If you're a frustrated vice president in an investment bank and you want to leave for an alternative asset manager like a hedge fund or private equity firm, then you might want to try a private debt fund. In the past year alone, the industry segment has grown from $440bn to $560bn – more than 25% annual growth, according to the Alternative Credit Council and Deloitte. BlackRock and Guggenheim Investments, the asset management unit of Guggenheim Partners, are both currently expanding their opportunistic credit platforms.
“Private debt is massive,” said Victoria McGill, a managing principal and the head of investment management, Americas, at Selby Jennings, a recruiting firm. “Lots of large asset managers are growing or establishing their private debt platforms, which is creating a lot of competition within middle-market lending."
The boom is being reflected in a rush of hiring and start-ups. In December, Blackstone veterans Mark Gudis, Edward Cerny and David Petrucco formed Backcast Partners Management, a middle-market investment firm focused on providing direct investment debt and equity capital. David Crescenzi joined Apollo Management as a managing director in the financial sponsors and leveraged finance group. Hitesh Kumar from UBS joined Orchard Global Asset Management. BAML bankers Jeff Schumacher and Sam Kwon both joined Varagon Capital Partners, while Joe Romic joined Hancock Capital Management. - To name but a few.
McGill says demand is highest for mid-ranking staff: “I would say seven-to-10 years of experience for a senior analyst or vice president is a sweet spot."
Despite the hires from banks, she says funds ideally want to hire people with PE experience already. “Candidates need to have experience in direct lending – specifically leveraged loans to middle-market companies.”
A recent report by Odyssey Search Partners suggests private credit funds could have another good year in 2017. The sector tends to do well in times of uncertainty, as traditional lenders stockpile assets. It's also possible that banks could push back into private credit if Dodd Frank is gutted, further boosting demand for experienced talent. However, Odyssey says this may take a while to feed through: in the short term, banks could be stymied by persistent capital shortfalls and a lack of talent.
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