Distressed Debt Investing

That is what I was afraid of on the internship being key. I have looked through Vandy's graduate details and saw some of the stats. A lot of the people stayed in the south east, but there definitely were some that went on to IB in NYC. In doing a little research online, I read they have had good success with placing students in Goldman Sachs internships, but I haven't verified those stats, I think I saw that on WallStreet Oasis or somewhere while searching.

But you are right on the loans and everything really not being that big of a deal relative to the income after you come out. Just using Vandy as an example, it is $45k/yr I believe, so $90k for the program but the average student comes out make over $100k. Right now, I make $60k at my job, so that starting pay jump would give me a pretty good return on my money. One plus I will add is my son will be in Kindergarten starting next August, which I assume is around when I would enroll if I did. That means $800/month in savings which would be huge to my bottom line or as far as cutting down my cost of living goes.

Thank you for the kind words! I really want to keep progressing, I hate to stagnate and I feel like that is what I am doing in my current role. I have no desire to do what I do now in the long term. I want to do big things and I feel like now is the time to do it. I've had a sense of urgency come over me the past couple months realizing I don't want to be in this role forever and if I want to make stuff happen, now is the time.
 
The internship at an MBA isn't that important. My wife, my sister, 2 of my in-laws all went to top MBA programs. Only one pursued the same career path that he interned in.

It is truly a get out of jail free card.

Regarding tuition, often a recruiting company will pay your tuition or second year. This is especially true for consulting firms.
 
Interesting, I have done a solid job of making it to where I am by networking and have hopes I can continue that trend. That would be awesome on a recruiting company covering part of the tuition though, that would be huge for sure.

Basically I need to figure out a game plan for how to get where I want to be. Currently trying to do some soul searching to figure out what exactly that is. Ultimately I would like to do this stuff on my own, but that is more of the end game. Can't jump right to it apart from the type stuff I've been doing in this thread, but even with that I need to elevate my knowledge significantly. I haven't had the best luck finding many people discussing these type topics. I just got 3 different books on distressed debt/restructuring so I'm hoping I can further my knowledge there.

I think my two options are:

1. Start studying, try to use connections to get on with a smaller PE firm in my area, then maybe pursue an executive MBA from a top school there if it will benefit me.

2. Start studying for the GMAT, try and kill it to get into a top MBA program, then try to get into a restructuring firm or PE firm from there.
 
newwurldmn said:
The internship at an MBA isn't that important. My wife, my sister, 2 of my in-laws all went to top MBA programs. Only one pursued the same career path that he interned in.

It is truly a get out of jail free card.

Regarding tuition, often a recruiting company will pay your tuition or second year. This is especially true for consulting firms.
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I think the answer to that is "it depends". I was a military pilot when I went to school. I did not do a finance internship. Despite graduating in the top 10% of my class, I'd have had a pretty tough go of trying to get a distressed debt PE job because the finance hiring types are pretty set on seeing you pay some kind of dues in the finance industry with an internship being the bare minimum. Another military guy in my class did both a summer finance internship and a post-graduation hedge fund internship and was only able to make it into a VC slot despite trying for a hedge fund role.
If I was in the sell-side prior to my MBA then I wouldn't have needed the internship, and if I wanted to go into something else after graduation, like general management, operations, or in my case becoming an entrepreneur, then where I did my internship was far less important. In fact a large number of my classmates didn't end up going into the same field they did their internships in (most of those who did investment banking internships realized how badly it sucked and decided not to do it, for example). So it's one of those things where if you specifically want to do what FCXOptions wants to do the internship is far more important than it should be, for almost anyone else the experience you cite is typical.
 
How much money would one need to manage in a hedge fund, acting solo, to make a living off of that management?

Why not just take some of the money you would spend on a sheepskin and instead use that money to set up via all the regulatory BS... your own hedgefund? I'd throw down 10K for ya. Unlike Marsman... you aren't in a former Soviet Block country, and it sounds like you have already established an excellent trading record. F*** an MBA. You already know what to do now. I guess the biggest thing would be to find others to throw down $'s on what would be an unheard of manager. But... maybe one of these established big money WS hedge funds, ....would fund you. I say go for it while your young. Set up your fund while you have a day job... then get get on the phone and beg for investors. It sounds like you have what it takes. All you have to do is sell yourself. Is an MBA really worth the time and money? IMO no. Be a Maverick. It'll happen. -vz
 
Sig said:
I think the answer to that is "it depends". I was a military pilot when I went to school. I did not do a finance internship. Despite graduating in the top 10% of my class, I'd have had a pretty tough go of trying to get a distressed debt PE job because the finance hiring types are pretty set on seeing you pay some kind of dues in the finance industry with an internship being the bare minimum. Another military guy in my class did both a summer finance internship and a post-graduation hedge fund internship and was only able to make it into a VC slot despite trying for a hedge fund role.
If I was in the sell-side prior to my MBA then I wouldn't have needed the internship, and if I wanted to go into something else after graduation, like general management, operations, or in my case becoming an entrepreneur, then where I did my internship was far less important. In fact a large number of my classmates didn't end up going into the same field they did their internships in (most of those who did investment banking internships realized how badly it sucked and decided not to do it, for example). So it's one of those things where if you specifically want to do what FCXOptions wants to do the internship is far more important than it should be, for almost anyone else the experience you cite is typical.
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I agree with this. Getting top PE jobs out of bschool is pretty rare - even at the top schools.
 
Sig said:
set on seeing you pay some kind of dues in the finance industry
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I wish this would include the finance work I've been doing currently, but I doubt they care about it much at all.

I'm thinking it will make sense to get in touch with these PE guys that I have access to through work, maybe not try and set up a formal interview, but see if I can just get some dialogue going and see what they are looking for and then go from there. I feel like I should be able to sell them on my story, it is just a matter of figuring out what they want me to know and going from there. Depending on how that all goes, then I think I will be in a better position to make a decision on going for the full-time MBA or not.
 
vanzandt said:
How much money would one need to manage in a hedge fund, acting solo, to make a living off of that management?

Why not just take some of the money you would spend on a sheepskin and instead use that money to set up via all the regulatory BS... your own hedgefund? I'd throw down 10K for ya. Unlike Marsman... you aren't in a former Soviet Block country, and it sounds like you have already established an excellent trading record. F*** an MBA. You already know what to do now. I guess the biggest thing would be to find others to throw down $'s on what would be an unheard of manager. But... maybe one of these established big money WS hedge funds, ....would fund you. I say go for it while your young. Set up your fund while you have a day job... then get get on the phone and beg for investors. It sounds like you have what it takes. All you have to do is sell yourself. Is an MBA really worth the time and money? IMO no. Be a Maverick. It'll happen. -vz
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Probably a decent amount. The potential returns are definitely there, BUT to even access a lot of the products you have to be an institutional client. Not sure what kind of capital would be necessary for that, but I would venture to say $5m+. I can access a lot of the public debt of course, but there are bond issues only available to institutions, bank debt that can be bought, trade claims, etc. So I guess I would be handicapped to an extent since I wouldn't be able to get in on some of the second lien type offerings that rank higher than Senior unsecured bonds in the capital structure.

A big part of it involves knowing bankruptcy law, that is something I will need to work on as well. I used to deal with bankruptcies some when I was in the credit union, but that was all individuals not companies. I only know the absolute basics here. Hoping some of these books I got will help me dive into that aspect a bit deeper. I would LOVE to do this stuff on my own. I need to learn a lot before undertaking something like that though and need significantly more capital also.
 
vanzandt said:
How much money would one need to manage in a hedge fund, acting solo, to make a living off of that management?

Why not just take some of the money you would spend on a sheepskin and instead use that money to set up via all the regulatory BS... your own hedgefund? I'd throw down 10K for ya. Unlike Marsman... you aren't in a former Soviet Block country, and it sounds like you have already established an excellent trading record. F*** an MBA. You already know what to do now. I guess the biggest thing would be to find others to throw down $'s on what would be an unheard of manager. But... maybe one of these established big money WS hedge funds, ....would fund you. I say go for it while your young. Set up your fund while you have a day job... then get get on the phone and beg for investors. It sounds like you have what it takes. All you have to do is sell yourself. Is an MBA really worth the time and money? IMO no. Be a Maverick. It'll happen. -vz
More...
For sure an MBA isn't the only way to go or necessarily the best way to go. However distressed debt funds are a very different animal than a straight stock trading hedge fund. Distressed debt funds are activists who make their own reality by buying up entire tranches of junior debt and essentially holding the senior debt holders hostage to give them some payout in order to keep them from losing more money in a protracted bankruptcy. To do that you need scale and it doesn't hurt to have a boss who's done this a couple times before to guide you along.
Also the answer to minimum scale on a hedge fund of any kind may be bigger than you might think. Even if you manage to get 2/20 and are a one man shop you need to be at $5M minimum to make a living and pay your costs. That said I certainly agree that FCXOptions seems like the kind of guy I'd throw $10K at as well...Marsman you'd have to pay me that much to get me to read his posts!
 
I appreciate the vote of confidence from you all!

But you are right, I've had quite good success up to this point, but I just feel like there is so much for me to learn. I'm kind of just riding the wake of a big ship since I have no way to actively play any part and am limited on what I have access to. Basically my method up to this point has been to dig into the balance sheet and find companies where I felt even with a decent writedown on asset value, I still should stand to recover more than I paid, hopefully it is a multiple of what I paid so even when I am wrong, a single winner can offset a loser or two. In what I've experience so far, that has held true. Also dig into revenue and on these commodity plays, finding breakeven costs and revenue detail to see what it would take for them to be viable. I think I have a lot of room on this to learn more though and dig into the bankruptcy aspects more and how things are handled.

Some of these plays have been downgraded companies that I was very confident they would come out just fine and not need to file bankruptcy, FCX being one of those. If I do get a job with one of these firms though, I think I will actively stay involved in this stuff on my own if possible. I find it incredibly interesting and to be honest I have been much more successful with it than regular outright trading, I see so much potential in it.
 
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