What do you think are the main areas or skills a commercial banking lender should focus on in order to transition his or her career to direct lending? In contrast, the boom in consumer tech and internet stocks riding on Covid-driven shifts in consumption slowed through the year, accompanied by a public market rout in tech stocks that challenged valuations. Non-banking financial companies (NBFCs) are at the forefront of the growing opportunity and have expanded their market share from ~21% in 2014 to ~27% in 2022, focused on growing segments such as personal loans, consumer durables, and two/three-wheeler (2W/3W) finance. I am headed into a corporate banking role this summer in a bank with CIB umbrella structure. I was wondering what are your thoughts regarding Credit Portfolio Advisory (specifically at Alantra, Dublin). I'm in the same position. Aside from these, the most likely exits and long-term career options are: If you want to learn more about the field, here are some recommended books: And before you ask: Ive never seen a financial modeling training program for Structured Finance. Megafund Credit Arms | Wall Street Oasis The bottom line: you still earn a lot in direct lending, but it is a discount to private equity salaries and bonuses, and the ceiling tends to be lower because of the lower fees. Both metrics may be defined in slightly different ways, but the FCCR is usually something like (EBIT + Non-Interest Fixed Charges) / (Non-Interest Fixed Charges + Interest Expense + Mandatory Principal Repayments). Fintech has also experienced sustained deal momentum amidst evolving regulatory changes, with multiple players capitalising on the tailwinds and innovations within lending and wealthtech. would be possible. Do you think it would be a feasible stepping stone to REPE? Your email address will not be published. Private Equity Recruiting from B School v MBB, 101 Investment Banking Interview Questions, Certified Private Equity Professional - 2nd Year Associate, https://www.wallstreetoasis.com/resources/skills/finance/agency-costs, Venture Capital 4-Hour Bootcamp - Sat May 20th - Only 15 Seats, Investment Banking Interview 4-Hour Bootcamp OPEN NOW - Only 15 Seats, Financial Modeling & Valuation 2-Day Bootcamp OPEN NOW - Only 15 Seats, Excel Master 4-Hour Bootcamp OPEN NOW - Only 15 Seats, Venture Capital 4-Hour Bootcamp - Sat July 15th - Only 15 Seats. Thanks for visiting! Here are some links if you want to learn more about the field: Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. Too many business leaders lack a clear understanding of profitability, but a few organizations are visualizing profits in startling detail. Internationals in IB/PE - Where are you now? WSO Free Modeling Series - Now Open Through, +Bonus: Get 27 financial modeling templates in swipe file, Being obsessed with Prestige has ruined my life, Being obsessed with Prestige has saved my life. The year 2022 saw a global tempering of the peak activity witnessed in 2021, triggered by tightening monetary policies across American and European markets as economies emerged from a Covid-19-induced suppression in economic activity. Yes, but its probably a better pathway into RE lending or debt funds since Structured Finance also deals with debt. Structuring roles require something closer to real math, which means that a STEM degree and maybe even a Masters degree in a technical field is quite useful. by joining a mezzanine fund. !, Unfortunately, the answer is quite boring: Stay in the space and work their way up at the same fund or move to a different fund.. You can estimate it with: CPR = 1 (1 Single Month Mortality Rate) ^ 12. Thanks! With ESG becoming more central to investors value creation and exit plans, improved ESG traction is here to stay. Expect to see JP Morgan, Goldman Sachs, Bank of America, Citi, Credit Suisse, and Deutsche Bank near the top globally and in the U.S. Lenders in areas such as mortgages and auto loans like structured products because they provide liquidity and capital and make it easier to issue additional loans in the future. The steps in a typical deal process might look like this: 1) Receive Non-Disclosure Agreement (NDA) from a Banker or Financial Sponsor You then mark it up and agree on the changes, and both sides execute it so that you can receive information about the company and deal. does this group trade stuff like BNPL debt? Areas like corporate banking, commercial banking, credit research, and credit rating agency work are in the maybe category: yes, you do credit analysis, but you dont necessarily work on the types of deals that direct lenders execute. Credit analysts also find themselves working on unique and complicated situations that the equity analysts often avoid. Yes, we have some example documents and memos for this sector, but Ill warn you in advance: these arevery long and boring. Your email address will not be published. Credit case studies are all about assessing the downside risk and rejecting deals where theres even a chance of losing money if the company performs below expectations. And WSO is known to be a huge PE worshipper. Investment Banking Associate Exit Opportunities: Guide Since many issuers of structured securities have below-investment-grade credit ratings, they have a greater need for credit enhancements than, say, a blue-chip Fortune 500 company. This example of subordination is the best-known feature of structured products, and it creates cash flow waterfalls like the one below (source: Deloitte): But if you want to take the red pill and stay in wonderland, youll see just how deep the structured rabbit hole goes. Thanks for visiting! Private debt is highly structured and heavily negotiated, so the investment banker must know who the logical buyers are, as well as their return expectations. This includes restructuring, asset sales, and joint ventures. Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews. But you usually need some type of experience, such as previous internships, to have a good shot at those. Established, for over a decade, by industry professionals with a unified aim to drive forward alternate capital industry in India. WSO says ECM has no exit ops because ECM doesn't exit well to PE, as others have pointed out. But at a smaller firm thats unattached to a large bank or PE firm, total compensation might be closer to $150K. Notice I say lateral, because this is buyside, and these roles are pretty competitive in their own right. While direct lending funds and private equity funds have similar business models, there are a few important differences: As a result of these differences, average compensation tends to be lower. I think OP was implying that this aggregation of PE exits he put together was the "Magnum Opus of PE Exits"--not that PE itself was a magnum opus. Maintenance covenants relate to financial metrics that the company must maintain after it raises debt. that work on dozens of deals per year. Consumer-to-Business Payments: A Strong Growth Outlook, but Only for Ive looked at studying for my CFA or going to get my MBA and switch to IB. Great article. Finally, mezzanine tends to fund the last debt required in deals, such as taking a company from 4x Debt / EBITDA to 5x Debt / EBITDA, while direct loans are used for funding up to that initial 4x. India has seen close to $19 billion in ESG-aligned investments in the last 5 years, with clean energy driving more than 60% share at $12 billion, and electric vehicle (EV) manufacturers commanding around 20%. The main one is that Structured Finance is a broader term that may refer to any transaction that uses special-purpose vehicles (SPVs) to add special features to loans. The latter half of the year saw public market valuations spilling into the private markets, making dealmaking more challenging as the gap in valuation expectations slowed investment activity. First Republic Talks Extend Into Night After Banks Place Bids, Warren Buffett Will Beat the Market in Recession Times, Investors Say, Jerome Powell Could Face More Opposition as Fed Choices Get Tougher, Munger Warns Banks Stuck with Commercial Property Debt, FT Says, Your Sunday US Briefing: Pressure Mounts on First Republic. However, if you're at a fund that focuses on lending against hard assets and doing more "complex commercial banking", then the exits will be less clear. For example - if you're doing LBO lending for PE acquisitions, PE is definitely a natural 'lateral' spot. I networked with a guy from SF so mentioned in my interview that I want to start on SF credit rating. What kind of exit opps exist if one were to complete a credit training program and then become a debt/credit products underwriter for maybe 4-5 years? 9 min read. I work at a large PC fund. Also, the federal government in the U.S. is more active in the market and may guarantee or even forgive student loans in certain periods, so the possible outcomes are less predictable than with other consumer ABS. Markets never sleep, and neither does Bloomberg News. The exuberance at the start of the year, with record dealmaking of close to $40 billion in the first 6 months, was followed by decelerating deal activity closing at $21 billion. There may be some exceptions for tiny regional boutique banks without much deal flow, but both those firms are more in the middle-market category. I have an opportunity to recruit for a private credit role for my junior year internship at a large shop through a connection. 2. cold call a bunch of IB boutiques in london Structured Finance-specific technical questions could come up, but theyre more likely if youve already had related work experience. The Magnum Opus of PE Exits | Wall Street Oasis Leading Indian GPs, such as Kedaara Capital and ChrysCapital, increasingly competing with global counterparts on large deals, crossed $1 billion in new fund-raises. Indian PE-VC activity rode the momentum seen in H2 2021 till H1 2022, which saw dealmaking of close to $83 billion in 12 months. I think your best bet is to do the Masters to improve your grades because that seems to be the main obstacle here, and then recruit for IB roles during/after the Masters. The recalibration of 2022, characterised by cautious capital deployment and a shift in the shape of deal flow after a watershed year in 2021 is likely to extend into 2023. Please refer to our full privacy policy. In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron. If you're new here, please click here to get my FREE 57-page investment banking recruiting guide - plus, get weekly updates so that you can break into investment banking. And if you want an internship or entry-level job at a bank, its not worth the effort of studying these specialized technical questions and networking specifically with this one group. Maxime minus est sapiente qui. MFs and UMM PE usually only hire out of banking. While private bankers do offer credit products, they are just one offering alongside tax, estate planning, asset management, and concierge services. Structured Finance issues more complex instruments linked to the cash flows of assets, not entire companies, and they may even work with the LevFin team to finance certain deals. Required fields are marked *. Keep me signed in. If this is more of a take-home case study where you have several days or a week to finish, you still should not create a super-complex model. Think: Leveraged Finance, Restructuring, and M&A and industry teams with solid deal flow and debt-related deals. The hours are shorter than those in traditional private equity because direct lenders tend to do less due diligence, they have less concentrated portfolios, and they rely on sponsor relationships rather than cold outreach to win deals. In exchange for this higher risk, investors in the Junior Tranche will also earn a higher yield, and the Junior Tranche will receive a lower credit rating. More than a decade after that crisis, though, people have moved onto blaming other targets, such as Big Tech, Big Pharma, and private equity. The business models of direct lending funds and mezzanine funds are quite similar: raise money from outside investors, invest directly in issuances from companies, and charge a management fee and incentive fee. Subscribe to Bain Insights, our monthly look at the critical issues facing global businesses. By Arpan Sheth, Sriwatsan Krishnan, Aditya Shukla, Prabhav Kashyap, and Ronika Sapra.