Leveraged Finance - Most Important Questions
I've searched WSO and M&I to the bone and I have some questions I could not find the answers to. I am wondering if those in-the-know or have previously worked in LevFin could chip in, for prospective monkeys like me.
1.) I'm still not sure on this - is leveraged finance more corporate finance based or more markets based?
2.) Some LevFin groups do their modeling in-house (JPM, DB, BoA) whereas some are mostly markets-based (Citi, MS, Barclays). Logically speaking, would it be right that the in-house modeling groups will naturally have longer "banking" hours whereas the more markets-based groups will have more "ECM/DCM" type hours?
3.) What are the best internships to set oneself up for LevFin (other than LevFin itself)? Would a boutique IBD internship make sense for Leveraged Finance recruiting? Or would a fixed income research internship make more sense?
4.) Is it common to see LevFin analysts stay on for a third year? (especially those in more market-oriented roles) Or do majority of them get "burnt out" and leave for PE/HFs?
I can speak for the industry group I work in only.
1) Markets based (high-yield debt) 2) Those guys still work long hours 3) Don't know. 4) Don't know.
Okay I am really confused now.. M&I says that leveraged finance is more on the corporate finance side (analyzing optimal capital structure) whereas some say it's more markets related... I'm guessing it's different according to each bank?
Lev fin at the bank I worked at was basically a sponsor coverage group which arranged debt financing for private equity buyouts - so more corporate finance than markets. Modeling was either done by them or the industry group. Relevant internships could be with a private equity shop or a BDC (Ares, Prospect, Fifth Street, etc). Not sure on guys staying and leaving - seemed similar to other banking analysts.
I might have mislead a little in my previous comment, celtics comment is spot on. I only meant markets-related in the sense of pricing and selling bonds and syndicated loans to the market.
In response to your 1st question - lev fin is really a hybrid. On one hand it's corporate finance-based in that you're working with companies (or sponsors) who need capital to finance a project or acquisition. On the other hand, since lev fin groups will syndicate (sell into the market) the vast majority of the debt they issue it's important that they are "in touch" with the markets.
I would guess that a solid boutique bank internship is a safer way into lev fin than a fixed income research position. Keep in mind that at the analyst level you're not being hired for you perspective on the capital markets.
Okay thanks, this gives me a better understanding - so leveraged finance is both corp fin (in the sense they're working with companies) but also capital markets (since they need to sell the debt into the market).
I'm wondering what internships would be best for leveraged finance. It seems like regular IBD and leveraged finance do not seem to be very related - how could one spin a regular IBD experience for leveraged finance?
1) Depends on the firm. There are two sides to levfin - an advisory side (esp. if you do a lot of sponsor business), which is a lot of arranging and structuring and updating the same credit stats pages a hundred times a day. Then there's the cap markets / syndication side, which focuses on execution, and tends to be more of a flow business at larger banks. If you're on the advisory side, you probably won't care much about them, apart from when you need to get updated pricing for your LBO model. Some firms will have a focus on one or the other. Some firms cover both out of the same group. Some firms will have separate groups for each.
2) Yes. The advisory-type levfin teams that hold the model get slayed. Cap markets guys have better hours (still relatively long, but advisory levfin is seriously brutal).
3) Depends on which side you're interested in, but IB internships are always more versatile anyway, so if you have the choice, go with that.
4) No hard and fast rules here, but generally, yes. Mainly because the cap markets guys arguably have (or at least, are perceived to have) less transferable skills. So it's more a function of the advisory guys having more mobility. And haaaa... if you think analysts go to PEs because they feel burnt out and want to chill for a bit... yeah, that's not what goes on in megafund PE.
Got it, but since IB internships are more corporate finance focused, it wouldn't make sense when applying to a more capital markets type LevFin right?
I mean it wouldn't look good if I were to say I'm just jumping around trying new stuff right? (ex. banking -> LevFin)
Sure - it depends on which side of levfin you ultimately want to end up in.
That said, part of the reason why IB internships are great is because you can spin them very easily, since the exposure is so broad. You just pull the classic "I did an internship in IB, and realised I liked A, B, C, but didn't like X, Y, Z, and that's what's steered / driven / geared / [car-related term] me towards [insert job]"
Plus (assuming the internship is at a good shop), there is always some degree of signalling you get from having done an IB internship.
Leveraged Finance sucks both in terms of exit ops and as a career. LevFin is where you go if you can't make it into IBD.
LevFin is also considered IBD... I completely disagree with your statement. If you are at an IB with a strong LevFin team, you have amazing exit opps and have a great skillset....
on top of that LevFin work 100 hours a week whether you are doing advisory type work or capital markets type work. Basically same hours as M&A, without the skillset and shittier exit ops.
You're a sophmore without any direct experience in this industry. Which means you know close to nothing about skill set, exit ops, or even what these people do.
Just stop.
Lev fin can give you great exit opps. -You can go to PE...lev fin is highly technical (i.e. modeling) which PE likes. Also, lev fin starts to get you thinking like an investor which is important for PE. -You can go to hedge funds -Generally speaking the debt markets are far bigger than equity markets, so there are generally more opportunities on the debt side.
Let me guess, you're currently working in LevFin and have an inferiority complex. Am I wrong?
Noone in their right mind would choose LevFin over M&A. Even at supposed "top" places like JPM, M&A will get you more relevant skills, and better exits ops period. This is the one area where there is so much misinformation - LevFin CAN get you into PE (the same way a non-target CAN get into BB IBD) but it's not the best route. LevFin is technical but technical =/= modeling - Have fun working spending 90 hours spreading debt comps all day, while your buddies in M&A/Sponsors are actually building the models.
pretty much a /thread there haha.
Just wondering, is leveraged finance more of a cyclical industry? Like during good times it's on fire, but during a downturn, it's one of the first divisions to get cut?
pretty much a /thread there haha.
Just wondering, is leveraged finance more of a cyclical industry? Like during good times it's on fire, but during a downturn, it's one of the first divisions to get cut?
That was awesome.
@"Sav" That was truly AMAZING!
Well done..
Warren sometimes you just gotta know when to raise the white flag and throw in the towel.
Helpful!
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