Why you must get a job in private credit. Or not
In the event that anyone has failed to pay attention, the private credit industry has been growing. If you haven't heard of private credit firms like Ares or Brookfield, now might be the moment to familiarize yourself. Growth may be slowing, but private credit is still expected to be the fastest growing area of the buy-side for the next three years.
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In a presentation released today, Huw van Steenis at consulting firm Oliver Wyman suggests that private credit is the latest dance in the long discotheque of bank disintermediation, and that flows into private markets firms will far exceed those into hedge funds and active managers in the years to come.
Source: Oliver Wyman
In the first half of this year alone, van Steenis says leading funds continued to see significant inflows into the private credit strategies, even as banks fought back in the syndicated loans market.
Source: Oliver Wyman
Future growth is likely to come from asset backed lending and specialty finance. Van Steenis points out that private credit firms are still very unrepresented in areas like credit cards and supply chain finance, and have so far been most active financing "hard assets" like aircraft. This is where the greatest potential for growth lies.
Source: Oliver Wyman
However, before you position yourself for a supply chain finance job at Ares, Van Steenis also notes that private credit funds are experiencing "headwinds" as a result of higher interest rates, asset "indigestion," regulatory scrutiny and banks' avoidance of the worst-case "Basel endgame" which would have increased their capital requirements and limited their own ability to lend.
Edward James, a London-based headhunter for RCQ associates, tells us private credit hiring is "definitely quieter" than last year, with jobs down by up to 25%. However, James says skills in private credit are still limited and that specialty finance hiring is particularly active (see above).
James didn't say so, but there are signs that some private credit firms are looking for old dogs who've seen a few credit cycles. Speaking to Bloomberg in June, TCW CEO Katie Koch said the credit cycle was already "quite mature." Markets are too complacent, said Koch, but there's huge opportunity to make money if you know what you're doing, particularly during a period of distress. "All of our MDs have invested in this asset class since before the financial crisis," Koch said, observing that 95% of people in the industry arrived since the last crisis ended.
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