Event-driven / special sits interviewing
Much has been written about interviewing for long/short equity funds and most of a successful interview seems to revolve around traditional stock pitches. I haven't been able to find as much information about the process at special sits/event driven funds. Will they expect you to have a pitch or two teed up (presumably related to their strategy, e.g. spinoff, post rx equity, activism, etc.) or will it be more about technical questions and case studies? Assuming you're coming from banking/PE do they go into transaction experience in depth? I know it probably varies considerably from fund to fund as does the precise implementation of "event driven/special situations" strategy but I would be really interested if anyone has insight into how the process typically works.
Following
Won't expect you to have a pitch right from the start but it would be an advantage if you followed a couple of situations related to their strategy and could discuss that in depth in your earlier rounds. Every special sits/event driven fund I've interviewed at has made me do a case study so I would expect one. Technical questions will focus on how well you can understand cash flows and debt waterfall.
Helpful, appreciate it.
Case studies weren’t also super hard as long as you could identify what tranche/security in the cap structure you want to invest in (if any) and when would you invest, if you would even considering investing in the company in the first place (are the assets crap/worth taking a look, etc.) Nothing in depth was expected as long as I could walk them through what tranche I thought would have the most recovery or what would be the value in certain cases. The main thing here was to lookout for any subordination b/w notes and how that could affect the waterfall. Or in some cases even legal edges you had eg. proceeds from asset sale can only be applied to certain tranche etc.
Case studies were either ideas they had worked on in the past or something they are considering
Lmk if I can answer any specific questions about the process. Not sure how the process would be for you since you’re a principal but these were the type of interviews I had at distressed/special sits funds for internships and FT roles
I suppose it depends on your level of experience, but my interview process at these funds for experienced / sr. analyst-type roles all involved discussing current and past investment ideas for the majority of the first round. I'd say its better safe than sorry and to have one or two pitches ready to go. I've had case studies that focused on cap structure arb with a focus on structural subordination issues to more nuanced successor subsidiary guarantee language to distressed investing involving a carve out LBO and waterfall for proceeds / remainco assets and where to position b/w loans, bonds, equity etc. These all have been same day turnaround or weekend case studies. The other thing is that in my experience my case direction has only been being provided a ticker and more or less being told "go".
Edit: Another thing worth pointing out is that there also isn't always a need to make things super complicated in these cases and to not lose the forest for the trees. The only time I've been dinged for a case study was at a fund that, in hindsight was more long only HY focused, was for recommending against a long bond position (that they owned already) because the bonds were unsecured with super loose covenants that allowed for jcrew types of IP carve outs / priming risk, and the push back was that asset coverage, even under conservative estimates, was so large that it outweighted aggressive financing risk. We can debate the merit of either view, but the point is that I probably would have anticipated how the fund wanted the case study to go if I had done more dilligence on the type of investors they were.
> the other thing is that in my experience my case direction has only been being provided a ticker and more or less being told "go".
that's pretty much how I've been given case studies too. It's more along the lines of "We’d like you to do a case on XYZ. We’d like you give us your recommendation on which security (if any) you’d like to buy and at what price. This includes both the debt and equity securities. Please lay out the entire capital structure for us to walk through."
The places I've interviewed at mostly aren't looking for detailed writeups or models but just wanted to see if I could walk them through the cap structure and point out anything interesting that I would invest in (if anything at all) and why and how I think about the opportunity
Thanks mate, sb'd. Can you elaborate on how to analyse cap structure arb and perhaps provide some examples?
Very interesting view - how did you notice priming risk? no / low restrictions on indebtedness?
Also just wondered how strong asset coverage can be - often the value of a company's assets are tied to IP (for it to be productive) and you mentioned IP was carved out here. What type of assets were those / how did you end up valuing that?
Seems like a lot of the discussion is around special situations on the debt side – anyone here cover that as well as traditional merger arb and other event-driven strategies?
also interested
Interested in it all as well...I have a feeling the professionals may be very busy atm
Send me a msg. Can connect you w someone.
Send me a message. May be able to help.
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