Credit Hedge Funds
Hi WSO community -
I've been checking out some of the top credit hedge funds: Brigade, Silverpoint, Canyon, etc. and it seems that the backgrounds of the people that work there are a bit more eclectic than the backgrounds of people that work at other top asset managers in other strategies. For instance, the Tiger Cubs definitely have a type (Target-->IB-->PE), MF PE definitely has a type (Target--> Top IB), etc. When looking at top credit managers, there are partners at each firm from such a wide variety of backgrounds and there isn't really any concentration of one backrgound.
What accounts for this difference? Am I reading too much into it if I assume that these seats are less desirable because of who they attract? Any info would be helpful.
All of the firms you mentioned are top of the line firms that can attract a wide array of talent. I don't think there is any one type of route to get a position, could just be what the PM or CIO is looking for.
Having an MBA or having worked at a top PE megafund tells you almost zero about if you can generate profitable investment ideas at a HF. Silver Point will never hire those folks, why the hell would they? Canyon’s background is Milken, literally the underdog investment bank where scrappy bankers and traders created the entire distressed industry. If anything, they encouraged that kind of off the beaten path background early on in the formation of the industry that eventually created the PMs running those type of fund today.
To answer your main question, yes. Only an uneducated college kid ranks and classifies job opportunities based on credentials of the the top performers in that job. Stick to Academia or Private Equity if you feel that is the most important aspect of a job.
PE funds esp. mega funds chase prestige. It's just part of their culture of maintaining exclusivity/eliteness and helps brand to LP.
HF are a way more quiet and reserved, and more technical and introverted.
I agree with your points but I'd really argue that the PE fundamental diligence is similar to tasks needed in L/S equity HF, especially for analyst role when you aren't really crafting ingenious ideas but rather modeling out the PM vision / thesis using given financial statements.
PM goes to tell you go model out case scenario IRRs for xyz carve out / roll-up / market TAM expansion / capex ramp-up / WC improvement here for this product, etc.
This is still very much like building out your operating/LBOs as associate in equity PE. Driver/KPI research and diligence so forth.
I'd wager that's why tiger cubs hire analysts via MFPE pipeline. But the story of analyst -> PM I'd agree w/ you since then you need to have a sharp eye and generate ideas rather than model.
Hi --
I agree with the above ^ PE, especially at the megafund level, wagers towards prestige and rely on LPs therefore it's in their best interest to maintain a pipeline of elite/wealthy candidates that come from the BB background)
Previously I've done on-cycle recruiting for major PE shops but now focused on structured products/HF/distressed credit as a head hunter for a major HH firm in NYC. There's no one exact reason to account for the difference but I'd say it's because relative to other buy-side positions, credit can branch out into far more esoteric spaces and managers will need to come with specialized knowledge of how to run this type of financing (i.e. not many people even know what a CLO is, let alone other types of securitization is at the junior level). It's a great lifestyle if you're good at what you do. Right now the world is trending towards more securitization (think china/places that typically have a buy/sell mentality without all the structuring). I think this accounts for various backgrounds and is also why people who end up doing distressed related/high yield/securitization/HF really need to be all in because it's not just LBOs and takeovers. This has been my take let me know if this was helpful.
It really can vary. I worked at a well known credit fund (not one mentioned) and we have people from a very wide range of backgrounds. There are some from traditional, LevFin, RX, but also laterals from more quantitative funds, L/S funds, as well as other credit funds. I get the sense that my fund, and funds like it hire more for intelligence than for a specific background. Each firm is relatively unique, and some funds may strongly prefer a banking background to a more quantitative background to a legal background and vice versa. I'll also add while it's generally target heavy, I've found many of these funds are open minded to taking non-target candidates if they interview well.
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