What is on-cycle recruitment like for distressed funds?
Exactly the title. I know the PE process is pretty established, but I've read very little about what an on-cycle recruitment process looks like for distressed funds. Can anyone provide any experience as to what the interview process is like, what questions are asked, what the recruitment process is like, and also whether you can recruit for both distressed and PE at the same time? Thanks.
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Went through the process at a few distressed funds and a distressed/credit special sits group at a MF. The interviews focused on a few main parts - interest in distressed investing, relevant background that leads to distressed investing, and case study.
Questions around interest and background mainly revolved around why I was interested specifically in distressed, if I had any relevant exp, how I would think of opportunities, how do I evaluate potential opportunities, what do I look for in opportunities, discuss any pitches/ideas I had worked on in the past that's relevant, etc.
The technical side of the interview was pretty standard among the funds with little variation - most of the places asked a mix of relatively easy/standard rx stuff and stuff that tended to figure out if you properly understand cash flows/EBITDA or not, debt waterfall was another thing they focused on. Pretty much every fund had me do a case study. Time given for the case study varied - from a couple of weeks to a couple of days to even less than 24 hours. The idea was to understand if you can quickly map out and look for opportunities in the cap structure and analyze the situation quickly but properly before diving deep into an opportunity. Going through the filings/relevant indentures and keeping an eye out for key points/covenants was also appreciated during the presentation. Analyzing credit opportunities is very different from equities and they want to see how you think here about the opportunity you have to present.
That's pretty much the general overview I could think of from my process. Lmk if I can answer any specific questions. I'm joining one of these funds out of undergrad so obviously I didn't go through the process as an ib analyst so won't have a lot of insight into the traditional process, but most of my bosses/coworkers at prior internships or current fund seemed to have done PE as the next step after ib before joining the distressed fund so that seems to be a very helpful background.
I didn't realize distressed funds recruited out of undergrad. That's crazy
Most don't. I was just lucky with my internship exp and how persistent I was to land a seat
I appreciate the answer. how'd you prepare for the case study stuff? or getting exposure to credit investing?
reading moyer and the hl rx case study gave me a decent understanding of how to evaluate distressed opportunities, debt waterfall, etc. Stuff I learned at previous internships also helped a lot so I kind of knew how to structure/present my idea or how to triage
Mind me asking what the main difference is between MF and non-MF?
I'm not sure what exactly the differences you're asking about, but lack of structured training program, slightly less infra, etc. are the things I could think of. An established MF might have more/better access to info/certain deals and maybe a better ability to structure complex deals. Locked up capital, etc. might be other things you want to consider but that varies from fund to fund.
Again I'm just an undergrad who will be joining one of these funds in a couple of months so I'm not really sure if I'm qualified to correctly answer, but from my conversations with my bosses and coworkers who also worked at MF PE shops the track to progress to principal/partner at the non-MF fund was quicker given the performance than at MF
target school? I have literally never heard of a student going to a distressed/special sits arm of a MF credit fund out of UG before.
BX TacOpps hires a few undergrads every year
Don't want to give away anonymity but I didn't go to HYP/Wharton. I did go to a school people probably consider target for ib though not for PE/HF recruiting out of undergrad. I'm not joining the MF but another distressed fund. I was kind of surprised that a group like that at a MF would interview someone like me too tbh.
Common enough at W actually (common is relative ofc)
What are some distressed funds that hire undergrads?
other than the a few of the MF, sliver point I think takes a couple out of wharton, know a guy who started at goldentree (although I'm not sure if he's in the distressed group). These are some funds I know that are known to take people out of undergrad. I interned/am headed to another one. Like I said in another comment, you could land a seat provided you're willing to put in the work to land the seat over guys with exp/ib guys. I spoke to a lot of funds during my process, 99% don't run a process for undergrads at all. You just have to put yourself out there
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