Does RX silo you?

The title is pretty self explanatory, but would going to a top RX shop (think PJT, HL, Evercore) limit your options on the equity side. I'm pretty undecided as to what I want to do after banking, but considering all options from straight vanilla PE to even corporate strategy.

I'm pretty interested in the equity side of finance as well so wanted to hear public opinion. 

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Comments (34)

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Apr 4, 2021 - 10:20pm

Yea PJT RSSG analysts are well known to have terrible exit ops /s

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  • Associate 1 in IB - Ind
Apr 5, 2021 - 2:46am

Real answer - to some degree but only specifically your nearest-term opportunity. But you still maintain maximum optionality, there just might be a few extra steps you have to take. For example, let's say 1.5 years in, you realize you don't want to do ANYTHING credit-oriented at all, and nothing HF-related that can leverage a distressed skillset either. Like let's say for some reason you want to do Healthcare. You're going to be the top of the lateral pool for the best Healthcare M&A bank/group available. And then you can go from that to the best healthcare PE group, if that is so your desire. And TBH there are a ton of MM generalist funds (healthcare/industrial/etc) that will probably interview you and screen your skillset without any healthcare experience as well

On the other hand, if you do want to do something credit-oriented (or even just mixed in terms of investing along the capital structure like an Apollo Hybrid Value fund) you are by far and away the highest tier of candidate available. 

One thing to note is that the longer you stay as an RX banker...the more you build a niche in it, the more the opportunity cost is of completely switching. But that's the case for every single coverage or product group, it's the effect of being specialized 

TL;DR - Tons of upside, limited downside

  • Prospect in IB - Gen
Apr 5, 2021 - 10:27am

What if I wanted to work at a L/S hedge fund? Do you think it would hard to break in? Would an M&A group at a lesser known bank better set me up?

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  • Analyst 2 in IB - Gen
Apr 5, 2021 - 10:07pm

Have a buddy that worked at PJT Rx -- the diversity of exit opps they got looks for was crazy, these guys literally got hit up by headhunters for everything. Of course they had their choice of all the distressed funds (Oaktree, Centerbridge, York, Anchorage, Silver Point, etc.) but also any vanilla PE shop they wanted. There's also a ton of hedge fund interest in the analyst pool and many get the chance to interview for spots that are usually reserved for people that have done a 2+2 path -- people have gone to tiger cubs and top long / short managers as well as activist / event driven shops. One of the kids in my friend's class got a lot of top VC looks before he signed at a growth equity fund focused on healthcare and tech so that's not ruled out either. From an exits perspective, it's probably the best analyst program on the street. 

  • Prospect in IB-M&A
Apr 6, 2021 - 12:34am

Thanks for this comment, really helpful. Not OP but I was wondering if you could comment on whether analysts in the other top RX groups (HL and Evercore) have access to similar vanilla PE and L/S HF opportunities, or do they typically have to be a lot more proactive about it?

Apr 6, 2021 - 10:03am

Other top shops are good but you aren't going to see the same hit rate where literally every analyst is going to an absurd place. Mainly because there is slightly less senior support. 

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  • Analyst 2 in HF - Other
Apr 5, 2021 - 11:37pm

No. It teaches you to think in a unique way that's different from other vanilla coverage groups. You enter esoteric situations and assist a debtor or a creditor group / class with figuring out a solution to a real problem. You can point to tangible differences you make and it's experience that isn't really matched in any other group, and as such, you can easily have a chinese menu of options to choose from for next steps. It builds a differentiated skill set that you can't replicate from that side of the fence (obviously distressed is different, thinking like an investor vs pure advisor, etc). It's valuable, doesn't silo you by any means...

Apr 6, 2021 - 3:21am

Anything rx/distressed/turnaround related is like playing 3D chess instead of regular chess.  

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  • Intern in PE - Other
Apr 6, 2021 - 10:06am

Damn and here I was playing 104-D interdimensional monopoly..

Apr 6, 2021 - 4:11am

The thing to bear in mind is that in an RX or distressed debt buyside seat you won't learn that much about how businesses actually work. You'll become an expert in reading legal docs & the bankruptcy code and figuring out how to further the interests of your slice of the complex, but you won't get as much exposure to the operating side of things. It's not a coincidence that distressed people talk about "names" rather than "companies"...

FWIW I did 2 years RX banking and 5 years distressed debt investing before moving to a more growth-oriented shop a few years ago. Have learnt far more transferable skills in the growth PE side of things.

  • Analyst 2 in IB - Restr
Apr 6, 2021 - 12:31pm

Analyst that's going on 2 years of RX experience at a balanced practice (split between debtor and creditor) and would say that it depends.
 

Debtor side is significantly more process intensive across the board, and usually necessitates a high degree of understanding for the debtors business. That's not to say that you don't get exposure on the creditor side though. 
 

You'll sometimes do very detailed work on operational drivers and KPI analysis on the creditor side, it all depends on the company, situation and specific seat.
 

I've been on a deal on creditor side where it was all deal structuring and recoveries/returns analysis, etc. and been on another one where we did more operational analysis than any debtor side deal I've ever done because our hedge fund clients were effectively buying the asset. 

  • VP in IB - Restr
Apr 7, 2021 - 9:39pm

100% disagree with this. In RX, you literally learn how to identify the root causes of business failure and remediate them. In many cases, you may take over in an interim management role replacing existing management - so you learn literally all the ins and outs of a business. On the distressed investing side, you must've had a different experience. What we do involves not only buying out distressed businesses at substantial discounts, but then actively taking on some of the management positions and flipping the company with an average hold period of 2 years after reengineering all facets of the company back to a profitable growth trajectory. Cost cutting is only a piece of the overall puzzle - you're identifying and optimizing all identified issues within the operations.

  • Intern in PE - Other
Apr 6, 2021 - 10:07am

Anyone have info on the other way around? Can someone make it into RX banking from a Workout/Recovery credit risk role at a BB?

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