WSO Primates,
I am currently a VP at a small buy side bank located in NYC. We do some middle market lending and are a buy side firm in the broadly syndicated loan space (middle market and large corporates). I work on a small investment team, we select, underwrite, and manage the loans, sort of an all in one operation, there is no separate PM or workout group. Comp is so so I make just shy of 200k all in, but i work basically 9-5.
I'm too old to crack into IB now (30), and I think the logical carrier path for me next is either a BDC or a CLO fund as I prefer the buy-side and dont really have a desire to be in a sell side Lev Fin group. I went a non target school and hopefully will be done with the CFA program this year. No plans to go back for a MBA as I think at my level it's sort of a waste if I'm not shooting to make stage push to IB.
Anyone currently work at either a BDC, private debt shop, or CLO?
If so how did you get the role, seems like job postings for these opportunities are fairly scarce.
Also, what is compensation like for middle market BDC or a mid size CLO manager for someone with about 10 years of experience?
Thanks.
Work for a major CLO manager (think GSO/CIFC/Octogan) but am younger and do not have as much experience as you. From my observations the recruiting cycle is very informal and hard to predict, as many people get jobs right out of college or after 2-3 years as a desk analyst or alternative buy side experience plus CFA. Some guys join after working in structuring roles, which seems like a really natural progression given the similarity of the jobs. Don't see a lot of former IB analysts working at CLO shops - in my opinion not because they can't get the job but because they go for PE of HF.
With your experience it sounds like you'd be a competitive candidate especially after completing the CFA. I got my job through a connection and not by going through a standard recruiting process.
Can't speak much to compensation as there is very little available data out there. I do not have a clue what more senior guys earn but my guess is that it is less than what someone with similar experience earns in IB/PE/HF. That being said I think compensation is still attractive and comparable to "broad" street averages if you are at one of the bigger shops. Keep in mind, however, that recent CLO regulation has been brutal and makes managing CLOs less attractive unless the firm has a balance sheet comparable to banks.
The work will be pretty interesting if you like the leveraged loan space because you get to look at a lot of companies. The popularity of using bank debt in LBOs has increased so much due to cheaper cost of capital and the fact that covenants are now the exception rather than the norm. CLOs stand to continue benefiting from this trend unless regulation smothers them -- which I think would result in more BDCs.
My only gripe about the job is that the analysis does not require as much conviction as say investing in a chunk of mezz or distressed (although this isn't unique to CLOs). However, there are always assets that become distressed that require significant analysis and involvement in the work out / restructuring process. You probably are already familiar given your current role.
Long winded response but don't see a lot on here about CLO managers. It's a vastly underrated buy side job considering how many interesting deals you look at and the rising usage of leveraged loans in high profile transactions. I would point out that the exit opps are limited but that's not really the point of joining one (which is a shame because the experience would be a great fit for certain credit HFs - maybe that is a more common path than I am aware).
I know the fundamental skill set differs, but what are my chances of breaking into a CLO manager if I'm currently and buyside ABS research analyst? Is my experience relevant enough to be considered for one of these positions? CLOs are one of the many assets we invest in, but they have caught my interest after learning a lot about them since starting.
A buyside ABS Research analyst ***
Mike,
Thanks for the response. Yes I agree risk retention rules have certainly put some regulatory hurdles but from what I understand managers are taking horizontal strips typically in equity tranches across creative legal entity structuring as a means to a work around. However, issuance continues to be strong and I think we get some bank de-regulation in the trump era at some point, which while the benefits are not certain I don't think regulation gets worse. Most BDC funds, outside of the Ares and Golub and other giant BDCs, are focused purely on middle market direct lending and while that will continue to be strong I dont think it will impact the CLO markets all that much which rely on broadly syndicated as their main underlying assets.
The most interesting thing going on is that CLOs right now are all resetting their coupons in line with the insane spread compression repricing wave across that is going on in the broadly syndicated market. These funds stand to make a lot of money for their equity tranches in 2-3 years down the road when credit spreads on floating rate bank debt widen again when then down cycle happens. This should translate to some pretty juicy bonuses for CLO managers which have been resetting their cost of funds super low.
Anyone others out there with any entry or comp insights? Would be much appreciated!
Thanks.
Hi Drew,
I am very interested in what happened during the risk retention era. Could you help me understand how did that rule affected CLO business? By "horizontal strips" do you mean CLO managers held 5% of the equity traches? Did the "skin in the game" make them more risk averse in selecting risky loans?
agree that risk retention can only get better from here. Also I think you're right that CLO spreads will catch up to the wave of repricings and benefit the equity tranches when new issuance spreads inevitably widen in the future (painful in the short term though). A counter to that might be that alternative loan funds become more popular and start participating more actively in syndications, hence making it harder for CLOs to reset at tighter spreads (for example my firm also manages non-CLO loan funds like most of the other CLO managers).
I'm an analyst at a buy-side Syndicated Loan and CLO asset manager - In my group, I expect that someone with your experience would make 200-225 for the first year or two, based on your current pay, and once you prove your worth I think that number would probably be in the 250-300 range in an average year. In our group the hierarchy is Analyst (0-7ish years exp) anywhere from $100-300k, Sr Analyst (8-unlimited years exp) $300-400k ish, Sr Analyst/Jr PM (subjective, some people never become PMs) $350-450k, PM $450-600k, Senior PM $600k-multiple millions. These aren't set bands, they're more so what I've inferred from conversations with other analysts/PMs.
I have a friend at Ares in their direct lending group who was making just north of 250 as a 2nd year Associate, and a friend at Golub in an AVP role making similar money. Not much insight to BDCs outside of that though.
EDIT: Comp #'s updated. Recently received some new insight from coworkers.
DBW,
Thanks for the insights very helpful. Just curious how did you land the job there and what type of work did you do previously?
Thanks.
I was straight out of undergrad - I got a job in this group as a middle office portfolio analyst and earned a research position. It was just a mixture of hard work and dumb luck, to be honest.
Hey @DBW521" thanks for the insights as I echo the others here as well. Can you expand on what a CLO Credit Asset Manager would do? I am curious as it seems like it is similar to leveraged lending and given that it is a buy-side approach where you are trying to satisfy the LP's in your fund that you will be doing just as much (if not more) analysis on these companies as they seek to acquire new businesses/etc....I could be wrong but if you could just expand on what an analyst duties would be and when you start having more "client" interaction.
Thanks ahead of time.
Sure - as analysts, we're generally assigned to a handful of sectors and it is our responsibility to develop fundamental credit opinions and relative value assessments for individual issuers, make buy/sell/hold recommendations, actively monitor holdings and potential holdings and also monitor the broader market and sector risks. We unofficially work as PM's for our industries and make the buy/sell decisions, present them to an Investment Committee for sign off, and then give the trader the green light. At times, depending on the unique situation, we can get very granular. For instance, one of my industries is consumer products and I recently visited a handful of brick and mortar stores to get employee feedback, as it is a distressed name and we're looking to potentially top up in our Opportunistic Credit Hedge Fund. That's far from the norm, but we do dive deep at times.
At our firm we, as research analysts, cover names for the CLOs, SMAs, Retail Funds and our Credit Hedge Fund. We do have 2 guys that manage the CLO's - one PM and one non-research analyst, but I'm not sure exactly what the analyst's responsibilities are.
Client interaction doesn't happen for everyone. You could be on a path to be a career senior analyst, which isn't a bad gig here. 40-50 hours/week making probably $250-300k+ in Chicago/Chicago suburbs (we also have teams in NYC and London). If you do get the opportunity to have more client-centric responsibilities, I would expect that would happen with 10+ years of experience. There's really no set timeline though.
Correct - we pull the financial filings and try to recreate the banking models using our own structure for uniformity across the complex. This role is much more modeling intensive than I would have assumed from the outside looking in. You're right that they could pay more - this is a very low-cost business overall. Although 90-100k is healthy right out of college, the main reason it seems that it could be higher is simply because they don't pay you until you produce. Once you have a coverage portfolio it's a completely different story and you move relatively quickly, considering you work only 50 hours a week at most, from 100k to 200k over the course of the next 5-6 years.
As for your question on the administration and outlook - we haven't had a single conversation on the Trump administration and its affect on our market. It doesn't seem to be something that management is concerned about in the least. With regards to general outlook I think that this space has a ton of upside, especially in the current rising rate environment. I think that fees are so low that we're not going to see much pressure from an index investment approach and I think that we still have a lot of room to grow internationally. I honestly don't read anything too special - the only market specific articles I pay attention to are from the LSTA.
How is the CFA viewed at your firm and what are some prominent CLO asset managers? Looking to get into asset mgmt. but something niche like this that won't be blown up by ETFs and quants.
CFA isn't necessary, but I'd say 1/3 of our people do have it (I do not). If you don't have direct experience, it's the extra push you need to break in. Its my opinion though that if you're a research analyst with a decade of experience, it doesn't really matter if you have it or not, so I'm probably never going to get it.
Top CLO managers are probably GSO Capital, Carlyle, CS, ARES Apollo, CIFC,Octagon, Blue Mountain Capital, Oak Hill, Invesco, Symphony... I'm sure there are league tables somewhere.
Anyone have any thoughts on Highland Capital? I know they're big on CLOs but not sure how much thats a focus vs other debt investing stuff
@DBW521" interesting. I am looking at a few CLO Managers to work for. Would you say that the markets are still favorable for CLO Credit Asset Mgrs? It seems like buying and selling commercial paper from the primary & secondary markets can be quite lucrative.
question ---- Any ideas of what a bonus structure would look like (What % range can you guess)? I know now the big firms clog up the industry (Ares, Apollo, Octagon, GSO Capital, etc...) and pay accordingly. Small firms with a decent size of AUM, say $8-10B, still seems like they can pay accordingly if they have a smaller deal team.
another question ---- Are you looking at Term Loan A & Term Loan B transactions? can you expand on what the difference b/t a Term Loan A vs. Term Loan B would be like?
Last question --- on the buy-side what is the hit rate for most firms that are buying up these deals? would you say between 20-30% ?
Thanks much.
Once you're fully ramped up and have your own coverage portfolio Analysts (2-7 years) are probably in the 45-65% range in an average year - for reference, year 1 base salary is also probably $75k and the first few years you see 10k annual bumps. Senior Analysts (8-unlimited) are in the 65-100% range. If you're good enough to be put on the PM track, obviously you can make a lot more. Some of that bonus comp is vested and from what I've seen it's like an 80/20 split cash/vested equity.
We invest in TLB transactions. TLA facilities are fully amortizing and are generally held by banks. TLB facilities are partially amortizing (generally 1%/year paid down quarterly in 25bp increments until the loan is refinanced at maturity) and are traded on both the primary and secondary market between Syndicated Loan managers.
Not sure what you're referring to when you say hit rate.
Ok great --- thanks much @DBW521" really appreciate it....
Hit rate questions was in regards to how many deals you look at and actually "purchase" (% wise) between the primary and secondary market that make it into your portfolio.
It's interesting how a CLO Credit Asset Manager can allow an analyst to have really transferrable skills. My first impression was that you would have to be doing compliance and BS grunt work and that a traditional commercial banking job might be better.... Guess that leads to my last question - how much of an analysts time is spent monitoring/doing compliance versus actually doing deal work (pitching the investment committee on your deal(s), building financial models, credit packages, digging deep/doing analysis etc...)?
thanks much!
at a top 10 firm, all-in comp for associates is more like $200-350K and for senior analysts $400K-$1MM, depending on level of experience. performance related fees (ie carried interest) may bring #s higher depending on the fund.
Speaking from experience, I tend to disagree pretty strongly. Maybe we're not paid as well as I think we are here, but in my opinion there is a 0% chance that a credit research analyst is paid anywhere near $1MM at a CLO Asset Manager. That's Credit Hedge Fund pay, not CLO AM. If I'm just plain wrong though, PM me, I'd love to know what shop is paying guys that much.
if the firm is managing a relatively small loan portfolio and/or is a 2nd/3rd tier CLO firm (no offense), the fee economics may not support higher comp structures. the top 10 firms usually manage $20bn+ AUM in bonds, loans, distressed assets (ie not just CLOs) and charge higher fees, though compressing, some with carried interest. trust me, speaking from experience there is a non-zero % chance that quite a few folks earn close to seven figures.
CLO investor here at one of the larger shops (think Apollo/Ares/GSO). In terms of entry point as a credit analyst, there is almost always some turnover at year end and that's typically when spots will open up. For BSL CLO platforms, most teams are aligned by sectors so it heavily depends on whether you have the right coverage experience for what they need to fill. For middle market CLO platforms, the teams are typically smaller and therefore analysts would tend to cover more sectors than in the BSL space. So there could be more leeway here in terms of fitting your experience to what they need.
These roles aren't typically posted but instead come via external recruiting firms. Search for CLO Analyst or Credit Analyst or Structured Credit Analyst and you should hopefully see some hits. I believe DFG was recruiting for credit analysts recently. Good luck!
What's an average hold size for a CLO when they invest in a deal? And would a CLO Credit Asset Manager that invests in debt invest more into a T/L A or B over a 2nd Lien/Unsecured Bonds/junior capital? Or would they invest across the entire capital structure?
I guess it all depends on how much risk you want to take and your reinvestment period for the CLO in general but just curious.
CLOs are comprised mostly of TL B with a pocket for 2L. TL A is typically held by banks and has less liquidity but may be bought if the economics work for the structure. Avg hold size is 50-75bps. CLO managers also have other fund structures (mutual funds, closed end funds, separate accounts) that may invest across the capital structure including HY, CDS, CLO debt/equity and post-reorg equity.
That makes sense and is definitely helpful. Any insights in regards to carry as a portion of compensation at CLO AM shops? Say when you are ~8-10 years in?
Any idea on trader compensation for CLO Asset Managers? Seems like traders could be right up there with PMs in this space as they maintain a lot of the relationships with the investment banks/private equity sponsors. Seems like the traders are effectively serving as the "capital markets" desk for CLO AM. Am I wrong?
bump
most traders in these shops are execution traders. they are not cap mkts focused and do not have relationships with PE shops - just sellside sales/trading. more often these days, these type of buyside firms are hiring former sellside sales into cap mkts roles to liaise btwn the firm and Street.
compensation can range from $300-500K for jr trader to $1mm+ for head trader. these traders typically do not take risk or manage their own book but maintain good working relationships with sellside desks and provide market and situational trading color.
Thanks. Super helpful, impressive how much comp a trader can make on the buy side, that’s for sure.
Thanks gmen v helpful. Follow up q - how many years experience is typically necessary for a head trader position? 4? 8? 10+?
Thanks. Super helpful, impressive how much comp a trader can make on the buy side, that’s for sure.
Just came across this thread - sorry for revival - currently an SA at a large CLO manager, investing in tranches in the primary/secondary mkt. Main goal for FT is Leveraged Finance at an IB, is this possible? Anyone see this happen after SA? Thanks.
How do CLO managers compete to get in on primary issuance deals? Is there someone responsible for maintaining a relationship with the investment bank leading the process?
CLO managers have traders that maintain relationships with leverage loan syndicate desks and secondary trading desks on the street. The traders will relay the PM's interest on new deals and put in orders with the syndicate desks for primary issuance and execute trades with LL trading desks in the secondary market. The buy side trader will maintain the relationship with the sell side through actively trading with sell side. From the the sell side's perspective, why would you give a full fill on new deal XYZ when Joe Blow CLO that hasn't done a trade with you in a year.
At the larger more traditional asset managers the leveraged loan traders will usually also execute trades for the firms other investment vehicles (mutual funds, SMAs). Great seat to be in if you can find one open.
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+1
I am a junior trader for the asset management arm at one of the mega insurance companies
I trade for our insurance account (to invest clients premiums), our mutual funds and CLOs (which pay our bonuses). I also am backup (and covered for a few months) as our teams CLO analyst. So my knowledge is not just on the trading side.
Let me know if you guys have any questions, this has been a very good thread on a great business which is vastly under covered on this site.
Just one thing re:pay. Numbers have been all over the place in this thread. Dont know of any analyst pulling 1mm+, but at the same time no one here is making less than 3 bills. We have 3 analysts who would be considered "junior" but were all plucked from associate 3 or higher positions at top BBs. Those people arent making 150k
I'm at a direct lender currently and am not all that interested in managing the relationship process as I move up, so this was very helpful. Thanks.
Have summer CLO experience, looking to find a full-time position on a CLO desk (managing CLO or trading tranches). Clearly an extremely tough job market and have been trying to network as much as possible. Any advice? I have a strong understanding of the market and I am very interested in the asset class.
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