Credit vs Equity Career at LO AM
Hi everyone,
Is there a significant difference between what a career looks like in LO AM between credit/HY and equity at firms like Wellington and Fidelity? Or are they regarded more or less as two sides of the same coin? I’m sure the investing mindset is different, but I’m wondering more so in terms of WLB, comp, and career progression. I’m an undergrad junior with an internship this summer at a large private credit shop, but I’m more interested in LO AM. I’ve had internships in equities, too, so I’m trying to get a sense of where I should steer my recruiting. Thanks!
Interested
Another apples to oranges comparison thread, but I'll give it a shot. I worked at a credit manager, and a friend of mine is an equity PM at one of the shops you mentioned.
Investing mindset: Generally both credit and equity tend to have your fundamental bottom up shops, more trading oriented firms, benchmark huggers, etc., but worth noting that offered products can make a big difference. Some equity mutual funds can be more flexible (e.g. longer time horizon, less focus on vol, more thematic investing), while credit asset managers typically have significantly more constraints. For example, CLOs are competitive products that require really strict adherence to allocations across ratings, sector, duration and given the securitized structure, buyers being insurance cos, etc., performing credit shops will care a lot about even the fewest bps of outperformance, WARF, and other factors that don't apply to equity side. Equity tends to be competitive for a different reason (e.g. spreads are arbed out, quant players, fund flow driven, ETFs, etc.)
WLB: I would say both have pretty good WLB ranging from 50 to 60 hours. Maybe some more intensive shops can get to 80 hours during earnings season. Really depends on how lean the team is (how big each analyst's coverage is).
Comp: Anecdotally, it seems credit side pays more at junior level; can debate complexity of product, but credit AM hiring tends to favor slightly more experienced associates with one to three years of sellside credit experience. Equity tends to hire straight from the gamut of undergrad to MBA. Can't speak to MBA pay, but undergrad pay seems to be low even accounting for WLB. Beyond that, other factors to consider include fees (typically compressed for both equity and credit), AUM (asset aggregation is name of the game), how wide the bench is (hierarchy, number of PMs, analyst promotes). I would guess equity is generally higher comp as a PM at a top shop, but there are a lot more PM seats at a lot more credit shops. Really hard to compare here lol.
Career progression: junior analyst, senior analyst, junior PM, senior PM typically tends to be the standard for both equity and credit. There's a lot of people on this forum that talk about LO seats being incredibly coveted, but I think one thing to note is that most firms I've interacted with are incredibly slow to change, slow to promote, and incredibly political in rewarding individual contribution. The goal of having multiple PMs and multiple analysts is to reduce reliance on individuals, as such, you might not have as many opportunities to really highlight your skills as a junior which in turn prevents you from working your way up the ladder. Star performance only matters insofar as it helps raise capital, and the return profile doesn't really aim for home runs, so might not be as meritocratic as you expect. PMs tend to be in their seats longer which may also cause firms to be top heavy with higher lower level churn, and given the job isn't rocket science, nepotism can play a big part in who gets tapped for new opportunities. Maybe ask an equity person for their take on this as it may differ for large firms with more structured programs.
So does credit not hire straight from MBA?
They definitely do, but generally it’s cheaper and more efficient to hire from sellside credit research or from IB analyst pool. Usually there’s less training involved as well, and anecdotally, I find MBA grads to be unreasonably cocky despite being less experienced.
from a comp perspective what is the difference between your fundamental credit, trading driven and index/benchmark funds? and how big are the trade offs (wlb/career optionally/pivots)?
Really in depth topic, but in short, everything depends on AUM, fund structure (defines fees), who owns the GP (employee owned, public, arm of a larger fund), how generous culture is (are they stingy? probs), how many names each person covers, how much overhead, etc.
Bump
I have noticed that the backgrounds of the equity investors tend to be more impressive than the credit investors - not sure why that is
Really? That kind of surprises me, but I don’t really know. I would think that credit and equity investing would be equally complex.
I’ve noticed it as well. The ratio of undergrads going after a buy-side role in equity vs credit is probably something like 4:1.
Bump
Speaking more to Fido than Wellington as I don't know the latter well. Generally speaking, there is probably lower ceiling on comp with slightly better career stability (less likely to get laid off) in HY at these shops. At Fido at least, think WLB was prob worse than the avg. asset manager and HY and equity folks both worked quite hard. Culture in Fido's HY group was very difficult for a long time but seems to have improved as some very senior folks left in the last ~5ish yrs
Thanks for your insight. How much lower of a comp ceiling, out of curiosity? Like a 15% discount, or a 50% discount?
Guessing it is closer to 15% for most senior analysts
Very helpful thread. What does comp look like for analysts that have been around for 10-12 years or so? Is there a difference between credit and equity?
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