Distressed debt funds in London are wooing staff from investment banks. And investment banking professionals in London are only to happy to swoon in their direction.
Back in February, we reported that hiring by distressed debt funds in London was becoming a thing. Junior bankers with restructuring and leveraged finance experience said they were getting multiple offers from U.S. distressed funds setting up in the City. Eight months on, hiring is continuing apace.
Funds like Centerbridge, Varde Partners, Ellington Capital Europe, MKP Capital Europe, Oaktree Capital, Lone Star and CQS have all been adding staff in the past few months. Others. like EdgeCrest Capital are waiting in the wings, ready to hire once they've got their FCA licences. In some cases the hires come from rivals in the distressed sector - CQS, for example, recently poached Simon Finn from Apollo to lead its new Principal Investments Group focused on the distressed debt space. In others, they come from banks.
Lone Star has been one of the biggest hirers of ex-banking types. In April, Lone Star hired Adrian Choo, a former real estate strategist at HSBC. In August, it hired Kambiz Nourbakhsh, who spent 12 years at Goldman Sachs before quitting in 2011 to join Mount Kellett Capital, the multi-strategy hedge fund founded by ex-Goldman special situations head Mark McGoldrick. And in September it recruited Alessandro Grande, a former financial institutions group analyst from Nomura.
Rival distressed funds have also been tapping banks for expertise. MKP Capital hired Killian O'Connor, a former Morgan Stanley in cross asset macro hedge fund sales, at the start of this year. CQS hired Nick Leyhane from Barclays as head of investment risk management in April. It also hired Abdul Abdelmassih, an ex-Goldman Sachs rates trader in July and Stephen Jobber from Cantor in August. Varde Partners hired Craig Rydquist, a former securization professional from RBS in September.
Headhunters in London confirm that distressed debt remains a destination. "There's definitely a bid on in Europe," says one, speaking on condition of anonymity. "You've got U.S. funds setting up both to buy distressed corporate debt and distressed portfolios of securitized products."
Chris Apostolou, a headhunter at hedge fund focused Arbitrage Search in London, said analyst roles in distressed debt hedge funds typically command a minimum £300k ($486k) package. "It's a booming area and the margins are high. People who move into distressed debt funds from banks are often able to progress much faster than on the sell-side."
There's a reason U.S. distressed funds are flocking to London. Figures from Thomson Reuters show that European distressed debt deal volume rose 43% in the first nine months of 2013 compared to the same period one year earlier. In the U.S. they rose too, but only by 22%.
Hiring is unlikely to subside anytime soon. U.S. firms are raising money and building their European infrastructure. MKP's recent London hires included a director of client development. Centerbridge just hired a head of investor relations and capital raising from KKR. Lone Star is ready to invest $7bn across UK and European distressed assets.
And while the pay packages on offer at distressed funds may look appealing, headhunters say the real money comes later on, particularly in private equity structures. "It's not about base and bonus, it's about getting carried interest," says one. "If you go and work for these funds the big money comes a few years down the line." Bankers who quit for distressed debt houses are unlikely to come return to banking soon, it seems.