Good credit funds?
Just starting out here and I'm thinking about recruiting for credit funds next year. What are some of the leading firms, and why do people think they're great? I've heard these names a lot but don't know much about them... was originally sold on private equity and so don't know much about what makes each credit fund special. What do they tell LPs about their "secret sauce" and how true is it?
- Anchorage Capital Group
- Apollo Global Management
- Bain Capital Credit
- Canyon Partners
- CQS
- Davidson Kempner
- D. E. Shaw
- Elliott Management
- GSO / Blackstone
- HPS Investment Partners
- King Street
- Oak Hill
- Oaktree Capital Group
- Sculptor / Och-Ziff
- York Capital Management
Bump - also interested
Mostly they are excellent at structuring, finding the right spot in the capital stack and going with a fine-tooth comb through the intricacies of each particular deal point. Many of the best credit investors have law degrees. A lot of the big players are chasing their tail a bit with a limited amount of high-yielding deals. Oaktree by definition is participating on most every distressed deal due to their size and limited amount of large double-digit yielding paper. Elliott is mostly an activist equity shop now (again very hard to scale credit investments). Your list is mostly excellent funds but the list of true credit funds is dwindling.
Not really true re Elliott. While more of their AUM is in public equities than credit today, they’re still one of the largest and most active distressed investors in the market. They’re a leading creditor in a number of prominent situations right now including Frontier, PG&E, Windstream, and EP Energy. They usually follow the same aggressive activist mentality in restructurings as in their equity trades.
Yes, it's really true. When more of your resources, manpower, and AUM are in stocks rather than bonds you are by definition mostly an equity fund. Hence there being a dwindling amount of credit focused shops, which was my original point and OP's original question.
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No reason for a credit firm to hire from consulting (exception is maybe Bain Cap). Would recommend maybe trying to go for a banking role (lev fin, rx) first. Also all three of the firms you mentioned are very active in distressed but I see what you're getting at.
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Apollo, while having a big loan business is also massive in PG&E, Petsmart, Frontier, other large distressed names through their distressed hedge fund. Distressed is Oaktree's bread and butter it's definitely not a high yield/CLO shop first and foremost (see Acosta deal most recently). Not really sure about Bain Cap tbh. These firms are just larger and have diversified pools of capital and I don't really believe that it would be any easier to land a job at these firms vs Elliot or DK assuming you're interviewing for a group that does distressed. It is however true that these opportunities are more abundant.
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When I was at Ivy we used Apollo to structure our acquisition of Formula 1 and Hostess. My experience was their brilliance of the basics.
I’d add Goldentree to this list...have done pretty well over past 20 years...only issue for your case is that they don’t tend to recruit much, they run pretty lean
Ares
Monsieur! Why do you want to go from consulting to credit?
Credit so broad… IG, CLOs, distressed, direct lending, specialty finance (various sub categories here..), structured credit, RE debt etc.
Depending on what you want to do within credit the list of shops would differ pretty widely.
Park Square Capital is also pretty decent. Of course not on par with some of the names outlined above but still decent
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The past 5 years Apollo, Diameter, Goldentree, Silverpoint, Sona stand out on a relative basis. None force themselves into distressed on an evergreen basis and all have succeeded for different reasons.
I could be mistaken but doesn't silverpoint make all of it's distressed investments from its flagship silverpoint capital offshore fund which is an evergreen fund?
Absolutely but not a fund that’s just a “distressed” fund
Also missing some of the below:
- Redwood (I'd probably work here over every other name mentioned on this list).
- Knighthead
- Glendon
- Angelo Gordon
- Brigade
I'd also include some of the old school Minneapolis credit shops:
- Castlelake
- Varde
- CarVal
- Whitebox
Summary is that there is a ton of these shops out there.
what's so special about redwood?
Super high AuM / head, PM / analyst mentorship model, under the radar, makes smart investments, and runway to launch your own fund if you do well. Compensation is top-tier.
Note this is different than the family office in Baltimore (which also looks like a cool place to work) and the real estate fund.
Would include shops like Fortress, Beach Point, Atalaya, Victory Park, Origami Capital, Solace Capital Partners, etc. as well
https://directlending.orrick.com/directlenderslist.html
Decently comprehensive list… although not fully-updated; take a look at PitchBook or Prequin as well (if you have access) for their top 50-100 lists. Cheers.
Sixth Street
I'm not as familiar with the credit world as I am equities, but a couple SF (Watershed and Golden Gate, yes Tom Steyer's shop) places and a Chicago shop (Magnetar) come to mind. I think Magnetar might be bigger in commodities/energy derivatives but not sure.
Also, ExodusPoint was launched by former head of credit at Millennium and its credit/rates business is larger than it's quant, equities, commodities, macro businesses.
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Surprised no one's mentioned it so far but PIMCO's alts group flies under the radar but have grown to $100B+ in alts strategies in the past year. They've also been hiring directly from undergrad.
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