Structured Finance outlook and exit opportunities
I have a great opportunity to join a ABS or CLO origination/structuring team at a BB, and it seems like a very interesting role. Seems like hours are less than traditional IB, and pay is similar at the analyst level.
However, I am wondering about exit opps for a role like this, as well as the industry outlook. I would really appreciate any insight from anyone who has works or has worked in structured finance before.
Thanks!
Not true about the hours. Hours are just like normal IB. Just my comment history, I've answered this question many times! In short, exit opportunities are more niche and limited compared to Corporate IB.
On the investment side, you're limited to working at pension funds/insurance companies on the investment side (there are far fewer roles in abs/clos available compared to cfg). I don't know of any private equity companies in structured products, and there aren't that many hedge funds.
Most of the other opportunities include working at the treasury department of companies that have abs/clos, or within the industry of the asset class you're focused on. (example: autos abs would make you eligible for working in auto firms, rmbs experience would make you a prime candidate for working in companies specializing in mortgages)
I personally enjoy structured finance a lot, but highly recommend that after two years you transition into a CFG group to increase your skillset and make you more marketable.
Thank you for this. If I were to lateral to a traditional IB group after 2 years, would I have to start from scratch? Or would I be like a 3rd year analyst with an opportunity to get promoted to associate after 1 year?
Complicated question and don't think I have the answer. It depends on the bank/group culture. It's something you'll have to play be ear and ask about once you start working there. I think some banks let you switch groups once you hit associate, but I'm not 100% sure. But i've also heard some groups will let you switch in your 2nd or 3rd year, but it'll delay your progress to associate by 1-2 years.
In my opinion, the 1-2 year delay is worth it as
1) you're already making bank
2) it's a small sacrifice to develop a broad skillset and open up opportunities down the road without being in your 30's and being forced to do an MBA to switch specialties, which might not be financially feasible due to familial obligations.
What are your thoughts on Goldman's SFIL group?
I've read elsewhere that the group is comparable to PE/IBD work and you come in as an investment analyst. You'd think the due diligence and processes you learn in that position would transfer into an investing role at a HF/PE, no? Especially if your group generates significant profit and you contribute.
Sure, other structured finance groups would be more pigeonholed and in many you wouldn't actually be investing, but any group where you're investing your own company's balance sheet, that's pretty much a buyside role, no?
There are several firms and funds that are in the structured products space. PIMCO, Wellington, PGIM, Nuveen, Metlife IM are the larger AMs heavily involved in certain asset classes here. Those are some of the biggest ones. And there are several credit-focused hedge funds to choose from. Coming from a Securitized products origination/structuring/trading background makes you a strong candidate without the same “ratio” of exit ops/competition. Sure there are fewer seats since it’s a niche industry, but there’s even far fewer competition you’ll be going up against. As the above poster said, any meaningful pension fund, endowment, or insurance company would want your skillset. But asset management, and financial CIOs (especially banks’ buyside desks), want you on their team as well. Think about CVC, GoldenTree, OakTree, Mariner, DK, Cerberus, Guggenheim, Och-ziff, etc.
I would say origination/structuring are more marketable than trading but depends the exact capacity you’ll be acting in.
This is so helpful! Thank you for the insight. I realized that exit opps are niche, but I wasn't realizing that my competition would be much smaller as well. I will definitely try my best to land this role.
Yup, gotta look at the bigger picture. And all the major PE shops’ credit arms have a structured credit investing component and some of them issue these products themselves (Apollo, GSO/BX, Fortress). It’s balance sheet reliant, so if you have under 5bn AUM total, most likely you’re limited to 1 or 2 issues a year. May not be as sexy as PE or distressed investing, but several of the issuances you’ll come across will involve loans that are distressed (RPL/NPL) lol.
could you also opine on the pay progression in these buyside structured credit roles vs. staying on the sell side in structured finance?
Can’t tell you of specific figures on the buy-side. In S&T though, it’s pretty common knowledge that structured credit and structured rates traders make the most bread. Google it and you’ll see supporting evidence of it.
What is the all-in comp like for structured products origination? Are bonuses similar to coverage? What would be the range?
Bro structured products seats make bank. You definitely get pigeon-holed but there will be like 20 people in the US who can actually do your job so you will have virtually no competition when jumping. As for exits ops - all the AM’s deal in structured products, and there are specific HF’s that deal too (Element, Millennium off the top of my head). You could always be a CLO manager as well (these seats are GOLD, you will make bank) or transition into FI research. I would take this gig, and never look back
Awesome! Is the industry outlook decent as well? I know a lot of S&T desks are getting automated, but I've heard that anything structured will be fine.
Look man all this doom and gloom shit doesn’t apply to bookrunners. I would say if you perform on your desk you can make a career out of it, outlook is stable - put it that way
Awesome to hear. I’m transitioning into a structured products role this month. Very excited to start, my only concern being the narrowness of the sector. This makes me feel way better. Thanks a lot
Just getting into CLOs but from what I hear it's the credit guys who make bank at CLO managers, not the CLO structuring guys. Seems like working in CLO structuring can be somewhat cushy and reliable (you have a skillset that is sought after and highly specialized) but the upside is limited (i.e., in most cases you're capped at something like 400k all-in comp). BTW 400k all-in ain't bad but just not super high upside, especially when you consider most of these roles are based in NYC.
Would love to hear what is informing your view, mine is informed from limited understanding of the space but some candid conversations with people who work in it.
Ah jealous. The CLO business is really interesting & not many people get to do it. Hope you took the job & are enjoying it. Report back on how you like it if you can!
Hey - I received a similar offer for this position. Did you end up accepting it? What are the hours like?
Bump - any further thoughts on Origination?
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