Q&A: Non-target → Top Bucket SSG Private Credit/Direct Lending

Non-target hardo (mid-tier State University; e.g. U of KS/U of AZ/U of UT), non-traditional undergrad (older, dropped out of mid-tier Private, Liberal Arts College for family reasons and went back to school later), made it into top-bucket private credit/direct lending team with a broad investment mandate and which focuses on distressed/RX and/or generally "hairy" deals across all industries. The Cliff's Notes summary of how I got there is:

[1] worked my nuts off with tons of self-study to prepare for both interviews and the role (e.g. WSP modeling coursework-the "premium package" and RX modeling course, read anything I could get my hands on, researched previous deals in the space to understand the mechanics of how the process works and sat for the CFA level one exam before graduating)

[2] hit the bricks networking until I wore holes in my shoes (I landed the interview that got me my gig through a referral from a longtime contact who'd become a close friend)

That said, ask me anything and I'll do my best to field your questions. If I don't know the answer, I'll at least try to point you in the right direction.

Also, good luck to all the monkey's grinding out on-cycle recruiting rn; I know it's tough out there, but patience and persistence are imperative for success in this space, might as well start developing those skillsets now.

 

AndyLouis 

@WallStreetOasis.com

 

 

 

 

 

 

 

 

Attachment Size
2ucEDJ-Private-markets-come-of-age-McKinsey-Global-Private-Markets-Review-2019-vF.pdf 5 MB 5 MB
An overview of private debt | Reports-Guides | PRI.pdf 496.54 KB 496.54 KB
Credit Hedge Fund opportunities | Wall Street Oasis.pdf 47.84 KB 47.84 KB
IL_0719_OMary.pdf 492.29 KB 492.29 KB
Preqin-Glossary.pdf 245.81 KB 245.81 KB
is-private-debt-the-new-hedge-fund-paper.pdf 434.19 KB 434.19 KB
PennantPark-White-Paper-Dec-2018.pdf 643.76 KB 643.76 KB
Direct Lending WP.pdf 265.05 KB 265.05 KB
PrivateCredit_Draft_v2018-05-07.pdf 691.07 KB 691.07 KB
Ares_Alternative_Credit_White_Paper2019-1 copy.pdf 698.17 KB 698.17 KB
Direct Lending · The Hedge Fund Journal.pdf 102.88 KB 102.88 KB
Direct lending Q&A with Dylan Cox, Lead Private Equity Analyst | PitchBook.pdf 35.36 KB 35.36 KB
2018-Direct-Lending-White-Paper_vF-3-.pdf 916.66 KB 916.66 KB
deloitte-uk-aldt-autumn-18.pdf 3.85 MB 3.85 MB
126152955-Credit-Analyst.pdf 431.19 KB 431.19 KB
Private-Credit-Strategies-An-Introduction-6.pdf 170.11 KB 170.11 KB
Private Credit Demystified – The Absolute Return Letter.pdf 1.75 MB 1.75 MB
lcd-loan-primer.pdf 182.3 KB 182.3 KB
37032798-Overview-of-Distressed-Debt-Investing-8-31-10-Gramercy-1.pdf 366.7 KB 366.7 KB
127487254-A-Note-on-Distressed-Investing.pdf 1.02 MB 1.02 MB
126152955-Credit-Analyst_0.pdf 431.19 KB 431.19 KB
86650842-Acquisition-Leveraged-Finance-28한성원-29.pdf 271.18 KB 271.18 KB
265576251-LeveragedFinanceHandbook-PDF.pdf 357.76 KB 357.76 KB
Valuation of Fixed Income Securites.pdf 2.19 MB 2.19 MB
Fixed Income Securities & Markets.pdf 7.68 MB 7.68 MB

Comments (54)

 
  • Prospect in IB-M&A
Sep 18, 2020 - 10:29am

Thanks for doing this. can you tell us more about your technical prep? what specific resources/textbooks did you read and use, and how was the interview for you? what kind of questions did they ask?

 
Most Helpful
Sep 18, 2020 - 1:38pm

It's my pleasure; having experienced the reality of being the "non-target trying to break in," always glad to lend a hand where I can. Regarding technical prep, I predominantly used the following:

In terms of the types of questions, that's going to vary dramatically firm by firm, as the private credit/direct lending space has expanded dramatically w.r.t. the strategies employed (e.g. venture lending, syndicated, clubs, mezz, sr., jr., unitranche, SSG/RX, etc...) at the fund where you're interviewing. That said, generally speaking, for most of these strategies, the nature of interview questions you'll likely encounter will intersect significantly. Strong knowledge of accounting topics, especially anything/everything cash flow related will be foundational to success in any such interviews. For me, the interview process was great; that said, my group has a really exceptional culture - very flat, broadly defined roles (e.g. origination/portfolio management are not bifurcated) -  and, in hindsight, that there were clear ways in which that manifested itself in the interview process. I had three "standard" interviews (one-on-one with members of the investment team) followed by a case; the case resembled a paper LBO in terms of how it was presented, but rather than modeling the equity, the deliverable included:

  1. modeling the credit, incl. base-case and downside-case
  2. structure the credit
  3. price the credit
  4. ID key provisions you would need to see included in the credit docs

In the interviews leading up to the case, the questions very very overweight behavioral w.r.t. technical in two of the three. The most technical interview (notwithstanding the case) was comprised of briefly shooting the shit and then jumping right into three hypothetical investment scenarios where I was given the generalities of an opportunity and then asked to compile the questions I'd was answered, key risks/opportunities, propose a structure/pricing and provide a determination as to whether or not I'd invest then defend my conclusions. The other two included intermediate and a select few advanced accounting questions on the technical front.  

Generally speaking, I found that having an understanding of what the fund's objective is/how that manifests itself in their strategy, how the process works mechanically, all the way down to a really granular level. There are nuanced. differences to be factored in here from one sub-strat to another (e.g. there are material differences between that of single-digit billion $ fund that lends sr. secured w/ focus on writing paper for MM SSG/RX facilities and that of a shop with >$25bn AUM which focuses on syndicated facilities; lots of reasons for that dynamic, but most simply in that there are material differences in the risk profiles of these sub-strats). Understanding the way a group thinks about investing is also helpful (some will lend cover-lite, some won't touch that paper; some will compromise on economics to hold strong on docs, others would prefer to give on docs and take on the economics); this will allow you to craft open-ended, situational questions re: investment process/decision making/analysis to align with approach of the group you're interviewing with. 

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
Sep 18, 2020 - 2:05pm

Re: exit opps, that's a great question. I think that, generally speaking, the opps are going to depend a lot on the organizational structure of the fund (e.g. are origination and portfolio management responsibilities carried out separately, on distinct teams, or collectively with everyone making contributions to all the various aspects of the investment process). In funds that manage those two core competencies separately (e.g. Churchill) the opportunities may be more limited, within the parameters of the responsibilities you had previously held; whereas folks coming out of firms that do not bifurcate their investment process at all tend to have fewer constraints on their exit opps. 

Specifically re: SSG/RX private credit/direct lending, there are definitely prospects for spinning out to distressed PE (or PE generally), RX/LevFin IB and/or credit hedge funds. Generally speaking, I tend to fall among those who believe that the limits on exit opps (within reason) are derived more out of self-imposition than anything else. At the end of the day, the world of Wall St. still runs on relationships above all else (despite what your quant would have you believe); so long as you're working in a front-office IB/buy-side investments role, if you hit the bricks and network till you wear holes in your soles, there's no reason you can't land the roles you want, especially earlier on in your career.

Comp varies a ton. That being said, (est.) median entry-level range:

  • base - $85,000 to $130,000
  • *bonus: 25% of base and up

* as one might intuit, bonus structure is effectively entirely discretionary and, depending on the firm, you might have find that you're getting higher/lower base and that leads to greater/lesser upside opportunity to crush it on the bonus front. 

Progression outlook is going to vary shop to shop. Generally, VP is at least 4 years in, Director/Principal at least 6 to 7 years and MD usually 10+. The same is true for MBA/CFA/CAIA/any other alphabet soup designations. My group doesn't really give a shit if you go to grad school; if you want to, they'll support you, but it's in no way a prerequisite for advancement within the team; the same is true for any/all other designations/professional credentials from the perspective of sr. members of my team.

I have thought a lot about starting my own fund (somewhere way down the line); stay tuned, WSO will be the first to know, lol 

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
Sep 18, 2020 - 10:39am

Thanks for doing this - always been really fascinated by these kinds of firms.

Who would you consider to be the top private credit / direct lending firms? What kinds of educational and professional backgrounds do you typically see for these people in these roles?

Do you feel the RX modeling course was worthwhile? I've always assumed that the real world RX and special situations had so many scenarios and variables needing consideration that anything offered through a self-study course would be too "clean" to be that helpful once you're on the job (other than just getting a better understanding of the high level concepts).

How's comp? 

Listen, here's the thing. If you can't spot the sucker in the first half hour at the table, then you are the sucker.
 
Sep 18, 2020 - 2:44pm

Good questions.

1. There are really two or three main categories here:

  • pure-play private/alternative credit investors
    • HPS, Bain Capital Credit, Oaktree, Pennant Park, Owl Rock, Antares, GoldenTree, etc...
  • private/alternative creditors embedded in buy-side firms w/discrete non-credit strategies 
    • KKR (FSK), Blackstone (GSO), TCW (TCW DL - Formerly Regiment SSG), Sixth Street, Ares, Cerberus, BlackRock Capital Investment Corp (Tennenbaum/Kelso), Centerbridge, Apollo, Carlyle, Fortress, CVC, Kayne Anderson, Angelo Gordon, Avenue, Benefit Street, NB Private Credit, AB Private Credit, Summit, ABRY, KPS, etc...
  • private creditors embedded in sell-side firms
    • GS MDB/GS PC; MSIM PC; JPMAM PC; etc...

2. The backgrounds are pretty diverse. In my group, we have people who cut their teeth in HY/LevFin IB, discretionary Private Capital (think Kelso), ABS, Mezz, Project Finance, PE, HY Credit Investing, as well as some who went directly to Private/Alternative Credit and/or Direct Lending. MBA is about 50/50. Some have CFAs. I did find the RX course to be a solid value, in terms of what I gleaned from it. I would say it's less about the individual variables in particular and more about conditioning yourself to think about the process in a way that will consistently produce analyses which, themselves, effectively depict the situation at hand thoroughly, accurately and objectively. Remember, gotta interview well to get the job; and for roles like these, there's an expectation that folks come in with a general understanding of the process.

 

3. see above for more detail. Cliff's notes version, lots of variance. All-in for entry level roles will range from (roughly) $125,000 to $175,000. Lot of factors at play. Something I neglected to mention above that acts as a significant driver of comp (esp. bonus comp), is the fee structure of the fund; for instance:

  • what's the hurdle rate?
  • how many points do you collect on returns that exceed the hurdle?
  • management fee?
  • fee on dry powder? 

If returns blow the fund's hurdle rate out of the water, and your colleagues perceive that you're adding significant value, even as a jr. you can totally have blowout years; but a lot of things need to materialize in a synchronous manner for that to be the case.

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
Sep 18, 2020 - 6:00pm

Incredibly helpful and thanks for the detail. Do you have any thoughts or opinions on the BDCs? From the outside, it seems like the work would be similar to working at a fund with a credit mandate, but I didn't know if there were some nuanced differences in the general learning experience, work environment, comp, etc. Thanks again.

Listen, here's the thing. If you can't spot the sucker in the first half hour at the table, then you are the sucker.
 
Sep 18, 2020 - 8:48pm

Can you talk about why SSG private credit? Also would be interested in hearing you opinion on the space and what kind of deals you do. Quite uneducated tbh but I would guess the landscape has similarities to the very "inefficient market" moyer described. I have been hearing with so much money raised for public distressed and ssg strategies that these markets are very different from the ones moyer wrote about.

 
Sep 18, 2020 - 11:00pm

So a couple of broad stokes re: "why SSG/RX Private Credit/Direct Lending?":

  • Get to roll up the sleeves and get to know a company, intimately.
  • Very strong commitment to/emphasis on "value" - said differently, it's an "old school" and/or "purist" approach to investing.
  • Broad mandate; latitude to structure deals creatively/unconventionally in order to:
    • protect our capital
    • earn more attractive risk-adjusted returns
    • get the "ball over the goal line," so to speak, in closing non-sponsor deals (we are not a sponsor finance shop; consequently, we kill the overwhelming majority of incoming CIMs well before they see a single investment committee meeting; *read* deals are harder to close and we own 100% of the due diligence most of the time as we don't have the luxury of offloading that workflow onto sponsors)

In terms of the deals we do, we're:

  • industry agnostic
  • prefer to retain seniority in the capital stack (though will invest across structures as deemed appropriate)
  • strong preference against becoming a "sponsor finance" lender; tend to do non-sponsored, independent sponsored deals rather than lend to major PE sponsor-backed portcos,

The basis, broadly for the attractiveness of alternative credit investing, writ large, comes down to a few core tenets:

  • institutional investors reach for yield w/o overextending risk within their portfolios
    • there are three ways to increase returns in credit investing:
      1. go out the duration curve
      2. go up the risk curve
      3. go illiquid
    • as such, private credit can offer better returns with comparable risk profiles relative to liquid products
  • limited correlation to equities
  • lower portfolio vol (at least on a short-term, observable basis - due to illiquidity)

Similarly, dealing in "hairier" alternative credit strats is, in essence, allows investors to drive even more attractive returns and, as it pertains to private credit/direct lending, for those funds which have a bias toward lending into the senior secured slot within the broader capital stack (assuming there is sufficient operational competence across the funds investment professionals) the risk is much more muted than the yields would suggest as, when things go sideways, we just take the keys and send the equity to zero, fund a DIP and/or hold a 363 sale, we become the equity, then sell the fucker.

TL:DR, yes, some of the inefficiencies Moyer references exist in this space (or, at least, some close replicas do)

I hope this is somewhat helpful.

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
Sep 19, 2020 - 8:16pm

Thank you so much for this! Super helpful! How often do your "deals" go sideways and you have to take over? I imagine that can generate attractive returns however it is probably not the goal. Another follow up, do you ever buy secondary direct lending debt at a discount? (If for example another firm needs liquidity or is not capable of a turnaround)

 
  • Prospect in Other
Sep 19, 2020 - 7:21pm

Thanks so much for doing this, super helpful! Did you recruit for RX groups at boutiques ("independent advisory firms") or distressed funds at all? It would be great if you could provide some insight into whether the technical prep would be somewhat similar to what you did.

 
Sep 19, 2020 - 8:09pm

Hey man, glad to help where I can. I didn't recruit for RX/EB IB, but did at distressed funds. I would say that the prep will be very similar (see the above) with the exception being, hone in on whatever asset class/industry/various other specific niches that the firm falls into. Broadly, distressed/RX/SSG, etc... roles require similar foundational knowledge regardless of buy-side/sell-side./asset-class. For instance, understanding what a 363 sale is and why it exists is probably a good thing. Same with the J. Crew, PetSmart/Chewy loophole, why they're significant. Spend some time digging through the mechanics of well-publicized deals, both re: corporate and sovereign distress (I'd recommend Windstream for corp and Argentina for Sovs - the ones Elliott and Bracebridge bought in 1998). Understand how the docs were structured, what the fund managers thought would allow them to generate returns. how they turned their these into deployable investments (i.e. long/short - the underlying, related security(ies), derivatives on the underlying, a combination of the two) and how they intended to manage those holdings. I find that those who understand the how's and why's which form the foundation for the space *and* have the basic accounting/corporate finance/market literacy, are personable and can demonstrably speak to being "gritty," hard-working, and resilient, tend to do best, both in terms of interviews and surviving in the space longer-term. 

 

Hope this helps.

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
  • Prospect in Other
Sep 20, 2020 - 2:11am

You're the goat man, really appreciate the thoughtful response. I actually have an interview coming up for a credit investments intern position (they invest in non-investment grade e.g. financing for LBOs, distressed/rescue financings) at an asset manager, and I don't have much knowledge about credit tbh (have basic finance and accounting down from M&I and have only read the HL primer). I saw the resources that you listed near the top of the thread, but they seem to be more on the advanced side. Do you happen to know of any primers/guides/resources that give a rundown on the fundamentals of credit (e.g. how bonds are priced, capital structure stuff)?

 
Funniest
Sep 20, 2020 - 5:22pm

suffered a serious headache reading this -- seems like you prepped for a d day landing brother

What concert costs 45 cents? 50 Cent feat. Nickelback.

 
Sep 20, 2020 - 7:48pm

Jamie_Diamond lol, I just love what I do and know how hard it can be to break-in out of anywhere but a target school and from anything but a traditional background. Being single, and staying home 99% of the time due to the pandemic, leaves me plenty of time to be a resource to the kiddos.

 

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
Sep 21, 2020 - 10:53am

I think that nearly all firms that are doing non-sponsor lending will also have a portion of their business that is sponsor-backed lending as well. If you think about the scalability of both models, sponsor-backed lending is much much much more scalable as you will build out a "client" roster of PE firms that will be doing multiple transactions a year. That's obviously not the case in the non-sponsor world where each transaction is essentially a one-off deal. 

 
Sep 22, 2020 - 10:45am

@DumbDebtGuy is 110% right on that. While there are definitely shops that tend to emphasize non-sponsor/independent sponsor deals, they all have some exposure to credits of MF PE backed portfolio companies; those guys just do so many deals and such a significant chunk of the "quality" opportunities in the overall market, it would be nearly impossible to entirely avoid working with them. It would also just be pretty fucking dumb, given that these guys are often good "partners in the market" to their portfolio companies and will come in with liquidity/operational/etc.. support when it's justifiable to do so. To my understanding, Sixth Street Specialty Lending, Crystal Financial, and Comvest come to mind as others which do a preponderance of their deals in non-sponsor/independent sponsor space. 

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
Sep 22, 2020 - 8:31pm

Glad it's proven useful. Personally, I'm not an "equity guy;" that is to say, I tend not to (naturally/instinctively) look at investments through a rosy lens of optimism and see the crops that can be grown from a pile of shit, rather, I tend to be a bit more pessimistic and see all the ways that your perfectly fine (or partly broken) farming enterprise could go to shit and pull at the first thread of the ball of yarn (read -"risks") until it's fully unwound. Generally, I feel like I'm just more predisposed to bring my a-game as a credit investor than an equity guy.

That said, I feel like there are definitely instances where (depending on what segment of the alternative credit space you're in) opportunities to lateral into PE exist. I wouldn't say that's a overly common outcome, but I also wouldn't describe as all that illusion either. More than anything else, this is a business that runs in your performance and the relationships you build. If you're a top performer with a strong network, there are few things that are totally off the table. If you're a mediocre guy with a shrimpy network, good fucking luck, you'll need it.

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
Sep 23, 2020 - 8:51am

Hey man really appreciate the Q&A. I'm a recent grad (Liberal arts w/o much of a wall st presence) working as an analyst at a covenant focused credit research firm. We cover leveraged loans, high yield bonds and distressed/special situations. I've been exposed to a lot of interesting covenant issues i.e restriction on material IP transfer to an unrestricted sub (J Crew loophole),  European Intercreditor rights in a super senior/uni-tranche structure, and some cap structure modeling, but my fundamental credit experience/accounting almost is entirely self taught. I'm focused on leveraging this experience into a distressed investing role in the future. Through some luck and networking my ass off I got a lev fin interview but it didn't work out. I'm still grinding with the networking and and working on my technicals but feeling a bit stuck here, I don't want to be the covenant guy forever.

- Should I look to the ratings agencies or sell side distressed research desks (to the extent they still exist?) to get this experience?

- Down the line after I've gotten some more credit research experience do most distressed funds even care about someone who knows the docs really well or is it limited to funds that are doing cap structure arbitrage and need to know everything about the rights/limitations of each class of debt? Do they just hire attorneys to handle that for them anyways?

Any thoughts on a course of action would be appreciated. Thanks in advance.

 
Sep 26, 2020 - 10:49pm

Always glad to be a resource where I'm able. First off, congrats on weaseling your way into a credit research role (even if it's covenant focused) outta UG, that's impressive no matter how you slice it. Beyond that, there's a couple of things that jump out at me in your post...

  1. I think change for the sake of change, in general, is not a productive endeavor. Do you like the firm you're currently with? How about the people you work with there? Are you still learning and further developing your industry knowledge/expertise and professional skills? Those are the things that, if I were you, I would be focused on. The other shit is much harder to control. Plus, if you're not crushing it where you are now, it will be much, MUCH, harder to spin out to any other front office/substantive roles in the industry by virtue of that fact alone. 
  2. As is true of everything, esp. in the more niché segments of the market (such as these), the extent to which a given firm is going to ascribe value to a specific skill/skillset, prior experience(s) or other characteristics is going to be vary, at least a little, from one firm to the next; that is to say, for all intents and purposes, no two funds are exactly alike on this. Now, there are certainly common threads (comprehensive understanding of fundamental research, knowledge of accounting, competency in financial modeling/utilizing excel, knowledge of the structural nature of a typical investment at the fund and the mechanics of how these structures work, etc...). Accruing a foundation of demonstrable experience doing work that has at least some degree of transferrable skills/knowledge/expertise/etc... is paramount (obviously); that said, I wouldn't necessarily consider the work that gets done at a rating agency to be all that much different (insofar as how people at the types of shops you're gunning for perceive it) from that which your doing now. Additionally, people in this space definitely value loyalty and "sticktoitiveness," so showing that you can commit to taking on a set of responsibilities and perform them well over a period of time is definitely a plus, and jumping from one firm to another in very similar roles/segments of the industry could be something you'd get dinged on. By and large, buyside shops only hire when there's a business need driving that hiring decision; similarly, buyside firms in very niché segments of the market (Alts generally, incl. HFs, PE, PC/DL, etc...)  don't really do "layoffs" in the way that BB IB or multi-hundred billion dollar mutual fund shops do, so they tend to want to be confident that when they hire someone, that's going to be a longer-term type situation. 
  3. Fluency in Accounting concepts is to working in Finance/Investing as is that of Greek or Latin to studying the Classics; it is, so to speak, the language of practitioners of these crafts. Could one outsource that piece, sure...but, it'd be clunky, inefficient and there would be no means to reasonably audit/interpret the facets of a given investment/deal/investment thesis which find their basis in/are supported by accounting principles (for those without some degree of fluency). Are there firms/strategies which rely on it more than others, of course, but, as a rule of thumb, it is always better to possess a higher-level of accounting literacy, than a lower one. As an Economics major who minored in Philosophy and Classics, all of my accounting is self-taught as well; the beauty of accounting is, it's really nothing more than basic arithmetic (maybe some algebra if you're going crazy over there) and a systematic framework of rules/standardized processes of recording transactions - e.g. it's literally the ideal discipline in which to carry out self-directed learning as there are no complex, esoteric thought experiments to be conducted, no debates to be had, nor any high-level quantitative/scientific methodologies for which one might often require hands-on guidance to folly grasp the concept; it literally comes down to possessing the desire to learn, the initiative to jump in/get started and the discipline to see the process through to completion.
  4. Everything I just said about accounting, so too for docs except, in that, with docs, it's gonna fall somewhere between the accounting and credit research in terms of the extent to which collaboration and/or hands-on experience on-the-job is invaluable to the learning process. As I'm sure you're aware, it's really a "reps" thing; you have to read "x" number of docs before you really start to grasp how they work on a mechanical level. One of the seniors on my team is known for being a credit doc wizard (not a lawyer and never went to law school) and is both highly respected and considered to be invaluable to the team by virtue of that skill set. 
  5. Insofar as credit research, that can, to some extent be self-taught, but it's definitely a case where some collaborative work is extremely helpful to accelerating that learning curve. To that end, you're doing all the right things and that experience will come when you are able to execute your "pivot" into a role where that's part and parcel in the day-to-day responsibilities of the position.  

You're in better shape than you realize; it is, as is true of much of the Wall St. complex, just a royal pain in the dick to weasel your way onto a legit/well-respected buyside platform (in any asset class/strategy, but esp. in alts); keep grinding/pounding the pavement and you'll get there, just might not be on your preferred timeline (a lesson I learned the hard way and, in the process of learning it, made my life much, much more difficult than it needed to be). 

Also, seriously consider starting the CFA process; you'll learn a ton and it's a highly prestigious designation (everyone I know and respect in this space - aka who isn't a clout chasing hoebag - perceives more tangible value* in someone who's a CFA Charterholder than an MBA**). 

*Actual, discernible, verifiable skill/knowledge/expertise that is relevant/applicable/useful to the work they will be completing and designates them as "well prepared" to successfully complete the tasks they'll be assigned.

**That is not to say that top-bucket MBA programs do not add value, they do; rather, it is to say that there's a limited extent to which those degree programs can implement meaningful "quality control" measures which provide a similarly effective means of screening/filtering relative to those inherent to the exams in the CFA program. Moreover, there is certainly something to be said for the distinction between MBA programs which have come to be known as more academically rigorous than others (e.g. Sloan, Booth, Columbia, Darden, Tuck, Simon, etc...). 

 

Cue the monkey shits from legions of hardos flying in all triggered that I didn't include HBS or Wharton above; since I'm gonna get 'em, I might as well earn 'em: neither HBS nor Wharton considered to place the same degree of emphasis on academic in their MBA programs as do Sloan, Booth, Columbia, Tuck or Darden. That. Is. A. Fact. 

Bring it on kids 😂

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
Sep 24, 2020 - 10:13pm

I have to say, this thread is sincerely incredible and a tremendous resource. I admire your tenacity and work ethic, from one non-target to another. I'm doing my SA next summer and I want to move into private credit or distressed debt, but feel lost as to where to start. Any advice you could give me or any suggestions you could give me (I'm a junior) would be greatly appreciated, whether that be books or white papers or anything like that (besides the ones you posted above, of which I've printed out a few and have started reading them). Also, how important is having an understanding of taxes in your field? And if it is very important, where and how did you learn the most important aspects? Thank you for this :)

Array

 
Sep 26, 2020 - 11:51pm

 

Insofar as white papers, I posted the pretty much all of the stuff I've got saved on my desktop (*read* that I could find on the literal clusterfuck that is my harddrive/cloud drives). Re: books, I'd say, Dalio's Big Debt Crises is a solid read (he's lost his marbles now insofar as BW/how he interacts with the world, but he does know his shit when it comes the nature of credit over the course of the entirety of recorded history. Beyond that, I think it would be a worthwhile endeavor to read things that'd help develop a strong foundational working knowledge of capital markets/the Wall Street complex (esp. IB/AM industries) on the whole and anything re: Economics (esp. behavioral economics) or quantitative/scientific topics. To that end, I'd recommend the following:

Markets, Finance, Economics, History of Finance/Markets/Economics, Investing

 

  • Anything by Mike Lewis
  • Anything by Taleb
  • Anything by Shiller/Akerlof
  • Anything by Stiglitz
  • Anything By Schweger
  • Anything by Peter Bernstein
    • esp. Against the Gods
  • Lawrence Ball
    • The Fed and Lehman Brothers
  • Bryan Burrough & John Helyar
    • Barbarians at the Gate

    Jordi Gali

    • Monetary Policy, Inflation and the Business Cycle
  • Aswath Damodaran
    • Narrative and Numbers
  • Mihir Desai
    • The Wisdom of Finance
  • Steven Drobny
    • Inside the House of Money
  • Mohamed el-Erian
    • The Only Game in Town
  • Tobias Carlisle
    • The Acquirer's Multiple
    • Deep Value
  • Tim Lee
    • The Rise of Carry
  • Danny Kahneman
    • Thinking Fast and Slow
  • Richard Bookstaber
    • The End of Theory
  • William Cohan
    • House of Cards
    • The Last Tycoons
  • Niall Ferguson
    • The Ascent of Money
    • The Square and the Tower
  • Greenspan
    • Capitalism in America
    • The Age of Turbulence
  • Alan Blinder
    • Advice and Dissent
    • When the Music Stopped
  • Andrew Ross Sorkin
    • Too Big to Fail
  • Sebastian Mallaby
    • More Money Than God
  • Hank Paulson
    • On the Brink
  • Seth Klarman
    • Margin of Safety
  • Adam Tooze
    • Crashed
  • Ira Millstein
    • The Activist Director
  • Eichengreen, Mehl, Chitu
    • How Global Currencies Work
  • Soros
    • The Alchemy of Finance
  • Acemoglu
    • Why Nation's Fail
  • Howard Marks
    • Mastering the Market Cycle
    • The Most Important Thing
  • George Anders
    • Merchants of Debt
  • Bill Keenan
    • Discussion Materials
  • Turney Duff
    • The Buy Side
  • Carmen Reinhart
    • This Time is Different 
  • Roger Lowenstein
    • America's Bank
    • When Genius Failed
  • Ed Thorp
    • A Man for All Markets
  • Howard Schmitt
    • Financial Shenanigans
  • Henry Kaufman
    • Tectonic Shifts in Financial Markets
  • Jonathan Haskel
    • Capitalism without Capital
  • Christine Richard
    • Confidence Game
  • Laurent Jacque
    • Global Derivative Debacles
  • Ron Chernow
    • The House of Morgan
  • Edward Renehan
    • Dark Genius of Wall Street
  • James Stewart
    • Den of Thieves
  • Einhorn
    • Fooling Some of the People All of the Time
  • Michael Pettis
    • The Great Rebalancing
  • Matthew Josephson
    • Robber Barons
  • James Rickards
    • Currency Wars
  • Daniel Yergin
    • The Commanding Heights
  • Robert Finkel
    • The Masters of Private Equity
  • Jason Kelly
    • The New Tycoons
  • Mark Spitznagel
    • The Dao of Capital
  • Atif Mian
    • House of Debt
  • Scott Fearon
    • Dead Companies Walking
  • Raghuram Rajan
    • Fault Lines
  • Timothy Geithner
    • Stress Test
  • David Carey
    • King of Capital
  • Andrew Lo
    • Adaptive Markets
  • Liaquat Ahamed
    • Lords of Finance
  • Scott Patterson
    • The Quants
    • Dark Pools
  • Rishi Narang
    • Inside the Black Box
  • David Enrich
    • The Spider Network
  • Mark Williams
    • Uncontrolled Risk

History, Politics, Society:

  • Harari
    • Sapiens
    • Homo Deus
    • 21 Lessons for the 21st Century
  • Jared Diamond
    • Collapse
    • Guns, Germs and Steel
  • Kurt Andersen
    • Fantasyland
  • Matt Taibbi
    • Griftopia​​​​​​​
  • Dacher Keltner
    • The Power Paradox

Science, Math, Statistics, Game Theory:

  • Rolf Dobelli
    • The Art of Thinking Clearly
  • Nate Silver
    • The Signal and the Noise
  • Annie Duke
    • Thinking In Bets
  • Gabriel Weinberg
    • Super Thinking
  • Dan Gardner
    • Superforecasting
  • Judea Pearl
    • Causality
    • The Book of Why
  • ​​​​​​​Bria​n Hayes
    • Foolproof
  • ​​​​​​​Ian Stewart
    • In Pursuit of the Unknown
  • Carlo Rovelli
    • The Order of Time

If you have specific areas of interest, feel free to reach out; I've built a small "personal library" of over 300 titles and would be happy to take a look for further recommendations on a specific topic. 

In my experience, a broad knowledge base is, albeit not imperative, among the "assets" which proves most valuable in minting great investors. I can't tell you how many times one of my colleagues has alluded to a literary reference or something they read/learned previously which, in and of itself, is entirely "ad acta" w.r.t investing, but that were incredibly useful in providing a framework/lens/perspective/etc... for thinking about a specific deal we were screening or existing credit we were doing damage control on. Being well-read, well-informed, "learned," if you will, is literally never a bad thing and will in no way, shape or form be harmful to your success in this industry or elsewhere. That being said, starting by developing a strong understanding of the mechanisms which drive markets is more urgent than reading on other matters. Hopefully this provides some ideas and/or a good starting point for you all.

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
Sep 24, 2020 - 11:04pm

Did you join straight from school or did you do a stint at say an Antares / Pricoa or something along those lines and then hop over?

Feel like private lending is one of those places, where there isn't a huge prestige barriers, if you are good you can make moves to almost the top firms in the market even if you started at a small shop. 

 
Sep 26, 2020 - 8:27pm

Hey man, good questions. Personally, I didn't take the banking or more vanilla credit/fixed income asset management paths after graduating/before coming on-board at my current fund.

Generally speaking, I would encourage you (and anyone else) to be mindful of the sheer enormity of the statistical challenge you're facing off against in trying to go straight from undergrad to a front-office role on the buyside; those odds become even more brutal re: any of the (notoriously) lean Alts funds on the street. That is in no way to say I would discourage you from trying; as a matter of fact, I'd encourage the opposite, the caveat being that I'd recommend carrying out that endeavor with a full appreciation for/in a manner which accounts for just how much of an outlier one must be to accomplish that objective. One that entails a diversification of the opportunity set targeted to include positions within the industry at firms/in roles that have more "traditionally" hired undergraduates right out of school.

Insofar as how to attack recruiting for buyside oops, regardless of the firm, I'll start with a DD analogy: the "fulcrum security" in this process for you (and anyone else) is going to be personal relationships. It'll be all but impossible to get meaningful traction interviewing at any alternative credit funds without having meaningful relationships within the firm; more broadly, it is not all that much less difficult to do so across the gamut of potential buyside opportunities you might encounter.

I want to be really clear here, some of the folks I admire/trust the most in this world who have made unbelievable careers in this space, told me flat out:

• "You're wasting your time. The vast majority of these teams don't have UG internships/recruiting efforts, those that do, are not wasting a single fucking second on you. If you're serious about this career path, you'll pivot your recruiting efforts, now, better, yesterday and focus on roles in banking, that's your best shot at making this happen." - advice from co-founder of a top event-driven HF*; founder his own single-digit billion dollar fund; currently runs a SFO for a, now retired, top-20 all-time HF manager.

• "The probability of you landing one of these roles is so infinitesimally small, like 0. ...so many zeroes...1%, that "1" is miles from constituting a significant digit. I recruited for these roles out of (top 7 MBA) and I still had a hard time; why in the actual fuck would any of these guys even entertain hiring you?" - advice from the former CIO of a double-digit billion-dollar endowment, currently CIO of his own single-digit billion-dollar HF.

These were both painful comments to hear, especially the first, as it came from someone who (both then and now) represented, quite possibly, the single person I most admired (of those I'd come to know). I share these remarks because, while I did heed their advice, I did so by dialing up my efforts so that I could run both races concurrently; I hit the bricks till I wore holes in my soles. That is what's required if you wish to thread the needle and land one of these seats. They DO exist. It CAN be done. But it is an absolute grind and you will be required to make very real sacrifices in your personal life, your social life, your academic life, literally everything else you do. These are all temporary sacrifices; these are all demanding jobs, e.g. not a 40-hour work week, but usually better work:life balance than banking, but the process of landing right one out of UG is in all likelihood far more challenging than the job itself will be. Perhaps that's why, for some, they're able to make it happen; these legendary operators see a kid out there grinding his (her) absolute dick (tits) off, they admire the hustle and see potential so decide to give them a shot.

*[think: Farallon, Canyon, Silver Point, Cerberus, Marathon, King Street, etc...]

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
  • Analyst 3+ in HF - Event
Sep 28, 2020 - 10:04am

Hey man, many thanks for putting together this thread and giving very detailed, personal answers. I know everyone here is getting a lot of value out of it. 

Chiming in on this post of yours. As someone else who broke in to distressed from undergrad, and a non-target with a very, very bad GPA, this post echoes very much with me. I can't count the number of times I have heard some variation of the same thing you had heard. And the thing is, they are correct. The single, best way to get your foot into the door on the Street and open as many possible future opportunities in the future is generally going through a banking program. Full stop. When I was in college I didn't appreciate this because, given my background, I couldn't even make it past a banking screen. Further, I didn't appreciate the training / soft skills that a banking program provides you with. My attitude was that I wanted to be an investor and the best way to do that was to go straight to an investing seat. This has pros and cons, and isn't necessarily incorrect, but in the fullness of ones career, spending 2 years in banking is not the worst thing in the world and most likely worth it.  

But like you said, great investing seats out of undergrad DO exist and, similar to you, I was extremely fortunate to catch the ear of someone respected in the industry who gave me a shot. That said, anyone else reading this shouldn't discount what DistressedDebtDavey said about the sort of grind it takes to get this done. Say goodbye to your weekends and most of your other free time while in school. You'll be too busy practicing investing via writing up real, actionable pitches that you can spam to the inbox of any buyside professional you can find. On the off chance that someone does read it and get back to you, be prepared to have the rug pulled out from under you with errors pointed out, logic questioned, and left with a feeling of "I can't believe how fucking stupid I was to think this". But, you pick yourself up and learn from that for the next time. If you want to get into credit, take the above and make it more difficult than it already is. Forget just needing to worry about the business and valuation, but how do you look at this thing through a credit investing lens and put together details on covenants, credit ratios and compliance, corporate structure and other credit nuances? In the end, people taking this approach are still students at the end of the day, and you will gain the respect of the investing professionals you speak with by being able to take the hits on the chin, understand their feedback, and get back to them with an updated / new pitch. That is how you get someone to create a seat for you out of school. 

I don't mean this at all to take away from the OP's experience or story, but I'm merely trying to emphasize the "grind" he is explaining people have to do because it truly is what it is, and people should know what they're getting themselves into if they decide to go down that route. For the majority of students, it just makes more sense to go through a traditional banking program and worry about this stuff down the line. 

 
Sep 25, 2020 - 1:02pm

It's funny you ask that question; I actually had a conversation about those firms with a guy I know who's currently Head of Private Credit/Direct Lending/Illiquid Credit at a BB IC firm (e.g. Mercer, Aon, WTW, Callan, Cambridge, NEPC, etc…). He is a fan of RX consulting shops (and, in particular, the two that you named). I, personally, am not an expert on any of these firms but, insofar as it relates to career opportunities, would be willing to go out on a limb and posit that you could certainly leverage that experience into RX/SSG IB, as well as RX/SSG/Distressed AM (incl. PE, PC/DL, HF, etc…).

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
  • Incoming Analyst in IB-M&A
Sep 25, 2020 - 1:34pm

Thanks for doing this. I'll be joining an IB LevFin group come the summer but I graduate in December and am looking for a 6-month buyside credit/DL role immediately after I graduate but before starting at aforementioned IB. I've gotten great feedback from funds to stay in contact for future opportunities post IB stint but have had a hard time finding someone who will hire me for just 6 months. I'm strongly considering IB as a long term career and with COVID my travel/fun options are extremely limited for the semester off, so I think it would be a good idea to get some exposure to the other side of the table before my analyst program starts.

Do you have any recommendations on the type of fund that would hire an analyst like that for 6 months? Would love to PM you if you think there is a possibility there, regardless really appreciate your insights. 

 
Sep 26, 2020 - 7:10pm

First off, congrats on landing one of those coveted LevFin IB analyst gigs; well done bud! Now, re: funds that would hire someone for a six-month stint from January ⇢ June, candidly, I think there's a slim:none chance of that materializing, it's really not a common practice anywhere, not to mention during COVID. That said, I empathize with your anticipated stir-craziness with so few options as to how to spend your time in the spring. If you're open to an alternative suggestion, I'd highly recommend starting to prep for the CFA; no matter what you end doing in the long run (IB, AM, HF, PE, etc...) it will looked kindly on by firms/hiring managers alike. I wish I had more optimistic commentary re: working somewhere in the spring, but I hope this helps a little.

P.S. if you're in Europe, that becomes a different question altogether in that, on the other side of the pond, there is a much more robust scaffold of "off-cycle" internships (probably the best-case option you'd have to look for). Unfortunately, I'm not super dialed-in to the Euro buy-side scene; fortunately, there is a robust Eurozone asset management scene, so if you're over there, you might be able to make some magic happen.

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
  • Prospect in CorpDev
Oct 2, 2020 - 1:47pm

Hey man, thanks so much for sharing. I'm in a target school and have been doing off-cycle intern at the credit branch of one of the buy-side firms (KKR, Blackstone, TCW , Sixth Street, Ares) but didn't got return offer due to the pandemic.
I'm about to graduate in Dec and the only offer I have now is a Corporate Development role in a F30 company. Just wondering 1) what kinds of background do they look for as junior analyst? If I work at the current Corp Dev position for a year is there any chance to get a credit analyst role? 2) Are there any opportunities I can consider before graduation that give me a better chance of breaking into buy-side credit firms later? Thanks!

 
Oct 2, 2020 - 5:13pm

Hiring is tough rn, no doubt. That said, I think, candidly, you're in a decent spot. Re: pivoting from corp. dev; I'd really just refer you to the above emphasis on networking and doing so with the intent of building authentic relationships (people can always tell if you just want something they have). Between now and graduation, I think you network your dick off and hope that you find yourself at the nexus of sweat equity, timing, and luck. If you want some further specifics, drop me a PM and we can chat.

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
Oct 2, 2020 - 2:08pm

Not to be a dick, but maybe add another view here, can you dive into your "distressed" experience? I work at a large distressed HF and often find that direct lending "SSG / RX" teams don't do much in the actually distressed space

 
Oct 2, 2020 - 5:10pm

For sure. The "lineage," so to speak, of my team tracks back to their inception as a Special Sits Credit arm of a fund with multiple mandates. While I don't want to get too specific (because there are, as you correctly pointed out) so few players in the space who actually do that work. To your point, a lot of funds do brand themselves as "non-sponsor special sits, private credit/direct lending," despite being the literal opposite, doing tons of sponsor deals and having WA coupons ~L+650 and where anything above L+800 is pretty relative to what they typically do. While we're definitely not a "loan to own shop," we do one a fairly regular basis end up taking the keys, getting a board seat (or additional board seats if we already have some), and rightsizing the enterprise to perform. The senior guys are all seasoned operators from shops across the street (Sellside: Jefferies-RX, HL-RX; Buyside: Tennenbaum-Special Sits Credit, Bear Stearns-Merchant Banking, Monroe Credit, Crystal). Generalities on specific transactions we've done recently:

  • sr secured 1L rescue loan @ L+1475
  • 2 DIP loans (1 existing credit, 1 where we're stepping in)
    • L+1050 (food products)
    • L+1225 (hospitality)
  • sr secured 1L; originally written at L+1050; amended after covenant violation to L+1350 (w/500ps PIK)

YTD we've taken the keys from four of the underlying credits in our current portfolio. Also, for context, our WA coupon for all of the funds dating to inception (>20 years) is L+1029. 

I think you're right to ask, there are a lot of Fugazi special sits people in alt credit/direct lending/private credit. That said, I hope you understand why I want to be at least a little vague. If you wanna chat in more detail, feel free to PM me; also, generally, always down to talk shop.

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

 
Oct 7, 2020 - 10:00am

Davey I would remove some of these deals (unless they are made up) because based on the deals you listed, the fact you work at a BDC (all publicly filed), and the salary range you provided (extremely LMM), it wouldn't be that hard to find where you work. 

Separately I think you are both right in terms of public distressed are looking at complex / screwed up situations vs. your private special sits looking at hairy / small situations that many bigger guys just don't have the capacity to (I could be wrong since I don't know your firm but you cannot name another firm that has an average yield of L+1029 that's not looking at tiny credits all day). 

 
  • Analyst 2 in IB - Gen
Oct 2, 2020 - 3:57pm

What's your thoughts on profiles from IB Credit Risk? Have decent exposure to DD and model review but most of the memo-writing and modelling is run by Lev Fin / FSG - we simply view the memo from an underwriting perspective. Good exposure across sub-IG credits as well

 
Oct 2, 2020 - 5:17pm

"In order to be a really good investor, you need to be a little bit of a philosopher as well." -Dan Loeb

 

Start Discussion

Popular Content See all

The lighter side of IB! (Hopefully)
+55IBby 1st Year Analyst in Investment Banking - Mergers and Acquisitions">Analyst 1 in IB-M&A
Why aren't Asians/Indians/Middle Eastern considered diversity
+31IBby Intern in Investment Banking - Industry/Coverage">Intern in IB - Ind
The "right" blue in excel
+18REby Portfolio Manager in Real Estate - Commercial">PM in RE - Comm
Leaving New York
+14IBby Intern in Investment Banking - Industry/Coverage">Intern in IB - Ind
Is Finance the back office of society?
+14OFFby 1st Year Analyst in Investment Banking - Industry/Coverage">Analyst 1 in IB - Ind
Do I Count as Diversity?
+12IBby Prospective Monkey in Investment Banking - Mergers and Acquisitions">Prospect in IB-M&A

Total Avg Compensation

October 2020 Private Equity

  • Principal (6) $693
  • Director/MD (14) $640
  • Vice President (54) $362
  • 3rd+ Year Associate (60) $272
  • 2nd Year Associate (112) $246
  • 1st Year Associate (242) $222
  • 3rd+ Year Analyst (23) $162
  • 2nd Year Analyst (52) $141
  • 1st Year Analyst (152) $118
  • Intern/Summer Associate (17) $66
  • Intern/Summer Analyst (168) $60

Leaderboard See all

1
LonLonMilk's picture
LonLonMilk
98.4
2
Jamoldo's picture
Jamoldo
98.3
3
Secyh62's picture
Secyh62
98.2
4
CompBanker's picture
CompBanker
97.9
5
redever's picture
redever
97.8
6
Addinator's picture
Addinator
97.6
7
bolo up's picture
bolo up
97.5
8
NuckFuts's picture
NuckFuts
97.5
9
frgna's picture
frgna
97.5
10
Edifice's picture
Edifice
97.3