Joining LevFin and FSG at this point in the cycle

Got an offer from a BB and I will have to choose my team soon. Their LevFin/FSG is the top one, however, would it be dumb to join one of these teams at the moment given the current economic/financial situation where a correction will most likely happen?
For those who worked in FSG/LevFin during/post the crisis how was the deal flow impacted? Same for people that worked in these teams during the Euro credit crisis in 2012?

This is for London/Europe.

Investment Banking Interview Course

  • 7,548 questions across 469 investment banks. Crowdsourced from over 500,000 members.
  • Technical, behavioral, networking, case videos, templates. All included.
  • Most comprehensive IB interview course in the world.

Comments (25)

Nov 30, 2018

Hey Pan European Monkey, I'm the WSO Monkey Bot and I'm here since nobody responded to your thread! Bummer...could just be time of day or unlucky (or the question/topci is too vague or too specific). Maybe one of these topics will help:

  • corp dev from fsg or lev fin? corporate development at a top tier firm? Say this is Sponsors at a top firm such as JPM. And does anyone ... Is it possible to make a transition from a leveraged finance or financial sponsors group into ...
  • Merrill Lynch IBD Questions FSG, Lev.Fin, M&A, or any of the industry groups? How does an analyst in a coverage/industry group ... differ (valuation vs. pitch book preparation) from an analyst in a product group like Lev. Fin, FSG, or ... clients into the firm in addition to their core functions? Is this frowned upon, or is
  • Job Hopping Open Debate the table (Lev Fin at a rising MM). Here's my predicament, I really enjoy the work product, deal ... a problem. Started in a rotational program in Markets at a BB and enjoyed the people, not so much the ... a career move to FSG /Lev Fin. As a few people I viewed as mento
  • 2 Nuanced Networking Questions their career etc.? For example if I am in High Yield group but want to make the switch to Lev Fin, who ... me to people in Lev Fin to make the introduction more meaningful? What would be best practices and ... type of situation or experience this? I've thought about talking to some people in our FIG or FSG
  • More suggestions...

You're welcome.

Dec 2, 2018

Anyone? @hominem

Most Helpful
Dec 4, 2018

LevFin is particularly pro-cyclical because it is capital markets driven so it exhibits more extreme boom-bust characteristics than traditional banking groups. The mistake that most people make when it comes to joining a cyclical group like LevFin is to extrapolate the past into perpetuity. In my experience, busts come a lot faster and more suddenly than booms. If that happens, investor demand will dry up, companies won't be able to tap the markets, and deal flow will come to a halt overnight. LevFin will have deeper and wider layoffs than most other groups, because of the massive hiring that happens during the boom. I knew a lot of laid off LevFin bankers from the last crisis. The right time to join LevFin is at the trough, when things are at its worst, and then you ride the cycle up -- not at the peak right before an impending crash. Best of luck with your decision.

    • 4
Dec 5, 2018

Makes sense, thanks. I am guessing you are mainly referring to the GFC. Given how extreme this recession was it might be just an anomaly, have you heard anything similar for the early 2000's recession and before?

Dec 5, 2018

I was speaking generally. That said, I should point out that the other mistake that people make when thinking about cyclical things is believing that this time might be different. But it usually turns out to be wishful thinking.

I hope I'm wrong. But if anything bad happens, at least you will have thoughtfully considered the risks beforehand and accepted those risks with eyes wide open.

Learn More

7,548 questions across 469 investment banks. The WSO Investment Banking Interview Prep Course has everything you'll ever need to start your career on Wall Street. Technical, Behavioral and Networking Courses + 2 Bonus Modules. Learn more.

Dec 5, 2018

Kinda expected these types of answers, but wanted to get the consensus from people that experienced the GFC.

Dec 6, 2018

One thing to keep in mind for this cycle is that debt markets have been white hot. Leverage loan issuance is at all-time highs, and the overall quality of the loans being originated have eroded for a couple of years. You probably have a number of banks that have continued to staff up to support issuance as we got deeper into the cycle. Many people don't expect the leveraged loan boom to end all that well, as the higher leverage points and weaker structures probably lead to weaker recoveries and a pretty punishing time for investors.

The GFC was focused on real estate / structured product markets, and while leveraged finance was certainly impacted, it wasn't the epicenter. There are a number of financial commentators that seem to think leveraged credit will be a major pain point for this cycle. Who knows if they are right or wrong? It is something to think about though, and definitely something to be prepared for if you are entering LevFin.

Finally, keep in mind that LevFin is primarily originating and dealing with performing credits that are pretty down the fairway for most institutional term loan / high yield buyers. The group is transaction and fee focused--much of the credit risk is being distributed to investors vs. held on balance sheet. There isn't necessarily a need for such a large LevFin workforce in a downturn, unlike credit underwriting / RX.

    • 3
Dec 6, 2018

I don't have too much experience in LevFin, but in my RE firm, we tend to lever up when the market is going shit because we want to have the buying power to catch good assets being mispriced. Is it better for LevFin to do the same thing as the Risk/Return profile have been vastly improved because of the reduced price?

Learn More

7,548 questions across 469 investment banks. The WSO Investment Banking Interview Prep Course has everything you'll ever need to start your career on Wall Street. Technical, Behavioral and Networking Courses + 2 Bonus Modules. Learn more.

Dec 2, 2018

Also interested!

Dec 2, 2018

bump

Dec 3, 2018

Anyone in LevFin/FSG could provide any insights for us?

Dec 3, 2018

In general: dealflow will of course be impacted in a down cycle, but that's true across the board. I'd recommend going with the top group, chances are analysts have placed well in the past and even if the economy blows up at least you have relationships with PE (assuming that's your goal)

Dec 4, 2018

Makes sense thanks

Dec 4, 2018

Does the advice @hominem provided about the cyclical nature of Lev Fin apply to the same degree for DCM? What does the short - mid term outlook for DCM look like?

Dec 4, 2018

In our BB's sponsors group, I believe exactly half the analysts got laid off in the last recession. That being said, last recession was particularly dire for credit markets and I don't think the reaction would be nearly as dire this time around.

Dec 5, 2018

Didn't expect so much layoffs... just a massive decrease in dealflow therefore lack of exits. Did some of the analysts transition to RX given their exposure to debt? And likely increase in RX dealflow.

Dec 5, 2018

Not sure what became of them. One of the interns moved internally, don't know what became of the rest.

Dec 6, 2018

Thanks!

Dec 6, 2018

Being in a credit focused team during a credit-bust is a great opportunity to learn about distressed and stressed debt. I started in the levfin team of a ratings agency and it was a fantastic learning curve. Almost every LBO I looked at was busted with the company looking for covenant waivers, holding out for amends & extends, and engaging in restructurings/liquidations. I felt that myself and the other new analysts learned a lot more than the guys who joined in the bull market when every deal got financed and problems were few and far between.

Dec 6, 2018

But that would be more applicable to RX team wouldn't it? How would the LevFin teams be involved in such situations?

Dec 6, 2018

Going off of this, how would FIG (specifically banks) be affected in the current market? I know the inversion of the 2/10 has major impacts and will on some of these financial institutions.

Similar to OP, i'm trying to gauge what the future for FIG would be, as I'm interviewing with a boutique in the space.

    • 1
Dec 6, 2018

If you're talking about CS, Sponsors/Lev Fin is def the top group. Even if deal flow slows down, I feel like the prestige of the group might still go a long way for exit opps. Tbh I would join it no matter what the market does. If this for SA or FT?

Dec 6, 2018

SA - most firms predict a recession in 2020/2021, basically at the start of my FT in case of conversion. Can you PM me please? Out of PMs...

Dec 6, 2018
Dec 6, 2018