Private Credit: Underwriting vs Portfolio Management
Hey guys, was wondering if you could share thoughts on underwriting vs portfolio management at a direct lending firm. Would appreciate insights on comp, work, wlb, and exits. Thanks!
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Currently associate at MF PC in underwriting (execution) and I believe the difference is firm dependent.
At my firm it's mostly just title and there is a lot of crossover, however inherently PM is more middle-office in that you role is not so much analysing prospective investments and building models, it's ensuring the opportunities that do arise, fit properly into the portfolio for a given fund allocation.
So definitely still involved however more from the sidelines. Like I said though, in my firm the difference is simply semantics and so you may find there is little difference in practice.
Mind if I PM you details of the roles and get your opinion?
sure
Portfolio management is quarterly reporting and coverage plus maybe mix of underwriting ops type work on incrementals for existing names.
Underwriting is more interesting (you figure out if you want to do new deals and diligence them and make memos) vs portfolio management is entering historical financials each quarter and paraphrasing the MD&A, maybe quarterly valuations, maybe some underwriting on small incrementals etc
I'm currently in a PM role for a distressed credit fund and my firm runs its a bit differently than other firms. We handle any amendments, upsizes, periodic IC updates, and most importantly, any restructurings. I probably wouldnt want to be in a similar role for a large sponsored lender, but my firm is typically non-sponsored LMM special situations and were honestly closer to structured equity / distress vs PC.
Key points for me before I accepted were: 1) were considered part of the investment team and not back/middle office, 2) we have a voice and pseudo approval rights over new investments and are brought in on the 85yd line to get spun up on the deal, 3) Comp is within a fair toss of the underwriting team, their target bonuses are 10-15% higher than ours but the base salaries and carry allocations are the same at each level.
Brightwood?
Nah, i did speak with Brightwood recently though. Seemed like an interesting enough place, comp was a bit on the lower side. Are you looking at a role there?
Can someone be fully transparent about pay here? Can post anonymously but we need some damn specifics
I’ll update when/if I get specifics
Going to depend on the firm, but my old shop which was more of a direct lender, the PM type team which did primarily restructurings / ran assets that they took the keys on significantly outplaced the underwriting team in exits. All in respect of moving into private equity style seats, moving up market, and moving to distressed funds.
Pay is less than an underwriting role, but to be blunt, focusing solely on pay is the wrong move. Sure it means lower $ in the short term, but, port mgmt at a place that is not fund management like Carlyle has, is truly front office relationship based, credit and legal work thats invaluable ability, you're so in demand you have no idea... you'll learn WAY more than an UW role, because you deal with a lot of real problems, think quick on your feet, differentiate yourself, and are the go to person at most places. You'll have autonomy to develop ways to track credit risk and speak to C suites in FO. You'll be more indispensable than an UW person who is a dime a dozen. I found constant challenges differentiates you to know so many different things. If you do both, as I've seen banks do, your life is gonna suck if when shit hit the fan. If you have great exposure, unless the people and team are toxic its a mistake to dip. And to be clear, big funds like carlyle, ares, hps.... I would rather cut off my foot than be there when shit ultimately hits the fan.
Unless there's a 6 figure difference with guarantees, you'll be moving from an in demand silo to a high probability of not getting a job because everyone in IB is now vying for it. Then again I know in biased as I love this niche and done it at multiple firms learning a fuckton
Can you make a career in PM up to VP level and then move to UW as a D? I imagine pay is 6 fig difference at MD level.
It'll depend on place but being senior and moving over with the same title probably unlikely. It's a different skill set. I don't want to rain on the U/W parade as theres zero desire on my end to be in that job
Short answer, no.
Could you speak more about the credit and legal work skills that are valued?
Legal - interpretation, enforcement, negotiation, and amending.
Credit speaks for itself
Portfolio Management has very different meanings in different firms. Some funds call middle office PM, while others refer to their workout teams as PM. Clearly very different. The name PM itself doesn’t mean much.
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