For some background - graduated from a large state school in the Southeast and have worked at two credit funds that hire directly out of undergrad - one involved in private credit / directly originated leveraged loans to middle market companies and another investing in broadly syndicated loans / bonds in the public market. The number of credit funds is growing and I think they are an overlooked opportunity by undergrads looking for internship / full-time buy-side opportunities.
- Barings LLC (Charlotte NC) - summer internships and 2-year analyst program across private credit, public debt, real estate, and private equity
- Prudential Capital (Most major cities) - summer internships and 3-year analyst program in private credit, workouts / distressed (CPW), and mezz/equity (Prudential Capital Partners)
- Bain Capital Credit (Boston) - summer internships and analyst program across credit and equity groups (private equity and venture capital)
- Antares (Most major cities) - summer internships and analyst program
- Goldman Sachs Specialty Lending (Dallas, Houston, Atlanta) - hires some full time analysts out of college, not sure if they have a structured program
*I know there are others hiring junior analysts on an as-needed basis, but for the sake of this post these are the ones I know that hire on a regular basis. *
Typical Exit Opportunities
- Other credit-related roles (private credit, public credit, distressed, mezz, leveraged finance at a bank)
- MBA programs
- Smaller equity funds (have to network, but I've found that once I explain to people what I actually do they are often receptive to including me in their hiring pross)
Most of the firms above like to hire associates from their existing analyst pool, so staying on is sometimes also an option
Brief Synopsis - Private Credit
Private credit funds raise money from institutional investors and invest it in loans to middle market companies for LBOs, recapitalizations, acquisitions, and/or general corporate purposes. The loans are typically originated on either a direct basis (originators call directly on management to pitch financing solution), through a sponsor relationship (private equity fund wants to acquire something and runs a process with a lender or group of lenders [also known as a club]), or through an agented bank process (bank structures loan / bond for middle market co and markets broadly to a larger group of lenders). With small $ sizes and few holders, loans here are typically illiquid and held thru maturity, so investors expect covenants to increase negotiating leverage in case the Company's performance deteriorates.
Brief Synopsis - Public HY
Public high yield funds invest in the debt of larger companies and may have separate accounts for loan / bond strategies, or multistrat accounts that invest in a combination of both. The key distinction here is the size of the facilities (typically $400MM +) to promote liquidity and enable active management. Investment opportunities (primary transactions) are typically marketed by lev fin groups at larger banks, while trading desks facilitate the purchase / sale of loans and bonds between investors after the debt has been successfully raised (secondary transactions). Public loans / bonds typically lack maintenance covenants to protect holders in case of worsening performance (if you don't like it, sell!), emphasizing the importance of liquidity/active management to avoid hairy situations.
For undergrads, I like to frame private and public high yield (assuming par strategy, not distressed) as PE / HF light. Private credit is very transaction oriented where senior professionals act as relationship managers looking for opportunities thru the channels mentioned above. Investors typically have better access to management and can request more in the due diligence phase, negotiate the terms of a deal, submit an offer ($ amount and terms), and ultimately find out whether or not they will be a capital partner to the target Company for 5-7 years. Illiquidity + deal structuring + access to management + long hold period = PE light.
Public high yield has a transaction-oriented component in analyzing new loans / bonds being issued in the market, but the timeline is usually much shorter (1-2 weeks from launch), as the banks help facilitate the process with marketing materials and answers to diligence questions. Coverage analysts monitor a particular industry or industries, underwrite new securities, look for opportunities in the secondary market based on new developments and price movements in loans / bonds, and use their research in the primary / secondary market to help portfolio managers allocate capital and manage existing positions. Liquidity + deep industry coverage + active trading + personal attribution = HF light.
Pros to Credit Funds Opportunities
- It's been awesome getting exposure to experienced professionals that are passionate about investing and have dedicated their careers to it
- Hours at both shops have generally been predictable and averaged around ~60 a week
- I work at the HQ of the fund so surrounded by a lot other buy-side professionals engaged in other strategies. Start to learn there's more out there than PE (blasphemy I know haha).
- Generally think it's easier to start in credit and jump to equity than vice-versa
Cons to Credit Funds
- For maintaining career optionality, it's tough to beat investment banking in a good group at a good bank
Hope that helps. Feel free to PM with questions and if anyone has more insight to pass on please do!