Special sits vs direct lending

Hi guys, just wanted to gather some datapoints to help make a career decision. Currently at a distressed fund (cross cap structure - senior debt, mezz, loan-to-own, pref equity, non control equity) and deciding between 3 offers - one in the special sits team of a MF and the other 2 in the direct lending team of other MFs. Background is that although my team has great dealflow / reputation, almost 70% of my time is spent on going back and forth between internal / LP reporting (especially given the complexity of our positions) and restructurings (lots of tedious calls with legal and tax teams - not as sexy as I thought it'd be). Even in live deals that we chase, the processes can run for months and often eventually turns boring or gets stopped in IC. The MF special sits team will be a good learning experience and great for more upside further in my career BUT I will need to keep slogging for another 2 years minimum. The direct lending team will allow me to look at more deals (with better likelihood of execution) and boost work-life balance, BUT exit opps will be weaker. I know most people would prefer being in special sits compared to direct lending, but there is something to be said for a less stressful life and more time to pursue side businesses (FOMO from many friends launching startups at crazy valuations) / pursuits. Has anyone been in a similar situation? Each person would have their own career aspirations / life goals, but just curious on how others have approached this. Thanks in advance.

Comments (5)

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Jan 7, 2022 - 8:58am
Anon1254, what's your opinion? Comment below:

I'd go with the Special Sits opportunity. Have had a similar set up in my career and personally would always go for the greater learning experience / further upside. The "slog" of 2 years is a bit irrelevant, because you don't know what the next two years will bring. If you crush it, your two years could turn into one year - or even a poach by another firm based on your performance.

At the end of the day, this really boils down to your specific career goals - do you want work-life balance, or a foot on the gas pedal scenario where you can be a sponge and learn as much as possible? For me, I always have chosen the latter. I concur that work-life balance is important, but to your point about your friends launching startups at crazy valuations - those are the outliers on the standard deviation curve. Most entrepreneurs/founders never get to see that, and failure rates are crazy high. Do you have a material plan to launch a start-up with all the pieces in place, or is this just wishful thinking?

Just my 2c.


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Jan 7, 2022 - 12:39pm

My firm does both special sits and direct lending and I had the chance to choose between both. I personally enjoyed special sits more due to the variance in the work, but both share the aspect of doing a ton of research/diligence on a deal only for it to get struck down by IC. The variance of special sits work (private equity, asset based lending, litigation finance, etc.) was more interesting to me, I felt that direct lending was pretty repetitive, others may have different experiences.

Another attractive part of special sits was taking a perspective on an asset class and being able to make/look at multiple investments over a longer period of time all following that idea (music royalties are a currently popular example here). Direct lending deals were more separate, which was less interesting to me. Just some thoughts and obviously everyone's experience/opinion is different.

Jan 9, 2022 - 11:03pm
FlybyWilly, what's your opinion? Comment below:

Special sits can mean a lot of different things. Is your group / has this offer ever done a distress-for-control or bought credits on the secondary market at distressed prices? If so, and if this would be >25% of your role, depending on your interest in this type of 'special sits,' I'd emphasize this oppty. 

If you're talking re 'music royalties, consumer/mortgage type NPLs, litigation finance, specialty finance, etc.' then, me personally, I'd go for the corporate credit direct lending gig. I like evaluating companies, and the incremental WLB boosts the attractiveness relative to the other offer. Ares' "Alternative Credit" group vs "Direct Lending" team is a great example of the delineation/definition of these two groups.

But congrats on both offers. They both sound top-notch and super desirable.

Jan 12, 2022 - 10:23am
AttackSnail, what's your opinion? Comment below:

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