Structured Finance/credit VS CRE lending
Which route would be preferable in the long term? I have the opportunity to transition to a boutique CRE lending role, where the firm manages commingled funds from institutional investors, including a sovereign wealth fund. While CRE has been underperforming recently, it may have reached its bottom, whereas structured finance has been thriving but could now be at its peak.
The timing of such a move is a key consideration. I find the work in CRE lending more engaging, as it involves financial modelling, which I prefer, whereas structured finance is more document-heavy. Furthermore, compensation at the boutique CRE firm is higher, reflecting its smaller, more specialised nature. The boutique has been underperforming in line with the rest of the market while the firm where I am has been doing really well. Would this transition be well-timed given the current market context?
Many thanks.
Based on the most helpful WSO content, your decision should weigh both personal preferences and market dynamics. Here are some key considerations:
Market Timing: CRE lending has been underperforming, but if you believe it has bottomed out, this could be an opportune time to enter. Structured finance, while thriving, may face headwinds if it's at its peak. Timing your move to align with a potential CRE recovery could position you well for long-term growth.
Role Engagement: You mentioned a preference for financial modeling over document-heavy work. CRE lending aligns better with your interests, which is crucial for long-term job satisfaction and performance.
Compensation: The boutique CRE firm offers higher pay, which reflects its specialized nature. However, consider the firm's stability and growth potential, especially given its underperformance in the current market.
Long-Term Prospects: Structured finance roles often provide broader exposure to credit markets and can lead to opportunities in investment banking or private equity. CRE lending, especially at a boutique managing institutional funds, can offer a niche but lucrative career path, particularly if the market rebounds.
Risk Assessment: The boutique CRE firm's underperformance mirrors the market, which could be a risk. Ensure the firm has a solid strategy to navigate the downturn and capitalize on a recovery.
Ultimately, if you value engaging work, higher compensation, and believe in the CRE market's recovery potential, transitioning to the boutique CRE lending role could be a well-timed move. However, ensure you assess the boutique's financial health and growth strategy before making the leap.
Sources: Leveraged Finance – 2017 Update, To Those Who's Had A Successful Career In CRE, What Advice Do You Have For Younger Generations?, CRE Lending Exit Opps?, What is your compensation in Real Estate Finance?, What's with all the IB/PE bros asking about CRE?
Any human around?
Do whatever you're more interested in. Literally every industry has ups and downs. You shouldn't make long term career choice decisions based off of what's going on right now.
Agree, but within reason. Every industry has cycles, but you can’t ignore practicality—being employed and avoiding dying sectors matters.
They say in investing that you can't time the market, and it is bloody hard to do that with your career. Follow what you are naturally interested in and you will advance further than trying to "play smart" and underperform your competition. Furthermore, things very rarely die out and the market is cyclical. Indeed it can even be biblical with seven good years and seven lean years. You have to be invested in those cycles to get through the bad years and turbocharge yourself during the good years.
You've answered your own question: the boutique fund. It is obvious you like it more than structured finance and therefore you will have a greater probability of outperforming (or at least pushing your performance to the edge) than being in a place you do not like. Additionally, if you can work in a fund that invests on behalf of a SWF then you know there is serious capital for the fund. Go for it.
Thanks a lot for your comment !
100% what I want to do—no question about that. The only hesitation is the shop’s performance. If it were firing on all cylinders, this would be an absolute no-brainer.
If your primary concern is with fund longevity then ask about their fundraising process and whether they are currently raising a new fund or are deploying capital from a recently raised fund. Furthermore, ask about their existing portfolio, performance including non-performing loans, and what your role will be around the portfolio management of the book. What you want to do is gauge what the actual work will be like, whether the fund itself is going to be originating new loans, and that the LPs want to back them for the long haul.
The two most interesting areas of credit in my experience is direct lending and distressed debt workouts. If you can deploy new capital and/or manage loan workouts then that'll help you in your career (as well as make you a better financier).
What is a boutique CRE firm?
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