Want to get into private credit, no relevant experience

Hi monkeys. I'm currently a junior credit analyst in institutional AM, and want to switch out of the public markets into private credit. However, I know I'm losing out on these opportunities to levfin/rx guys, and I realize when I do even make it to the interview case study, my models and analysis look far less sophisticated. After so many rejections I'm starting to feel really demoralized, and am even considering maybe going back to square one and doing an IB stint (not that that's super easy either post-grad). Has anyone on here been able to make a similar switch and can give advice? Or have suggestions on where to start in terms of sharpening my technical skills?

Comments (7)

Jan 11, 2021 - 10:39pm

When it comes to Private Credit case studies I've found the focus is much more on the risks & mitigants portion and being able to speak intelligently about your view on the credit than the model or any supplementary technical analysis you might run.

Assuming you're speaking about vanilla private credit, the model for a case study really only requires projecting out cash flows for ~5-7 years and running a simple debt waterfall of usually just 1 or 2 tranches in an LBO type scenario. Would also include ways to sensitize inputs / growth rates for a Base and a Downside case.

Out of curiosity, why do you think (or know) your models are less sophisticated than those of a IB analyst? If you can get your hands on some 1-hour PE model practice tests you can pretty much just copy everything except the equity returns section to practice what you would need for a case study, and probably use the same formatting as well

Jan 11, 2021 - 11:45pm

Unless your models are just straight up wrong, I wouldn't worry so much about them being complex. Just model out something reasonable and accurate with a few sensitivities and you'll be fine. No need to overthink the model (I think it's a common mistake people probably make). That being said, make sure it's CORRECT and then focus on the write up. The other poster is correct. When starting to prep for PE, I focused way too much on the modeling aspect, and I realized the actual investment memo is probably the more important part. Think of the modeling as just a barrier to enter. You can do it or you can't. The memo is more important (again, unless your model is just wrong)

  • Analyst 2 in AM - FI
Jan 12, 2021 - 1:13pm

Thanks all for your input. If it means practicing and refining modeling skills on my own time, I am more than happy to do that. What I am concerned about is the feedback I have received from headhunters/hr and even in first round interviews with teams, which is that I don't have the transaction experience. I'm not really sure how I can compensate for this shortfall if it's a serious barrier to entry. With respect to the models themselves, since we only look at IG and performing HY credits, we don't really need to dig much further than the credit metrics (historical and basic forecasting, with bull/bear/base case scenarios). They are just not as complex as the equity research models I've seen from sell side for the names I cover.

  • Associate 2 in PE - Other
Jan 20, 2021 - 10:45am

As a public credit analyst, you have ample opportunity to be involved in "transaction oriented" situations if your mandate allows you to trade event-driven, distressed, or other special situations where you need to interact directly with the company / advisors regarding tenders, new money investments, restructuring plans, etc. It is not pure soup to nuts transaction experience, but something you can definitely play up. I've seen people do this successfully. There are lots of situations where the lines between public and private credit become blurred. 

  • Analyst 2 in AM - FI
Jan 20, 2021 - 5:09pm

Thanks for your input. Unfortunately we're only involved in performing credits (unless something goes awry in our HY book). I can think of some of the "situations" you mentioned but it would definitely be a stretch for me to say I was involved.. what part of the process specifically should I be able to speak to (modeling, doc negotiations, etc)? 

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