Are debt funds ‘Buyside’
Curious if you guys consider working for a large debt fund/mezz lender (BX, Brookfield, Apollo, etc) as “buyside”? On one hand you are taking investors money and trying to generate a return for them, similar to equity funds. On the other hand you are still at the mercy of true buyside owners on every deal.
I know labels like this aren’t important. Just curious what you guys think.
I can’t see anyone arguing debt funds aren’t buyside. You’re still doing the exact same thing, but working with a different portion of the capital stack. You could argue that debt funds are less sexy, but it’s definitely still buyside.
.
I'm concerned why you're wondering if they're buy-side. Just work somewhere you want regardless if it's buy-side, sell-side, or dumb-side.
Just a debate amongst my friends. You can see in my post that I said labels aren’t important and I was just curious what you all thought. But thanks for the input pal.
Tldr
lol you need new friends
I’m more concerned that there are working professionals who are retarded enough to actually be debating this. Yes. It’s buy-side. Do you need to go back to finance 101 to learn the differences between the two sides?
Gee I wonder who threw the MS lmao
Yes. You are just investing in a different part of the capital structure
Yes, buy-side by any possible definition of the whole sell-side/buy-side equation. The sole point of distinction is made you are making investment decisions with your firm's money and/or money invested or managed by the firm's clients (whether called shareholders, LPs, or even via SMA agreement).
Lending at Brookfield is technically buy-side but it’s also sell-side AF in terms of status bro don’t take the job or no one will think you have high status bro! Trust me bro, you don’t wanna be at the mercy of the TRUE buyside, which is the equity funds...
What’s your deal
I’m giving you shit dude. Even though you say in your post “it doesn’t matter if it’s buyside or not” it’s clear you’re concerned with labels / status and what not
Def buyside and comp is equal to or greater than equity side until maybe director and above ( just due to carry potential and more upside)
If you’re investing capital on behalf of yourself or others you’re buyside, irrelevant of what part of the cap structure you’re investing in. I also wouldn’t necessarily agree debt funds are the mercy of the equity. For vanilla core lending perhaps, but funds operating higher up the risk-curve (special sits / opportunistic lending) will often just walk if the deal isn’t right rather than just giving in to the equity’s demands.
Anybody who thinks debt funds are at the mercy of the equity must be extremely new and inexperienced, may have felt that way last few years, but it far from the normal experience of the real estate world most decades.
Agreed, sounds like a debate amongst those who haven’t experienced an asset underperform business plan materially. Debt funds in particular will burn the equity if it’s required to recover their capital.
Good to know. It’s definitely felt like that
Of course it's buyside. Full stop. As for being at the mercy of the equity...if anything its the opposite...broadly speaking lenders set the terms of the debt. If those equity holders miss a payment or beach a covenant, they are at the mercy of the creditors to grant a waiver. Its a totally stupid debate.
Now really, if you want to get all existential using that logic...is an equity sponsor really on the buyside given the GP (pe sponsor) is at the mercy of the LP?
Fair point except the GP actually buys stuff so that was a no brainer for me. Debt funds aren’t buying anything
I am not really sure that is an accurate way to think about loan originations. They are exchanging cash for a fixed income security (note and mortgage typically), I think that is "buying" something by any meaning of the world. I mean, if I hand over cash and get something back in return, I am a buyer. I can sell/trade this security just the same as well.
This isn't a great way to think about it. Look, I know almost nothing about this, but as per my old refrain, the question in real estate is risk. If you or your entity is putting up dollars and taking risk, that seems to be "buy-side" to me. Not opportunity cost, but actual cost. Which pretty much seems in line with everyone else's (more sophisticated) definitions. Debt funds are putting up money which they might not get back. GPs and LPs too. Investment sales teams or debt brokers? Not so much.
Well, they are buying the underlying debt/securities of the asset/company. Directionally, you're doing the same underwriting as an equity holder, especially the lower down the cap stack you go. Some investment grade low risk piece of debt might a tad more lax in underwriting, but once you get in to CCC/mezz levels you're arguably taking on more risk than a equity sponsor. From a portfolio perspective an equity sponsor will take a zero or two in a portfolio knowing that some will be grand slams 5x+. Where as a debt investor, one or two bad deals can really damage a fund and there isn't the upside to get out of the miss.
The logic train doesn't hold...similar to the GP/LP analogy...is a derivatives trader of MBS or insert whatever not buyside as technically they aren't buying anything in the narrow definition you're using. What about a short seller...they aren't "buying anything either. What about a small fund that buys equities they have zero influence over due to position size, does that count, they are buying equity yes, but have no control.
At the end of the day if you're putting capital to work its buyside. If you wanna have a debate about what is more or less risk on within being on the buyside that is one thing but deploying capital it deploying capital, whether or not if fits the narrow definition you created for the sake of your debate amongst friends.
Technically it's the buyside. This is indisputable.
In practice, it's a standalone arm (Episodic Lending/Lev Fin) of investment banking, constituted as a buyside entity.
The only time it is worth even thinking about "buyside" is to make fun of bankers for not being in PE when they come from the IB forum to troll.
Companies sell risk. Funds buy risk. Banks are your real estate agents who charge enormous fees for putting a 'for sale' sign, with their giant face on it. What's so hard about this?
As banks like to call it, they are "intermediaries"... but yeah, not so functionally far off from agents, but they do take intermediation risk, thus can get blown the fuck up if the assets they actually chose to hold (which isn't much these days) get twisted in value or their capital deposits disappear overnight (however the fed has pretty much made the latter situation impossible, and can pretty much stop the former as well via same mechanism, what a world!).
.
I’m going to start using sell-side as a generic insult. “Damn bro do those Cole Haans have rubber soles? That’s sell-side af”
do they... buy shit? lol
That’s pretty much the reason for the question which I could have articulated better. Wasn’t as obvious to me as to the genius analysts on the thread
One does not need to be a genius to understand this... it's very simple
Couldn't resist jumping onto the dogpile. Yes. We buy shit. We run a book. We are judged on returns and capital deployment. We are given money to manage. Traders and bankers ask us if we wanna buy shit. I think you're getting twisted by the fact the PE has had some more leverage in the broader market when it comes to dealmaking bc debt funds have too much capital and rates are low. However, I can tell you we have 0 cov-lite on the books and don't swallow the L+400 trash either. And if you saw what it was like actually running a deal process, you would see that at the end of the day it's the bankers, the sponsors, and the companies, that are staying up late answering our endless list of diligence questions, so call them "real buysiders" all you want, but when you're seeking financing, you answer to your underwriters or you don't buy shit. Now to be fair, sometimes we sell credits at significant gains before maturity, so maybe that makes us sellsiders lol.
your last point isn't even sellside, its exiting a position in which implies you bought it in the first place
Holy shit bruh catch the sarcasm. Can’t tell if you just ruined my joke or made it better.
Pisses me off to keep hearing everyone that debt isn't "sexy". Plz someone elaborate how long-term job assurance is not hot compared to these super liquid products.
1.2x multiples must really get you going.
By those standards, teachers, nurses, accountants, and government paper pushers would have “hot” jobs
That escalated quickly…
Only if they foreclose on the equity slug ;) #UCC
YES they are
Provide capital -> buy-side -- You are BUYING services to get a transaction done
Provide advice / act as middleman -> sell-side -- You are SELLING your service
Its really not hard guys...
Yes... Please review definitions of buy-side and sell-side. Thx.
Lot of credit funds that play in the special sits/distressed space usually don’t even look at sponsor backed deals. They usually either convert to or take equity as kickers too. One of the more purer forms of value investing and “sexier” than PE imo.
The argument could be made for lev fin/sponsor backed lenders to a very weak degree.
Think a creative debt fund gig where you get exposure across the capital stack would be more fun than most REPE jobs due to the exposure to different asset types and geographies.
Sorry for the off-topic question. I urgently need advice. I want to buy an apartment on credit, but I'm worried about it.
I am not well versed in the laws related to the purchase and sale of real estate, so I decided to contact a trusted Mortgage Broker Woking. But my friend says it's a waste of money, and I have no problem figuring things out alone. I'm unsure if he's right because I've heard many stories of failed transactions to buy apartments and houses. Should I listen to my friend to save some money, or is it not worth the risk?
Dignissimos eum dolorem dolorem adipisci est dicta. Cum veniam qui voluptate officia suscipit natus facere architecto. Dicta vel quis impedit iure. Eos doloribus magni assumenda ut voluptates.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Cupiditate eveniet enim in sunt corporis officiis earum quis. Eum ex magni non assumenda. Expedita voluptatem qui velit. Quia ullam neque non officia.
Nihil minima eveniet magni temporibus. Illum nemo unde enim quis ipsum.
Necessitatibus dolores perferendis distinctio consectetur. Ut veniam sunt labore aliquam alias at.
Corrupti est est odit ut. Harum similique voluptatem sunt consectetur maxime odio accusantium molestiae. Amet neque veritatis fugit veritatis placeat molestias et fugiat. Non qui facere quod quis aut enim sed.
Exercitationem optio dolor reiciendis aspernatur illo. Iure laborum et sed eum. Pariatur nesciunt et est ad. Aperiam recusandae eum qui. Quasi eos quis id hic ducimus quod.
Veniam quos dolorum voluptatum doloremque placeat. Ipsa architecto velit iure veritatis. Est quia ut ab consectetur excepturi.
Dolores dolorum et hic reprehenderit magnam quia. Laborum sed consectetur dolorem et explicabo. Aut officia natus aut aliquam consequatur officia incidunt. Ipsum omnis cum culpa impedit et. Repellendus qui occaecati corrupti aut. Molestias ratione dolores est voluptatem et reprehenderit consectetur incidunt.