Credit funds are driving demand for a new breed of credit analysis staff.
Credit analysts who focus on the default risk of corporate bonds are old hat according to one senior buyside credit researcher. They're being replaced by analysts who have a broader background in leveraged and structured finance.
"The market for credit analysts with leveraged finance and high yield experience is extremely hot," says Andy Evans, head of credit research at Insight Investment, the asset management arm of HBOS. "You can no longer look at corporate bonds in isolation without understanding other areas of the capital structure - an appreciation of leveraged loans and mezzanine finance is becoming a pre-requisite."
Having built up its team in 2004-2005, Evans says Insight is now concentrating on bringing its equity and credit analysis teams closer together, rather than adding staff. However, he says plenty of others are hiring: "A lot of analysts from banks' high yield desks are being hoovered up by hedge funds and crossover shops."
The Financial Times today quotes Michael Hintze, head of hedge fund CQS, as saying the fund has been on the lookout for credit officers from banks. "We know this sometimes creates cultural challenges...but we want their expertise," Hintze says.
Figures from Standard & Poor's show credit funds' share of the leveraged loans market rose from around 5% in 1999 to more than 40% today.
Evans says funds' need for credit expertise is here to stay. "Whereas investors were previously happy playing around in the high yield bond market, more sophisticated investors are now expanding into leverage loans and mezzanine debt, which were previously the preserve of the banking sector."