It all started last July. Oliver Duff, HSBC's former head of leveraged finance in Europe, quit for a little-known Canadian firm, PSP Investments to lead a European private debt push. Since then, PSP has done all sorts of hiring.
Duff's new employer has money to spend and it's been dispensing it to lure people from banks and other firms on the buy-side. This month, PSP poached Marco Strizzi, a former J.P. Morgan analyst and associate who spent the last two years at private equity fund BC Partners, along with Paola Rastelli, an infrastructure investments specialist from Arcus Infrastructure. In February it poached Cathy Hu, a former associate in leveraged finance from RBC Capital Markets. In January it poached David Witkin, a former executive director at Goldman Sachs. In the final quarter of last year, PSP hired juniors from J.P. Morgan and Perella Weinberg.
While Rastelli's going into infrastructure, most of the new hires are off to work on Duff's private debt team. PSP reportedly has $4.7bn to invest globally and Duff's going to need help allocating his share in Europe. He's not the only one: funds like Pemberton Asset Management are going for growth in the private lending space in London. Albacore and Park Square Capital have also been hiring. Private debt funds have been pinching banks' juniors since 2014, at least.
The exits for the buy-side come as banks rebuild their leveraged finance businesses at the top end. Following Duff's departure, HSBC hired J.P. Morgan's Ray Doody in January. Citi recruited Simon Francis from Credit Suisse as head of its EMEA leveraged finance business this month. Tokyo Mitsubshi made two senior hires to its EMEA leveraged finance unit two months ago. There have been some big hires on Wall Street as well - Credit Suisse hired Matt DeFusco from Goldman, for example.
"There's been some big spending," says one leveraged finance headhunter, who declined to be named. "At this stage, it's just two or three banks which are filling gaps with big name hires, but we're expecting a lot more activity as the year goes on. The feeling in London is that there's going to be a post-Brexit leveraged finance boom as the pound declines, and banks seem to want to capitalize on this."
Figures from Dealogic show leveraged finance activity up 10% year-to-date in EMEA compared to last year, and up 14% in the U.S.
For the moment, recruiters say most of banks' hiring is at the senior end. "Banks know they can't promote juniors into these roles," says one headhunter. "In leveraged finance you're dealing with sponsors [private equity funds] and sponsors want to talk to adults, so banks need people who are big brand names."
However, with juniors quitting for buy-side funds like PSP, recruiters say banks' leveraged finance teams are heavily depleted and will need attention very soon. "The replacement hiring hasn't really happened at the junior level yet, but it's going to," predicts one recruiter who also asked to be anonymous. She added that Deutsche has seen four or five exits from its leveraged finance team in London post-bonuses, and will definitely have gaps to fill.
One of those Deutsche exits was Samir Dada, a vice president in Deutsche’s leveraged finance team who quit for BAML. J.P. Morgan also poached Alexandre Falewee, a leveraged finance analyst from Nomura in February. It's not exactly a rush, but banks are slowly starting to bring on junior leveraged finance talent - and they'll need to compete with the direct lending funds which are looking for the same thing. Let the battle begin.