Private Debt Poaches Bankers in Search of Better Prospects
(Bloomberg) -- Europe’s direct lenders are luring staff from banks as funds make further inroads into the broader debt market and expand their European reach.
A flurry of senior moves and new hires took place in the industry in the first quarter of the year. That follows a 10 percent increase in general headcount to 522 last year, according to a Deloitte report. Private credit funds have been targeting staff with 10 or less years of experience, with the majority of the intake from 2018 at this level coming from financial institutions, the report showed.
The hiring reflects the growing allure of an industry that has flourished in the past decade as regulation in the wake of the financial crisis forced banks to pull back from riskier lending.
Credit funds are filling this void, and emerging as an attractive proposition to professionals as they grow bigger and participate in more high-profile deals, according to Mark Pettman, managing director at London recruitment firm Natural Search.
“Direct lending can offer better prospects financially at a time when banks are increasingly under pressure over bonuses and compensation,” he said.
There may be more risk and ultimately more reward to be found in the industry, with some professionals attracted by the potential of earning carried interest, a common policy among private equity firms where senior managers receive a share of the funds’ profit. Carry compensation for debt fund managers is lower than its private-equity equivalent but can still be more significant than in banking, recruiters say.
The pickup in recruitment is tracking an expansion in the firepower of Europe’s direct-lending funds. Funds raised for the strategy with an Europe-focus totaled $21.6 billion in 2018, the third biggest year for fundraising, according to research firm Preqin.
An expansion into mainland Europe has spurred much of the recent hiring activity. The direct lending industry is less London-centric, given that firms rely on an on-the-ground team to foster relationships with borrowers and buyout firms.
Ares Management UK Ltd. and Pemberton Capital Advisors LLP recently opened offices in Amsterdam, hiring former bankers to lead their local operation.
Elsewhere, Beechbrook Capital LLP hired a senior executive from a regional bank for its new Frankfurt office. And last month Goldman Sachs’ private capital group recruited a managing director from Alcentra to head mid-market lending in Germany, Austria and Switzerland.
“Hiring activity at senior level has been more strategic recently with funds bringing in investment professionals to cover specific European regions, as this often requires local knowledge and language skills, that are often difficult to find,” said Jack Andrews, an associate at Paragon Search Partners in London.
The industry’s overall headcount looks set to increase over the the course of 2019 with other large funds expected to open offices in European capitals. Funds raising fresh capital may provide a further driver for recruitment.
“This is increasingly important as more capital is being raised for direct lending than before and funds need to deploy,” Andrews said. “We expect hiring to remain strong this year, but perhaps shifted towards the more mid to junior level, and with some focus on active portfolio management also.”
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