Compensation at CLO arm of an insurance company?

Interested in joining a CLO arm of a insurance company

Curious if anyone knows what comp would be for a role like this and how it compares to comp at a CLO fund not under an insurance company umbrella

Background is 3 years in a FSG group

Comments (13)

Jan 6, 2022 - 12:58pm

I'm referring to working at a firm that has raised outside capital to deploy in the leveraged loan market of sponsor backed syndications

Not investing directly into CLO funds

Not sure if that's an "investor" or "manager" title

Curious for comp at the associate level

Jan 7, 2022 - 10:32am

Can't speak to specific figures but I'd imagine it would be on the lower end of the 'market range'. Benefit is you'll probably have better WLB and maybe more responsibility overall. If they take in outside money it'll be a more lucrative operation than most traditional insurance AM, and comp should reflect that to some extent, but still be on the lower end given these guys manage less risk/total return stuff and likely have lower fees. But at the end of the day still need the talent to bring in outside capital, but not every Analyst is gonna value the incremental comp relative to the better WLB/stability that these places provide, which is probably a large part of the value prop from a hiring perspective. FWIW Allstate and Pac Life have pretty solid CLO businesses, not sure if you are referring to either.

Jan 7, 2022 - 2:20pm

Thank you. I'll look into those firms. PGIM seems to be big into the space as well.

Is it fair to say that most insurance company CLO funds are not funded by outside capital?

Rather they compete internally for excess premium dollars across divisions? I assume some debt raised as well?

Do they happen to do direct lending thru private credit?

Jan 7, 2022 - 3:25pm

Yes - but I'd put PGIM in a different class than "insurance AM", upper-tier shop regardless of technically being owned by an insurance company.

If they are issuing CLOs they are going to be taking outside capital. Their own balance sheet might buy into a number of the tranches, and likely puts up equity in some cases, but if it is going to be a CLO then naturally I would assume there is outside capital coming in. Not as in tune to these dynamics but this is my assumption based on what I know.

Can't speak specifically to these shops but insurance companies do a lot in the direct lending space, so I would assume most if not all have some exposure ]. I think they tend to separate them, so you'd likely be in either private or public credit, but not sure if that is the case everywhere in the insurance world specifically. I know some funds touch both on the same desk.

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Jan 9, 2022 - 9:17am

I've worked in equities for an insurer and recently made the jump to a more traditional LO managing client capital, so I can speak to the difference at a high level (not specific to CLO). The disclaimer here is that I have only worked for one insurance company and I purely interviewed at traditional LOs, so this is just my experience at my old company.

In general, the tradeoff at an insurance company (which is probably similar for pension and endowments) is that you have less career risk, and as a function of that you have less career upside in terms of comp. Assuming this investment branch of the Insurance company you are interested in is not taking on outside capital. If its purely the company's capital, then it is permanent, and you have no risk of flows (outside of flows specific to the insurance business itself such as catastrophic events and cap gains management). This generally results in less comp variance, less upside, but also less downside relative to an active manager managing client capital. 

How much of a delta will depend on the size of the insurance company, geographic location... where as these variables are less impactful in comp across active managers. For example, a $5B fund is an ok size (especially if AUM per head is solid) while that would be tiny for an insurance company. In my experience, the primary driver is the bonus/performance incentive structure. Base will be comparable with materially better upside from performance comp at a traditional manager (virtually every fund I talked to had a performance incentive structure materially higher than my current structure). Again, it could be just my old company, but I know my company contracted a consultant very recently to review comp practices at other investment arms of insurers for our structure (out of which came no change to our plan), so I would assume that it is similar across the board. 

Still, comp is not bad by any means on an absolute basis (they have to be somewhat competitive to attract a decent level of talent), and it's a very stable seat with high comp relative to hours

Jan 18, 2022 - 8:57pm

Surprised no one in the comments even offered a rough range. Market rate for 1st year CLO associate out of banking should be around $225-250k nowadays, give or take. Size of the manager / type of manager shouldn't have a meaningful impact on pay as you're too junior for it to matter. Maybe more delta in senior titles

  • Analyst 1 in Research - FI
Jan 19, 2022 - 6:21am

That is about market, but I can say that you probably won't get that at an insurance company. Based on my knowledge, someone with 3 years exp will come in max ~180k

While I agree with you the comp structure doesn't have much impact at the lower levels, it mostly is a function of working <50 hour weeks

Jan 21, 2022 - 10:52am

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