Performing, direct lending or stressed/distressed? Some key things to consider when deciding which strategy is right for you.
A natural step many people in banking want to make is to move to the credit buy-side. But what type of credit investing suits you best.
Here are some thoughts about the various strategies and whilst some roles will combine elements of more than one strategy and the lines between strategies are blurred, most will have a particular focus so it’s important to think carefully.
But credit’s credit – right?
Sort of. The fundamentals of credit investment run through all of these strategies so make sure that it is right for you. A keen interest in the fundamentals of a business and wider business and macro environment are key. An attention to detail, ability to identify risk and an interest in the legal position of lenders are also highly relevant.
There are endless nuances between the strategies – however some key areas to consider when deciding which works best for you should include the following:
What’s your risk mind set?
Remember in credit – a lot of time is spent focussing on the downside. Unlike equity your upside is capped so whilst the prospect of massive expansion into new geographies is exciting for the equity investor – for the average performing debt investor it’s far less appealing.
A seasoned PM at a liquid strategies fund summed it up “The way you outperform in credit is by not getting it wrong – being right 90% of the time is not good enough.”
The further you go into the distressed space – the more...
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