Private Credit -->> ???
Hi everyone -- I have been in private credit for the past 5 years. Started at my first fund out of undergrad and focused on special sits (bridge loans, asset based distressed loans, etc.). Started at a new fund about a year ago doing more of the same. Comp has been fine (comparable to IB), hours have been fine (50-60 hours a week average, more during live deal), but I am very bored. Usually the deals have been blessed from the top by MDs, so diligence for us is more like pushing out memos and running a process with lots of structuring -- both funds are respected and multi billion $ AUM.
Anyone else in a similar boat? I am fascinated by high yield / distressed, more of a trading environment but I had no luck getting interviews at those roles. Whereas I had dozens of private credit interviews at the usual suspects. Anyone make the the move from private credit to public?
follow -- PC
Similar background, would also love to hear from somebody who has made the switch
I work at a firm that touches both sides but personally focus more on public side. The grass is always greener and I know many peers in the public biz that is really trying to move over to the private side given the perception of better career stability and well-rounded skill development - which I think is true for the most part. Credit is going to grow across the board in my view in the coming decade given the yield environment in conventional assets, but private credit is relatively less mature and has a steeper curve in the near term (thus creating more jobs and comp). The right reason why you’d give that up to move to public side is really quite singular - you just love the markets and being proven right (hence lots of egos in our business).
In my view, the key question mark on someone with your background going to the public side is focus on the idea vs. process. Since you have experience in private investing at legit shops, most people will give benefit of doubt that you can mechanically do the job (i.e. push out models and analysis). But as you point out, private investing tends to be much more sourcing/relationship driven vs. critical evaluation of the investment thesis/risks. Some people prefer one side while others vice versa. What the public investor will want to see is if you can think about an investment through an independent and contrarian lens vs. the deal guy whose focus is on “moving the ball forward/getting it across the finish line”. Public side investors are not showing up to become buddies with management/sponsor and hope to get the first call. Sometimes you might sink a ton of time/energy into doing work on a name and conclude that doing nothing is the right call (depends on PM style tho, some like to spread out small bets and trade frequently). Also there are market technicals that need to be appreciated to time the trade and anticipate outcomes.
Best way to show that you’re interested in and capable of succeeding on the public side is to pitch an idea. This shows that you can generate investments without having to get “staffed” on some inbound from a partner. Even better if you can demonstrate how your private side perspective can be valuable to the PM by thinking about an investment in terms of public secondary accumulation leading to an original new money opportunity (rescue, refi, DIP, etc) by taking a creative angle.
Could you please explain what this means? Thank you in advance.
Gov't rates so low, people will be chasing yield and will need to deploy in higher yield assets such as private credit, LL and HY. Its also, in part, why the stock mkt is ripping.
This was very helpful, I really appreciate it. Do you have any resources you could point me to (memo templates or books) regarding high yield pitches? I am not familiar with the trading aspects, so I worry my pitch will fall apart if I don't account for liquidity, trading dynamics, universe of buyers etc.
In a case study interview for a credit analyst this isn't important and likely doesn't even come up. Its almost entirely fundamental credit driven thought process. And if you think a name is too rich to buy...what level would you buy it at...ie what level of compensation do you need for the risk.
Case by case but would disagree for experienced hire coming from buyside with 5yrs of exp. This approach is fine if you’re coming out of banking - i.e show that you are a solid financial analyst and can communicate a point of view.
But if you’re looking at coming in at solid mid level, PM needs you to hit the ground running with no handholding. It definitely helps to stand out by demonstrating that you are focused on making money (some use vague jargons like “being commercial”) and not ivory tower analysis. Who are the stakeholders and what are they motivated to do? Who is trading the paper and why? How do you think security reacts to your buying/shorting? Is this a transactable idea or are you talking in a bunch of hypotheticals? For example, if you have an analytically strong short thesis but pitching it on a name that has extremely illiquid bonds where there would be zero borrow - then the PM will view you as someone that feels a bit too green and offer a more junior role accordingly.
The people that get the seat in a competitive process will demonstrate a certain level of savvy in how they think through all these practical issues. But if you are switching fields (from private), some may be willing to give you a pass on not being as versed in these issues if you can compensate for it by bringing something else to the table.
You should look to join a publishing sell-side credit team at a bank where you can get some "market" experience. My guess is you will struggle to get a buy-side job directly against candidates that have 3-5 years of public market credit experience. You need to move away from having a transactional mindset and develop a markets mindset, as Lead Left has pointed out above, and a bank might be a nice place to do that. As others have pointed out, the grass always looks greener but in some cases it isn't. Public market credit can be a drag when dealer inventories are low, FED/ECB buying leads to spread compression and everything trades tight, and companies just don't go bust anymore. The number of times I've heard "yeah the fundamentals are crap but money is flowing into credit and we need to own the higher-beta names so we don't underperform and lose AUM" will grate on you after a while.
Would love to hear on how you made your move
bump, would be curious to hear perspectives of people who made the move from private credit to special sits/distressed/opportunistic type roles. I've had some interviews but not too much success, probably because they view my background as too performing, not liquid. Other than highlighting hairier deals/workout situations, would it be helpful to prepare some pitches/try to cold email rather than just through HH's?
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