Special Situations/Macro Investing ?

Still exists and still called the same thing. Special situations encompasses lots of different investment strategies like event driven, opportunistic, distressed, arbitrage, value, etc.

I'll take a crack at it and hopefully some practictioners come through or those with relevant experience can add lots more detail.

1. McGoldrick is not a "macro" investing guy (ie. speculating on sovereign credit, fx, commodities etc). That's much more a trading strategy. Much of what he and his team did often had macro elements, but these guys are pretty bottom-up investors (ie. looking deep into the financials of a company, its competitive landscape, figuring out cash flow and how it flows in the capital structure etc etc).

2. What he does is called Special Situations, so that's right. Some may lump it with distress since many distressed situations are not overly straight forward in how they work out. But he got his start at GS where he set up their Special Situations Group ("SSG") and this was in Goldman heyday of prop stuff. This meant that he had huge support from GS's balance sheet (ie. Goldman prop money) and built out a huge global team to scour the globe for such opportunities. These guys did everything. Debt, Equity, Loans, across sectors, you name it. (ie. they may have bought into some mid-ranking bond in an Italian company figuring that the yield was great, that it was a market dislocation (maybe the pensions that held that bond had to sell it due to some guideline), and that the company would pay back the bond and that if things went sour that it was high enough above the equity and other pieces of debt that they would be ok, or maybe some business needed a 3 month loan as a bridge in between financings or... or..

How to get in. Hm.. Well a lot of the SSG groups across banks are either closing or getting smaller (from my knowledge) due to global banking regulations (essentially stating that banks can't take as much risk with their own money). These groups will always probably be around in some form or nature and just morph in name though they may be much smaller (different discussion). You could try to join a distressed/restructuring group at a bank, you could do IBD (probably needs to be more model heavy), join a credit fund out of college if you know anyone, join a credit/distressed research desk at a bank, join a trading desk as a trader (on more illiquid products - where you have to model anyhow), maybe join a DCM team and work on the origination part (rather than syndicate or distribution). If its a bank you are joining, then you look to make the shift into a hedge or PE fund that does this stuff (McGoldrick's fund is called Mount Kellett - performance has not been too great).

These are just some ideas and hopefully have given you some sort of clarity. I will leave it to others here with experience in this field to opine and hopefully provide more guidance than I can. Good Luck.

Thanks a lot for the replies. Definitely helpful. So, from what I've gathered, both here and other places online and on the forum, it seems like there are a whole slew of options that could get me a position at one of these funds/groups in the coming years.

My followup questions are just whether this seems like its going to be a viable strategy in the future (short term, long term, future in general), which it seems like it will be from what I understand.

Other question is what is the best way to get myself to this position quickest. Will going straight to a distressed fund/SSG right after graduation be the quickest way to being in a decision making role at one of these funds, or would something like credit research, a distressed trading desk, or rx IB be best? And a little further than that, what role, in anyone's opinion, would prepare me the best for a successful career with this kind of strategy (not exactly easiest to get into the position but what kind of background would give me the most benefits for this)?

I can only imagine that there aren't any 'bests' but any comments on these questions would be awesome.

Thanks again.

There will always be "special situations" around. That's for sure. There may be lean years for distressed/stressed stuff (ie with low rates, ample liquidity and markets going crazy) - sounds kind of like now in the US, but lots of pockets of opportunity in smaller companies, Europe, Asia etc... Once again, I leave it to practitioners to comment.

I'm not sure about background, since people get in with all kinds of backgrounds. I think McGoldrick went to Bowdoin, so he was a liberal arts guy, as are many people. As for getting to the top.. welcome to the club. Easiest way is for you to start your own shop and do well. Joining big shops means you'll just be part of the machine and it will be a long slog to it. If you join a bank you can maybe follow that path and make the jump or join a new fund/spinout from day 1. Of course this comes with fundraising risks (ie. inability to raise funds which means inability to invest which means inability to make money) and a number of other things but that's probably the "easiest" or "shortest" way.

Otherwise join the queue. Good Luck

Joining a restructuring group is probably one of your best bets as it would put a clear 'distressed' stamp on your experience and is less of a crapshoot during recruiting than trying to get on a specific S&T or research desk.

If you can get a few years of experience in and jump to a fund like Oaktree or indeed Mt. Kellett you might avoid being stuck doing very basic grunt work like you would straight out of college. Of course that is very difficult but you would at the very least be in the field. The environment for raising funds may become easier again in a couple decades but hopping to a fund reasonably quickly would give you a chance to develop your chops as a principal.

Big restructuring banks are BX (debtor side), HLHZ (creditor side)...

OK, that's what I thought. I'm in the middle of an IBD internship right now, and it would have been nice to not have to do this for 3 more years. haha

As far as the restructuring Investment Banking goes, I've heard that the debtor side usually places well with PE firms, while the creditor side with HF. Not sure if this carries any truth, but as far as I'm concerned, does this really matter, or is 'special situations' special enough where its not exactly HF or PE?

I guess its not very urgent now though, I've got a long couple years ahead of me.

Thanks for all the responses.

RX will be same hours as M&A if you go to any of the reputable banks (HL, Laz, BX). then directly join a credit or distressed/special situations fund (can be Mount Kellet or any other special situations fund), take it from there. Thats pretty much the most straight forward you could do this.