Distressed Debt / Special Sits Groups
Anyone got insights on what the job entails? Was offered to join as a desk analyst at a BB (think DB/BofA/Barclays/JPM).
As per the team's description, it's not really a sales / trading role but more research driven as the desk does both market making (trading) and principal investments.
What are the exit opportunities? How's the comp?
Based on the most helpful WSO content, distressed debt and special situations (special sits) investing roles, like the one you're considering at a BB (Bulge Bracket bank such as DB, BofA, Barclays, JPM), involve a mix of research, analysis, and investment decision-making. These roles are distinct from traditional sales or trading positions because they focus more on in-depth research to identify undervalued securities in companies facing financial distress or undergoing significant restructuring.
The job typically entails:
Research and Analysis: Conducting detailed financial analysis and research on companies that are underperforming, in default, or going through bankruptcy proceedings. This includes analyzing financial statements, cash flow models, and legal documents to assess the viability of investing in distressed securities.
Market Making and Trading: While the role is research-driven, there is an element of market making (trading) involved. This means you would be responsible for creating liquidity for distressed securities, which can involve buying and selling positions based on your research and market conditions.
Principal Investments: Making direct investments in distressed assets. This involves not just trading securities, but also potentially taking significant positions in companies' debt or equity with the aim of influencing restructuring processes or gaining control of assets.
Exit Opportunities: - Private Equity: Especially those focused on turnaround situations or distressed investments. - Hedge Funds: Particularly those with a focus on distressed debt or special situations. - Investment Management: Roles in firms that have a mandate for distressed or high-yield investments. - Advisory Services: Moving into restructuring advisory or turnaround consulting roles.
Compensation: Compensation in distressed debt/special sits roles can be lucrative, especially as you gain experience. While it can vary widely depending on the firm and your performance, it generally aligns with the broader investment banking and hedge fund industry standards. At the junior level, total compensation (base salary plus bonus) can be comparable to other areas of investment banking. As you progress, the performance-based component (bonus) can become a significant part of your total compensation, reflecting the success of your investments and contributions to the firm.
Remember, the specifics can vary based on the firm's focus, the market environment, and your individual performance. It's always a good idea to network with current or former employees of the team to get a more detailed understanding of what to expect.
Sources: BB Debt Capital Markets - Exit Opps / Comp, BB Debt Capital Markets - Exit Opps / Comp, Distressed debt / special sits investing - On the job
Was (and to some degree remain) interested in seats like your describing. Ignore the title - currently doing private middle market distressed investing (credit and equity). Interviewed for one desk like the one you're describing and chatted another prior to taking my current role.
From my understanding based on these experiences day to day work would be a mix of (i) modeling; (ii) reviewing / staying abreast of covenants, bk dockets, and transactions of hot names; (iii) screening / sourcing new situations/credits; (iv) speaking to the buy-side to pitch ideas and possibly sell-side/legal RX groups to stay in tune with new transactions. Varies heavily bank to bank how much prop risk they take, though it is significantly less than they used to 5 years ago and especially pre GFC. Believe DB/JPM/GS are the most active in that regard but not sure. Also heard prop risk and willingness to do things like participate in restructuring / AHGs and take equity correlates pretty heavily to buy-side exit ops. Also got the advice going to a "franchise" that's not just going to cut distressed and has strong senior analysts to learn the ropes from is key.
Comp (and hours) I heard was generally in line with with S&T roles the junior level with bonus being driven mostly by desk PnL. Interesting dynamic I've heard is that the good analysts can get picked off by the HFs relatively quickly given the close relationships with the buyside and skill set overlap but recruiting is mostly cloak and dagger / unstructured.
How are the exits?
I’ve heard primarily L/S credit, distressed HF or event driven funds. These are essentially the guys your desk is trading with.
You’re certainly not at an advantage for PE (even distressed / turnaround focus) vs. an investment banker. That said, anything related to distressed could be within the realm of possibility you are at a desk that is more active as described in my earlier comment.
Anyone got info on exitx, comp etc, espcially at BofA's Global Credit and Speical Situations team?
BofA's team looking at it has a surprisingly large number of headcount who have stayed on for a very long time. The fund that spawned out of Merrill's distressed group is Cross Ocean fwiw.
For other firms I've seen hires throughout the years at various levels of experience at Citadel, Diameter, King Street, Millennium, Apollo, Carronade, Aristeia, Hudson Bay, Redwood, and others. Ie; it is a relatively common exit to go to credit analyst seats at hedge funds.
Thank you. Is BofA's team considered good in the industry? Also, how does it compare to other distressed/special sits teams on the street?
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