What do Private Debt Funds Look for When Hiring?

Europe’s private debt market has evolved rapidly over the past decade as it continues to expand and diversify. Unitranche lending represented the majority of European direct lending in 2018, and unitranche deals over the past few years have gained in scale as funds raised have increased in size. As for distressed debt, more attractive yield compensation for the risk taken has started to emerge and it’s expected that we’ll continue to see extensive opportunities to deploy investment capital in distressed debt opportunities (William Nicoll – Co-Head of Alternative Credit, M&G Investments).

Given this migration of money from public to private markets, we have seen the private debt talent pool grow rapidly over the past 10 years.

Who is employing this talent?

European private debt deals grew by 9% in 2018, meaning a total of 416 deals completed during 2018 compared to 382 in 2017 (John Baker – PrivateDebtInvestor.com). Due to this expansion and diversification, firms in London have been focusing on attracting top tier talent into their debt teams, with Ares, Oaktree Capital, and CVC being the top 3 most active firms in hiring debt professionals over the past 12 months.

Top 10 Most Active Funds in Debt Recruitment:

  1. Ares Management
  2. Oaktree Capital Management
  3. CVC Credit Partners
  4. Nomura Holdings
  5. HPS Investment Partners
  6. Cerberus Capital Management
  7. Tikehau Capital
  8. Cheyne Capital
  9. Intermediate Capital Group
  10. Crescent Capital Group

What backgrounds do these candidates have?

Most private debt hires in London over the past 12 months have been London School of Economics alumni, with the University of Oxford and Cass Business School close behind. Out of all of the debt professionals, 42% have a Master’s degree, 12% have an MBA, and 1% have a Doctor of Philosophy with the top fields of study being economics, finance, maths, business administration, and accounting and finance.

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The typical candidate that these firms take an interest in are those with at least one year leveraged finance or restructuring experience at bulge bracket and international banks, or direct lending and special situations candidates at private equity/debt firms. It's also much easier to make a buy side move before you reach VP level in a bank; there are far more opportunities for analysts and associates and VPs may have to take a more active approach if they're looking to move into a buy side role .

As you've seen above, those with strong academic credentials who studied at top 10 universities are also favoured and European language skills are becoming increasingly valued as the debt markets in Western and Southern Europe develop.

When it comes to the interview process, one of the most important aspects is being able to demonstrate that you possess an investor mindset and this is often where candidates fall down. This is something to be conscious of during the modelling test stage of the interview, which your potential future employer will use to look for evidence that you possess an investor mindset that is in-line with their own culture and strategy. They'll also be using this stage of the interview process to check your quantitative skills and attention to detail.

With Prequin forecasting that the private debt market could reach $2.5trillion AUM over the next 10 years and that investors will continue to allocate to their private debt strategies (Alan Flanagan & Robert Wagstaff - BNY Mellon), it looks like there will be increasing opportunity for those who are looking to join a private debt team in Europe.

Posted by Sarah Grantham