flight to safety" and potential rate cuts by the Federal Reserve.
Search Funds and Entrepreneurship: If you're considering a more entrepreneurial path, recessions can be a good time to explore search funds or acquire small businesses at discounted valuations. Look for businesses with strong fundamentals but temporary challenges.
Skill Building and Networking: If you're not ready to dive into a new venture, use this time to upskill (e.g., coding, financial modeling, or a new language) and expand your network. As highlighted in WSO threads, being proactive during downturns can set you apart when the market recovers.
While the macro backdrop may seem daunting, recessions often create unique opportunities for those willing to take calculated risks. If you're feeling burnt out, consider balancing your introspection and travel plans with strategic moves to position yourself for long-term success.
Sources: Moving to Buy-Side in a Recessionary Environment, Best Investments in a Recession, https://www.wallstreetoasis.com/forum/investment-banking/how-to-position-for-a-recession?customgpt=1, How to deal with a recession career-wise? A few lessons learned during the previous GFC, End to a Rough Quarter | The Daily Peel | 6/30/22
A recession is not a happy place for anyone by definition; in general in periods of volatility within finance trading/markets roles tend to do extremely well vs the rest.
Outside of finance I have friends working in AI doing amazing, given the money floating there that is a play if you can and will likely not be as impacted by macro. Finally, looks like defence is having and will be having a field day too for a few years.
My 2 unstructured cents.
Are your friends all in technical roles? Seems to be limited BD / Strategy / Finance opportunities at the AI companies.
Technical roles indeed
Bump, interested as well
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