2024 Questions List - LevFin and Private Credit
Hi everyone - I will intern in PC next year and I was thinking of making a very exhaustive post for everyone who wants to try to get into LevFin or Private Credit, and who don't really know what to expect, how to choose among the diverse career opportunities, which are the best groups to apply to, or any practical questions about the debt universe in general. Whatever goes through your mind. And I would try my best to summarize your responses so that everyone could benefit from it :)
If you are in the field or have some knowledge you would like to share I would really appreciate it, as I have limited information myself and would really like to know the thought process behind the answers.
Here's a preliminary list of questions that I prepared that I think could be very valuable to those like me who are trying to plan the next few years of my career and want to get the details right:
- How are LevFin and Private Credit different? What are the similarities? Do both share a similar "investor" approach since some BBs actually keep the loans in their portfolio?
- What are the best places for a career in LevFin? Which ones involve the most modelling and which ones are rather passive in the process?
- Is there a realistic potential for a career in LevFin or Private Credit outside of US / UK? Any well regarded institutions that stand out?
- I saw that BBs also have Private Credit arms (e.g.: GS) and I was wondering if it's a recent occurrence? Is it the BB's cash that is being deployed (which I think would be weird given regulations) or is it collected from external investors?
- I heard that for DB, there's been a mention of LDCM and LevFin teams, are those essentially the same? Or one focuses more on the execution, and the other focuses on the actual syndication / marketing / running the books?
- Is it hard to start a career in PC directly, or would you suggest taking the LevFin path for a couple of years before making the transition?
- As a firm, why would you go to a BB's LevFin team rather than a PC fund? Are PC funds almost always asking for higher interest margins than BB's purely due to the fact that they can customize the loan and be more open to whom they lend, or are there situations where a PC fund can price it cheaper? Why would a Large Cap firm consider a PC fund instead of a BB? (as was the case lately)
Thank you for taking the time to read this. If you have some additional questions you'd like me to add to the list please let me know, and I will update the post accordingly.
Based on the most helpful WSO content, here are some insights into your questions about LevFin and Private Credit:
Differences and Similarities between LevFin and Private Credit:
Best Places for a Career in LevFin:
Career in LevFin or Private Credit outside of US/UK:
Private Credit Arms in Bulge Bracket Banks:
Difference between LDCM and LevFin Teams:
Starting a Career in Private Credit vs. LevFin:
Choosing Between BB's LevFin Team and a PC Fund:
These insights should help clarify the landscape of LevFin and Private Credit and assist in making informed career decisions. If you have more specific questions or need further details, feel free to ask!
Sources: Private Debt/Direct Lending/Private Credit - What are the differences? Best firms with WLB, Q&A: BB LevFin - Mezzanine - Opportunistic PE, Private Credit Resources and Prep, Overview of Leveraged Finance, Levfin VS Leveraged Lending?
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Ex-LevFin analyst @ a big balance sheet bank - just my 2 cents
1. LevFin = underwrite and sell the loans/bonds to institutional investors (CLOs, Credit funds)
PC = underwrite and hold the loans
Banks rarely hold institutional loans (TLBs) on their balance sheet. They do hold TLAs (Bank Term Loans) on their balance sheet but TLAs are relationship products much like revolvers
2. Big balance sheet banks run the levfin market. I.e. JPM & BofA. Contrary to popular belief, levfin isn't as modelling intensive as folks make it out to be. Only thing you need is cash flow modeling/debt schedule tbh. Credit structuring skills are more valuable in my personal opinion (anyone can model!)
3. No clue
4. Most banks usually have "Origination" and "Syndication" teams within levfin. Origination = LevFin aka Leveraged Finance Originations & Syndication = LDCM or Leveraged Capital Markets
The latter focuses more on syndications
5. At the end of the day, you are actually taking a risk @ PC vs. in LevFin you are there to collect syndication/underwriting fees. If you are dead-set on PC, I don't think starting at LevFin helps in any way (assuming you can go into PC right away)
6. LevFin market is way cheaper vs. PC. There have been more large cap PC deals in recent history because the market has not been great; hard time syndicating out the loans. There are a lot of steps you have to take to issue loans/bonds, i.e. get it rated, marketing & etc. The market picked up recently and there have been a lot of PC refi's within the market given you get much better pricing w/ TLBs.
#6 won’t be true for much longer. Have already seen funds going to +475bps spread, wont be long before it’s at 99.0/+425 right alongside syndicated. For credit funds, the only metric that really matters is being able to deploy into high(ish) quality assets. Terms/pricing are nice to have but don’t matter when deployment is the name of the game until the system breaks.
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