Welcome to Other People's Money. I'm

Maxy and today I'm joined by high yield

Harry. Harry, welcome to the show.

>> Thanks for having me, Max.

>> You are a leading voice in the finit

community and a prolific chronicler of

all things related to the buy side, both

on Twitter and through your venture

byside hub. I want to start because

between AI supposedly coming for the

junior analyst job, the maturation and

maybe we could say saturation of private

equity and the growing concerns about

the state of private credit, things

don't really seem great on the buy side.

And so I'd love to hear from you whether

you think that's true and and is this

what you're seeing from the data that

you collect from thousands of buyside

professionals through the buy side hub.

>> Yeah, thanks again for having me, Max.

So I would say it's very bifurcated. I

don't want to say tale of two cities,

but there's so many different things

going on at the moment that allow for a

lot of folks to to make money on the buy

side, but it's kind of the year of the

investment banker and part of that's

because of SpaceX and some of this other

IPO activity that we've seen and are

expecting. Um but also the environment

is kind of leaned more towards bankers

just in terms of stability just because

a lot of PE and then private credit as

well to to some extent uh like those

folks have had to wait on exiting

positions. They've had to do

continuation vehicles. Fundraising has

been a bit more challenged. It's just

not the same environment it was from the

2010s but also 2122

uh what have you. So, one of the things

that we've noticed is private credit

compensation's kind of like peaked a

little bit. Obviously, as you progress

throughout your career, you're you're

earning higher compensation levels, but

there's that worry there on the on the

private credit side, which I think is

like a 12 to 18month lag from a lot of

these PE folks. And then on the PE side,

it's really interesting because we just

saw an article from FT and there's

private equity folks who are expecting

their carry check to have hit by now. uh

who who are who are taking some sort of

like non-reourse loan off of future

earnings that they expect from carried

interest just to continue and subsidize

I guess their lifestyle given it's kind

of expensive to pay through private

school with some of your kids among all

the other things that come up from

living in New York City. So, it's a

really interesting time where I think

unfortunately like some folks are more

illquid than they want to be. They

definitely wanted exits, realizations,

term loans to be paid down. Um, but

that's not quite what's happening given

the environment, given multiples,

fundraising rates, etc., and AI and

software.

>> I would say the LPs probably feel the

same way.

>> Yeah. Yeah. I I imagine they're they're

they're not too happy. Hopefully,

they're getting their economics. Um, but

you know, we we've seen a lot of LPs

voice concerns both about private equity

and credit.

>> So, it sounds to me like you're saying

it's the year of the sell side, not the

year of the buy side.

>> Yeah. Yeah. That's that's a really good

way to say it. Uh, because we don't even

have a open AI and anthropic quite yet.

Um, and with banking, there's just a lot

of M&A activity going on and a lot of

stability. Even with AI, uh, it seems

like a lot of bankers feel pretty good

about this year and next year.

>> We'll go through all three of these

things. Where do you want to start? You

want to start with private equity,

private credit, this AI coming for the

junior analyst job. What do you think is

the area where there is the the biggest

pockets of concern?

>> Yeah, that's a good question. I think

first and foremost with private equity

versus private credit, you see a lot of

doomerism with private credit. And I

think it's very fair because we've seen

that even some of these wellestablished

funds are seeing their redemption rates

go up quarter over quarter. we're going

to see that 5% rate hold. This is

structured to not go above the 5% um

gate, but it is very real and very

concerning that you're seeing consistent

teens level uh redemption requests

because that shows there's a lot of

people in the asset class who are one

worried, two maybe shouldn't have been

there in the first place. That's a whole

different discussion we can have too. Um

and and then just general broader

worries about

the downside risk with the asset class,

especially given the fact that

we know AI is going to play a massive

role in disrupting

software companies, business services

companies, tech- enabled services, stuff

that for many folks equals like 20 to

35% of their portfolio. And that really

hasn't played out yet. Some of the

private credit names that have run into

issues haven't necessarily been those

businesses quite yet. And some of that's

just been coming from the fact that

rates have been high for four years.

This, you know, just stresses the free

cash flow ability. Multiples were

higher. There's no uh real exit at the

moment. So

there's there's more pressure I think

from the equity side than credit because

I I think a lot of people forget that

the docks are tighter in private credit

than they are in like the broadly

syndicated loan market and equity

obviously takes the first the first hit

in a default or you know any other sort

of restructuring like I think I think

private credit is actually more

advantageously positioned to loan to own

restructure figure out some sort of

situation to kind weather the storm or

take the keys.

>> I would generally agree with that. It

has surprised me the degree to which

people have focused on private credit

given where it sits in the capital

stack. You don't really hear about

private equity. I mean there are entire

firms built around investing buying

these sort of old sluggish software

companies at low multiples levering them

up. Maybe they do some sort of

consolidation. um you know that's entire

firm's strategies whereas private credit

you know obviously is in a bit different

state in the stack and maybe doesn't

have as much as much exposure in one

particular fund.

>> I think that's a really good point and I

think the one thing I would add from my

time in both private credit and public

credit is the diligence process is a lot

more thorough in private credit than

public credit just because how it's

structured. Like public credit has a

dynamic where there's a 100 lenders in

the capital structure. The timeline for

a deal to get done is seven to 10 days.

But obviously these high yield road

shows, same with IG, this is like one,

you know, same day new issue um today's

business or like something that's done

over a two to three day period. So it's

a lot faster in the public credit

markets while private credit has that

eliquidity premium. um and knowing the

fact that you're kind of holding on to

this paper for for quite some time. So,

you really need to get a lot more

comfortable, a lot closer to the

numbers, to the people. Um and as a

result, the diligence process is is

deeper, longer, and more exhaustive.

>> So, with these redemptions from private

credit, um there are a number of forces

that are at play. Some people have

talked about the fact that uh the BDC's,

the publicly traded private credit

vehicles are trading many of them at

discounts to their NAV. And so if you

can get a redemption and then go into

the BDC, there's a little bit of NAV ARB

that you could play. That might be the

most generous sort of smart money reason

why we're seeing redemptions come up.

But then the other side is that they

really went after retail and retail

perhaps didn't quite understand um how

the gating worked and and what that they

were investing in. Um and so there's

there's concerns about private credit,

but then there's also just the FOMO,

right? like what's happening in the

equity markets, what's happening with

the AI trade, people want as much

capital as they can to chase this trend

between those three forces coming

together. I mean, do you think any one

of them is dominant?

>> I think the retail component is really

important because that's not necessarily

a flow that will happen three, five

years from now. Um, is definitely part

of the flow story over the past two to

three years where retail is getting more

involved in private credit. I think this

is going to scar retail quite a bit

where like you know for any professional

who who does this for a living we we

kind of get the gist of private credit

where it's okay it's it's locked up

capital there is going to be a mids

singledigit default rate um that comes

with the territory but you're getting a

nice yield and maybe this replaces some

of the high yield allocation you

historically got uh might be more

attractive than some court bonds, what

have you. Like I think that's how a

professional would look at it. Like

retail might look at it differently. And

when they realize like, oh, I can't have

my I can't get my money like that, you

know, a wonderful life type of moment

where the money's not in the bank. I

think that causes people to be panicky

and get their money out the door. And I

think also retail is is quite smart. um

people don't give them credit for for

it, but they do kind of like lack some

of the sophistication

that makes that would make them more

comfortable with private credit. So, I

don't I don't think they should be

involved with it if they don't really

understand what's going on. I think from

an institutional lens, you're using

private credit to replace some of the

other credit oriented products um that

you would historically have invested in.

And I think that's something that stays

and makes sense, especially because I

think some of the the IG uh secured type

of paper, it can be quite attractive.

But I I think retail is the the big

piece of the puzzle here where

a lot of them, if they don't know what

they're doing, shouldn't be involved in

the market, and I don't think they'll

necessarily come back.

>> Okay. So, you think retail isn't coming

back? I mean certainly the industry was

penciling in quite a bit of growth from

retail basically to infinity. Uh and so

when you talk about the comp rolling

over I mean how much of that is the

slowdown right now and how much of it is

projection out into the future that um

you know this business isn't going to

just be up and to the right forever.

>> I still think like it's worthwhile

saying that like comp is really

constructive. Like there's there's been

points where like the the baseline a

couple years ago with private credit

associate comp at top funds has been

like 150 cash comp 150 bonus um if not

more you know if not getting into 325

350 at top New York shops. I think

that's started to edge a little higher

too. Um and that's like a that's only

like a 25k to 50k delta from like the

top private equity firms. Um, so this

like private credit's a career where if

you're in it for seven years, like

you're you're making quite a bit of

money quite fast. Like you know, like

somewhere in the frankly 500 to 700

range, which in New York is no joke. Um,

and obviously there's a little bit of a,

you know, you lose some of that and like

there's a bit of a discount if you're

not in in New York, but if you know, if

you're in Chicago, LA, elsewhere, you're

still getting compensated extremely

well. So, you know, even like a small

little hit uh or like fundraising

pressure, stuff like that,

it it's not as consequential as what the

downside of like a bank can be. I still

think there's like some AUM stability

with these PE and private credit funds,

but I think the problem comes with, you

know, what if we hire 10 assoc or 10

associates instead of 12? Um, you know,

same with like, okay, we hire three

instead of five, etc. What if there's

only two VP slots instead of three?

Like, I think that's where a lot of

private equity and private credit folks

might start running into issues where

it's like, oh, wow, you know, my my fund

can't raise. We're not doing deals.

we're not exiting deals. Um,

we're not able to to fund raise and

we're just kind of like managing the

fund and it's going downhill from here.

Like I think there's a lot of those

stories but happening behind the scenes

and I think that's what kind of leads

people to splinter off into different

things. Um, but but compwise like yeah

it's flattish on the credit side and a

little bit on equity but people are

still going through the progression to

some extent. Um, but it's not as

high-flying as like the variable

compensation that I think some

investment bankers are seeing relative

to like some of the bad years that we

had um four years ago with banking.

>> Interesting. And so when you say, you

know, people are still advancing through

um but it it sounds to me like there's

kind of a ceiling right now that because

the the capital markets have slowed down

for private credit that there just isn't

as much opportunity for people to move

up and you know to get to that 500 700

range that you're talking about, you do

need to move up within the org. Um, so

what is the what does the career

mobility look like for people in private

credit and private equity and how do you

project that moving forward?

>> It really is a pyramid like most things

in life where there's a ton of analysts

um ton of associates. I think you can

really kind of like go through the

motion and um not almost everyone but

like everyone can become an associate.

It's just a question of okay can I get

to the senior associate level? uh can I

get to VP? And the slots become harder

to come by um you know as you keep

going. One of the things I've noticed is

a lot of the private equity associates

will splinter off into private credit

after their two to three year stint

which is a little surprising. Um maybe

they just want like a little bit better

of a lifestyle where they're working 10

to 15 hours less per week like not as on

call as private equity. um or or maybe

they're going off and going into like

the lower middle market or a smaller

middle market shop where they where they

think there's more opportunity and where

they're able to potentially get out in

New York City as well. So those those

are a few things going on. Um I do think

the industry is like a little topheavy

where there's just a lot of um people

gobbling up the carry and I think that's

a dynamic that won't necessarily change

new fund formation. Like I think I I

think it's kind of like capitalistic in

nature where eventually the carry is

just not re you know it's kind of

hoarded by too few people that

eventually creates dynamics where it's

like okay I'll go raise a new private

equity fund or I'll splinter off or you

know I'll go the small medium business

route um you know like just acquiring my

own business and owning all the

economics there like I think that

dynamic is still going to exist. I I do

think though we're kind of heading

towards a world where you just need like

a little

a little bit less of of headcount. Um

where you kind of have like eight

associates instead of 10 dynamics like

that. I think people need to build out

or they need to

assume a world where AI is perfect. You

know, as of right now, AI is as bad as

it will ever be. It only advances. It's

just a rapid rate that no human can can

advance at. And I think that's something

that's like quite remarkable but also

quite scary. And frankly though, today

like what I was doing as an analyst like

seven years ago has been absolutely

reshaped by AI where AI can do 90 to 95%

of it. the memo building, the diligence,

the finding sources, the random Excel

tasks, um like all all the grunt work

stuff that I would have to do by hand or

or or by Excel has just dramatically

changed. And I I think that's something

that like really changes and advances

the role of what an analyst, associate,

etc. looks like. And that that drives

the fact that you really need to be more

than just like a deal monkey and make

sure you're understanding businesses,

doing sales, managing processes,

coordinating with people, like doing

tangible things that are tied to like

the real world economy to actually

advancing

uh you know the operating profile of a

business and building relationships,

doing sales, etc. Because I think I

think in many ways like uh every job is

sales and you know being able to do that

is is something that will have some

value uh you know in a AI singularity

world.

>> So it sounds to me like if you're at a

bigger org it's just going to be harder

to get as many of those opportunities.

So do you think there is advantage for

uh younger finance professionals to to

actually spend time at smaller orgs

because up until now it has been the the

big guys are kind of eating everything

and that's where you want to be. Um

those jobs were better, the the

advancement was better because they were

the ones raising money. They were the

ones raising new funds and that's where

the opportunity was. Do you think that

has now flipped?

>> Yeah, I think I think it's two-sided.

Like when I think of big companies,

there's like the big companies like

Apollo who are always doing deals. They

have a lot of capital to deploy. Um

there's a lot of money coming in the

door there. And I I think that is

obviously a place where you will learn a

ton, you'll do a lot, you'll be quite

smart, etc. Like I don't I don't think

that's ever changing. I think the the

institutions

that are a bit more in trouble is where

you're kind of like a cog in the wheel

and you're you're going through the

motions. You kind of have like more of

an email job type job. Uh you're working

few hours like you know maybe maybe it's

a big name but the fundraising isn't as

good. Um your work is more like

boilerplate asset management type of

type of skills. Like I think I think

that stuff is a little harder

to like rationalize over a 10 to 20 year

period. I think what you want to do is

be a little bit uh closer to kind of

seeing how the pudding is made. And some

of that comes from like the lower middle

market, the middle market, what have

you. just situations where whether

you're the priv private equity player or

you're like a one-stop co capital

provider where you're at a private

credit fund that does a little bit of

equity or maybe you're a private credit

fund that's like a little more hands-on.

I think that's like the more compelling

place to be because the the two career

paths are really going to be oriented

towards like the AI tech enabled stuff

and then the real economy stuff. And I

think the real economy stuff is really

important here where the skill set you

want to learn and that you want to build

towards are skills that tie you to like

the real economy and in driving a

business forward as opposed to like

guessing oh this company's going to

going to beat on earnings by like $5

million or oh I read this GLG call or

talked to this expert or blah blah blah

like and didn't actually touch anything

tangible to the business but I I think I

have this understanding Like I think not

to like go too far off topic, but one of

the problems with like software

investing from finance professionals is

that they're not actually technical um

you know it comes from just like reading

some sims, talking to some people, stuff

like that, but they're they're not

really in the weeds and don't really

understand it. So I think the fear is

you don't want to be a finance

professional who doesn't actually

understand business. Like you want to be

someone who has like transferable skills

where you know if there is problems in

private equity or um you know a lot of

these different buy firms that you can

go out and like work for a business or

buy a business and actually manage it

and actually figure out how to grow

beyond just like the things that don't

exist anymore in terms of just buying

like a smaller competitor and getting

multiple arbitrage. Like that that's

kind of the easy way out. uh the firing

people like you actually have to figure

out how to grow a business and I think

that's like the skill set that finance

professionals should be indexing for

like the real economy stuff.

>> So in in a prior cycle like were the

roles because I've seen it with people

and and I'm using private equity as the

example but you know there were private

equity professionals who their job was

to go actually be inhouse at one of the

portfolio companies. I mean, was that

job considered to be um the job that you

wanted at the time? And and is that

maybe why people haven't done that? They

don't have those skills.

>> Yeah. I mean, I think the higher

compensated job is being an investment

professional working on the deals as

opposed to being like the operating team

member and like going into the portfolio

company. Um I I think I think both of

those roles can be attractive. Like if I

think in private equity, you just want

to make sure you're close to the deal,

you're close to the management teams,

you're driving value. Like a lot of

those PE roles exist without having to

become like an operator. But I think the

operator is a good place to be. um

because some of those folks go on to be

CFOs and I think that's been quite

lucrative for a lot of those people who

are senior finance leaders or CFOs who

join the private equity ride are

compensated with some profit share um

and and have a good result upon the

exit. So that was I think that was good

for the past cycle, but given exits are

slower, you're just you're kind of

relying on your cash compensation now.

>> Understood. So, you want to still be on

the investment team, but you don't want

to be the person who it's like a

barbell, right? Like maybe you want to

be the guy who's been on the factory

floor a couple weeks a month talking

with management. Um, or if you're in the

software side, you want to be somebody

who is using codecs and cloud code and

and those sorts of tools and really

understands it. You said that people

weren't technical, but as coding starts

to move more towards being AI generated,

I mean, doesn't that give investment

professionals perhaps an opportunity to

up their technical knowledge?

>> So, there was something very interesting

from from Scott Goodwin over diameter.

He basically said that they didn't hire

analysts before, but now they're able to

just because there's so much knowledge

at the tip of everyone's fingers that a

lot of these students who are more

inclined to take action and learn and

you know in our like 99th percentile uh

you know they're they're able to hit the

ground running and provide a lot on on

the other side of the coin. some of the

more like senior credit analysts or

investment professional folks are having

a harder time adjusting to AI. You know,

they're not they're not tech forward.

And I think that's something that can

can really hurt you and kind of like

hinder your advancement. You know, I

think there's a constant joke that I

post that other people post about like

boomers or other people not being able

to open a PDF. Like I I think some of

that applies to like actually deploying

agents and you know being AI centric uh

across like the workforce. I I think

there's a lot of people who are a bit

stubborn to change or you know might

face displacement. So, you know, there

there is like definitely a new wave of

people who will be a AI forward, but it

doesn't necessarily mean that everyone

who's already in the industry is going

to figure out how to like claw code and

and you know, have open claw and stuff

running around. So, what's an example of

a task that you think you could do

better, faster with AI or that you can

do now with AI that you couldn't do

before that this, you know, boomercoded

senior credit professional um is not

able to do that a younger person can.

>> I think we're we're kind of beyond like

the whole the whole prompting um element

where it's like, oh, how do I like

develop very strong prompts, etc. right?

It's more about, okay, what what can my

agents do? And I I think I don't know if

we're quite there with finance in the

way that we are with like tech where

agents are running around and doing

things. Um, I think that's kind of where

the the puck is going. I think we we'll

get there quite quickly. But the big

thing that comes to mind on my end is

just the ability to develop memorandums

and to do grunt work and Excel is is

just quite quite rapid. Um, you know, I

think I think a lot of people don't

understand the prompting element, which

is why I brought it up because, you

know, obviously that's kind of like 101

at this point for a lot of people. But,

you know, some people might have a

negative view about AI because they

don't understand how to like, you know,

get get it to do something quite well

after a few iterations. Like, they might

give up up after just saying, "Oh, blah

blah blah do this in three sentences."

Like, needs a lot more direction than

that. Um but realistically like a lot of

the heavy lifting on research,

diligence, modeling, um you know,

developing memorandums is is is all done

and I think that frees you up to like do

some other things. We are seeing a bit

of like an agentic movement with AI

expert calls. So I think that's

something that is going to continue to

take place where a lot of your diligence

processes are completed by AI and you

know you're gathering information from

third party experts which is something I

never would have thought would happen.

Um so all that's flowing in to like

really turbocharging you to focus on

things that counts and I think that

comes from delivering a compelling

pitch, having the numbers that you need

to reinforce your view and conviction.

Um, but also I think the element that

really shouldn't go away is speaking to

people, speaking to management teams

because that's how you can kind of get

like certain tells from folks about, you

know, whether they have conviction,

whether they're like leaning into

something too hard or or, you know, um,

showboating or what have you or, you

know, um, avoiding something that's like

more important than than they're letting

on. Like that human element I think is

something that is really important and

needs to stay. And I think that's that's

kind of how the the puck is moving.

>> And so for the senior professionals, was

that something where the work would be

getting done? It would end up on their

desk and they're the ones that are

supposed to extract the insights from

that and you're saying that now the

juniors have the ability, they have the

time to actually deliver those insights,

you know, to one layer above that next

senior person themselves. Um, just

because they have the time, right? They

have the time to think deeply about the

data that they've just compiled and

analyzed.

>> Yeah. Yeah, I mean I think it's a bit of

a mix where you know there's been

structures where okay on the on one side

it's the deal lead the MD VP associate

etc on like a private equity private

credit side and then on like the public

credit or hedge fund side you have like

a senior analyst and then a junior

analyst helping them out. um what I

described it kind of sounds like that

would replace the junior analyst or

associate in some instances as some

shops maybe it does but also

I think the folks that might be well

positioned are those like mid-level

folks who understand the industry well

um are kind of like advancing well

relative to some more senior

professionals and they're also kind of

AI forward like those are folks that I

think can do the job of both an

associate and like a principal director

type quite well. So I think it's kind of

a mix like I would I I wouldn't

necessarily lean on the fact that junior

analysts would be replaced by this. I

would think it turbocharges them. Um and

I think if senior analysts don't know

how to properly use AI, then you can't

just say, "Oh, I'm just going to have AI

instead of a junior analyst." AI is

perhaps a bigger threat to

um maybe people who are 10 years into

the industry think they they know enough

and are not willing to put in the work

to learn how to use these new tools than

it is the juniors.

>> I think it's going to be very shop

dependent and also industry dependent.

Like I don't think it I don't think it

would eat away at like the principle in

like a private equity or um private

credit fund because that's like very

relationship based and process based.

But I I think it eats away at like some

of that analyst to VP level type process

and um I guess kind of the latter of

like, oh, I need I need this person to

check that, this person to diligence

that. If it's like a four to five person

team, it probably eats away at like one

of those more junior type roles.

>> Okay. Well, then I guess how do you

determine

which shops are going to go which way,

right? How do you get that data? I think

on the buy side of like we're very

compensationoriented.

Um so if we get that data it would be

more on the culture side and I think

what we do see on the culture side is

like people complain it's it's topheavy

um for for a lot of parts or like you

know the hours are bad or you know the

room for advancement isn't as good as I

think it is. So that kind of goes to my

point where even though it really is

some of the more senior folks who are

probably more in danger from AI, um the

fact that they've kind of climbed the

ladder to date makes them a little more

insulated than you would historically

think. Um so I I think I think we see

like the valuable data that people are

able to get comes from understanding,

oh, is there going to be a VP seat for

me? what is my like what should my

carry, what should my bonus look like um

as a VP as opposed to like you know as

opposed to other things.

>> Correct me if I'm wrong here, but it

kind of sounds like we're moving towards

big law, right? Where you know they

there's just not any real partnerships

left that you've got people being named

non-equity partner. Like is that the

future for the industry?

I think what's kind of funny is like a

lot of these private credit firms who

sold like the people who got the money

from these sales were like only a

handful of folks. Um and I you know

that's that's extremely compelling if

you were one of the founding members or

you got a got a slice of equity but you

know if you missed that and were more

senior then I I definitely understand

feeling a little um hurt. So I think the

compensation comes from you know having

some sort of deferred equity plan like

that's something that people start to

get like the associate level at banks or

you know maybe the VP level for for

other institutions like I think that

element is a really important piece of

the pie and that's usually like a three

to five year vesting period where you

you um you vest incrementally um but

then also like the carried interest

component is is huge like I think that's

That's how a lot of private equity

people are defined. Like they're they're

cash poor but um equity rich. So the

fact that we haven't really had as many

exits as we'd like is probably a big

problem for you know some of these PE

people who who probably like want to you

know want to make a few million to 10

million plus.

>> So my question would be you know

everyone was expecting Kevin Walsh to

come in and we were going to get rate

cuts. Now it looks like we're moving in

the opposite direction. Um, is this

being pushed out even further now?

>> Unfortunately, just the inflation

environment is is is so sticky and you

know, we probably were cutting a little

too early. Um, you know, obvious I I

don't feel super great about living in a

labor market where all the jobs are

healthcare and government. But, you

know, rates clearly are going to stay a

little higher. um it definitely does

push things out and there's just so many

different headwinds coming at you from a

PE and private credit standpoint with

the high rates which means lower

valuations the AI risk um eating away at

some of these business models like

ultimately if you paid like 14 times for

something but the mark you know back in

21 the market saying this is like a 11

times business now and you know even if

eBay has grown a little bit like that's

that's like a tough pill to swallow.

Like that's something people don't

necessarily want to do. And I think

that's why a lot of the conversation

with private equity lately is kind of

turned towards, you know, this may not

be like the four to six year holding

period that we were used to. And as a

result, you know, we have to extend

things out. Um, we've to manage the

business better for incremental returns

of dividend recaps and and stuff like

that and refinance refinancing our debt

and unatron financing um, and having

longer hold periods. But, you know, four

years of like high rates, it definitely

definitely eats on a business. And I

don't think that's something people were

modeling for uh, back in 2122.

>> Well, I mean, they're not high rates

historically. Like, let's be clear about

that. like if you go for the the median

interest rate over like the history of

the United States, um they're not really

that high historically. And so, you

know, coming from the perspective of a

traditionally public markets investor

where you get marked to market daily,

you have to take your losses and and

that's that's the game. Um and if you're

not right, like you you get you get shut

down like very quickly. So, you know, I

I don't necessarily like feel bad for

for these professionals who, you know,

took a 40-year bull market in bonds and

and with rates coming down um and

thought that that was just going to

continue forever when we hit the zero

bound.

>> I think a lot of those people like the

you you kind of sound like my mortgage

banker in a in a way just comparing

rates uh to where they are now versus

like the 80s, etc. Like I think a lot of

the people who started in the 80s 90s or

early 90s are retired if not close to

retirement. I think like the people that

had easy were like the 2010s people like

I think everyone who's everyone who had

like this 40-year bull market has

already retired recouped things. Um it's

just there was so much training and so

many people coming up from analyst to MD

during the 2010s era that a lot of the

mantra of that low rate fragmentation

type growth has bled into the 20 2020s

and that wasn't necessarily something

that's sustainable. So I think I think

that's the disconnect and I think the

argument more so is like oh you know

there's people who haven't been through

a recession at all like there's a lot of

people who enter the industry in 0 0709

and you know they they had like a world

of hurt because they had a really tough

time uh finding a job or they had to

deal with like some really messy

situations. But then a lot of people

after that they haven't really been as

challenged as much. Like sure there was

like some energy stuff, but that was one

industry. COVID um you know, a lot of

that was like sure revenue went to zero

for a lot of these industries, but there

was so much relief and kind of like a

you know, a V-shaped recovery that a lot

of that worked out fine. Um so I I

definitely think to your point, there's

a lot of folks who haven't been through

real,

you know, a real longer rate environment

compared to like the 2010s. And I think

that's the problem because so much of

that investing philosophy from analyst

MD was built off of a rate environment

uh 10 to 15 years ago that doesn't exist

today. Yeah. And I guess you know it

sounds to me like people didn't really

learn as much critical thinking skills

as they needed. They learned a playbook,

right, that worked in an environment and

they assumed that it would work forever.

And when you talk about what people are

going to need to go learn how to do

moving forward, it's improve margins,

grow ibida, learn skills that allow you

to turn over more rocks, learn learn new

skills that allow you to to apply to

find better opportunities. Um because

the opportunities that people have have

deemed to be economic are just no longer

there. And so that means you're just

going to have to turn over more rocks.

>> Yeah, absolutely. And I mean I I don't

want to like discredit investors as of

today because there's a lot of folks who

are already doing that and have been

doing that for 10 to 20 years. It's just

there's been a lot of easy levers to

pull which made people a little

complacent. And some of that's been on

the credit side too because there was a

period where like I started in software

credit investing and like you could

invest in like every single software

company um that was coming into a CLLO

back in the late 2010s and be fine. like

sure like some of them traded down a

little bit but like this was pretty much

all part paper like no defaults for the

most part um and that that whole

landscape is just flipped on his head.

So I think that's something that uh you

know people need to be aware of where

you can't just be super docile you can't

just wave in investments um you need to

really dig deeper.

>> So on the on the credit side we are

seeing things trade down but we aren't

really seeing the defaults yet. I mean,

do you think that's coming?

>> Yeah, I mean, I think the big thing to

think about here is like revenue growth

should actually look pretty good for a

lot of software companies um for this

year, for even next year. I think the

big question is when you get to the time

to amend and extend or the time to

refinance in 27, 28, 29, like there's a

ton of maturities in the in the late

20s.

Does anyone actually want to take that

bet? Do people want to continue on?

because that's the issue like I've seen

with a lot of cycllically or secularly

declining names where like is let's say

it's like broadcasting for example like

we know broadcasting is dying um like

the user base the people who are

broadcast customers are like literally

dying unfortunately so it's just

something that's like a melting ice cube

to an extent I think you would see that

with software where you know you have a

competitor who is able to add an add-on

product. Um, you can't do pricing per

seat anymore. Uh, you're not necessarily

as insulated as as you once thought and

you need to spend more on R&D or tokens,

what have you. Like there's just so many

there's like 10 different things hitting

these software companies at one time. In

addition to the fact that like

historically you could just leverage

these businesses seven times and feel

fine, which is like, you know, that's a

very high leverage profile relative to

like some of these businesses. um you

know at like five 5.5. So just all that

just really really hit software and I

think if I'm a software investor today

um if I haven't drisked like I'd

probably find times like while things

are tight to derisk um to get out or to

you know figure out like some sort of

comfort level with like what I'm

actually willing to own. I think I think

a lot of people have spent time on that.

Um but I think I think some people are

like a little too complacent or um

buying the dip and you know I think I

think three years from now software and

you know leverage software could look a

lot uglier.

>> Well I think one of the other questions

about the refinancing is the the obvious

thing might be to go oh we'll just go

put it into data centers right you've

got these data centers that are

essentially backed by the AAA rated

credit of the hyperscalers. Um, but

something that, you know, we've been

hearing from people is just like the

deal size, the check size is just so big

that for credit where you need to have a

lot more bets in a fund. Um, it's really

hard to to be able to participate unless

you are the Apollos of the world in a

lot of this data center financing. I

think that really ties into what we've

been discussing where like the big guys,

like the big asset managers who are able

to fund raise, who can deploy a ton of

capital, I think they're actually in a

really good shape. Um, you know, the

industry is definitely gravitated

towards like these top five types of

folks. And then I think beyond that um

like the you know the the middle market,

lower middle market, the really like

roll up your sleeves type is the more is

the other interesting part. Um but yeah,

like I think if if I'm in a top shop

where I'm able to deploy a ton of

capital and be like, you know, almost

the lender of last resort other than the

Fed, like I think that's an extremely

compelling place to be. And if you're

just kind of in the middle, um that's

that's less compelling of a place to be.

How do you determine which path is right

for you between that lower middle market

where you're going to get your hands

dirty, you're going to learn how to

operate a business, um you might get

more visibility with management teams,

etc. And making it and choosing that big

firm because because you're saying the

big firms are getting more capital, but

perhaps the opportunity to rise up

within the firms, it's going to be even

harder. You're going to need to be even

more special. So, how should you as a as

an individual decide which track is

right for you?

>> I think early on in your career, you

should index for prestige. Um, you know,

you want to work at the best investment

bank, the best types of groups, the best

type of opportunities as you possibly

can. Um, and then from there, I think

you you want to have

time spent, you know, if I'm like an if

I'm an IBOPE type person, I I want to

work at the most prestigious um, you

know, most well-known, most high

visibility type of firm. And then from

there, I have a ton of optionality of,

you know, what do I actually like to do?

Like, I think that's the thing 25 year

olds should be thinking about, like what

do I actually like to do? How long do I

want to work in finance? Um, and like

where do I want to live? Like I think a

lot of those folks would stay in New

York City, but they might go to San

Francisco, Chicago as well. Maybe they

go to Florida. Um, you know, you where

you can save a ton of money, you

know, by not having to pay state tax. So

there there's a lot of different things.

Like you can go the hedge fund route,

you can keep going the private equity

route. I think the route that's like

extremely less compelling now is the MBA

route. Unless you come from generational

wealth or you just you desperately need

to um you know pivot into something or

you're you know or you served our

country and you know you it's paying for

you to go to an NBA program. I think

those are the types the three types of

people who should be going. But I think

a lot of people um are kind of like

loboing themselves on an MBA and there's

just rapid uncertainty in the market

especially relative to like 10 years ago

just because of AI where like the

workforce is dramatically changing and

do you really want to take yourself out

of that for for two years? Like I think

that's something um that's a little bit

harder to justify now. So you have the

hedge fund, you have the pre route,

maybe go private credit, um maybe go

small business too. I think that's

compelling and then also like you know I

can go way more into the small business

side but like the other component is

like if you are able to transition to AI

where like I think a guy who did a quick

investment banking stint and then you

know got super senior at open AI um was

was like light cap and like you know if

you are able to pivot into like a high

growth industry like I think that's

something you should take um you know I

would be skeptical about just like

jumping at any AI opportunity because I

think I think the biggest bubble right

now isn't anthropic or open AI. I think

it's like some of these Siri B series I

type companies that just continuously

raise financing but can't go public and

you know are kind of stuck where they

are and maybe claude eats their business

model in in a year. um like that's less

compelling, but like I think if you can

find like a very AI forward company,

then you should probably go that route

too.

>> Yeah. It's funny. I've heard people say

that um and this is related to what you

said about small business that like

founding is is essentially derisked like

that there's so much money out there for

founders and they're able to get some

liquidity relatively early that like to

go out and and be a founder of a company

is is actually a pretty good bet these

days. But to go be like a first 10

employees

um is a little bit or and anything

anything before there's a clear exit on

the horizon is a little bit more risky

um on that in the in the AI world just

because of exactly what you said like

there's so much uncertainty and you're

going to have this period where you've

got a brand on your resume for however

many years that you're waiting you know

to get your exit uh that that doesn't

mean anything to anyone. I think that's

very well said and you know just to like

toot my own horn a little bit like

pretty much I have you know I have the

high yield hairy business and what we've

done is um you know I was just like

making jokes on the internet in 2020 and

virtually unheard of for a few years

just posting like a lot um and it really

blew up starting in 2023. Uh this is

something I was able to like go

full-time on in 2025 via you know like

social media marketing um like large

newsletter businesses with over 100,000

folks and then this buyside hub

component where we're getting all this

comp data and all this culture data um

but this has been something like

especially on the buy side hub side

where like I've I've like bootstrapped

it with like my Wall Street financings

and you know that's I I it's not

necessarily something I would call drisk

like sure you could raise some But um as

someone who has deployed preferred

equity, I'm not one who wants to take

preferred equity. So you you know the

the entrepreneurship part is extremely

compelling. Um I I have a lot of joy

from it and I think we're going to

provide a lot of value with what we're

building. But, you know, it's definitely

the founder element being derised and a

lot of people gravitating towards that.

Um, definitely gives me a little bit of

like a bubble worry where, you know,

everyone can just go into YC and do what

have you. like

it it makes me think like some of those

folks will run into trouble, but um

clearly like some of the bets that I

wish I took or other people wish they

took are some of these um massive AI or

Silicon Valley stories that have just um

you know grown exponentially and and

allowed people to make a ton of money.

Like I think I think that's something

like more people should be turning

towards and I think some finance people

have to turn turned towards that but not

enough.

>> Yeah. And and it brings up the question

of like what is the job that the

22-year-old graduating from undergrad

wants these days at from an elite

school. You know if you go back to the

80s and 90s it was obviously investment

banking. That was the place to be. If

you graduated from a a top school you

had good grades. going to Wall Street

was pretty much, you know, a license to

print money. Um, and and then that

changed and you had the period where

like the hedge funds have been have been

great and and now it feels like it's the

Frontier Labs and then simultaneously

the trading firms like the Jumps, Drain

Streets, Susuana,

those are sort of like the top coveted

jobs at a lot of these IV IV plus

schools. And you know, I wonder where

does the buy side, whether it's um

private equity, private credit, and and

we could include investment banking, you

know, sit in that hierarchy of the top

jobs.

>> We're very and even my follower base is

very IB, private equity, private credit,

um byside asset management focused, but

a little less so hedge fund focused. But

we do have a decent amount of hedge fund

data on buyside hub and we'll get PMS on

there and those will be the people who

are compensated the most. Like sure the

our average user is like 300 makes

$350,000 a year but we'll get PE hedge

fund people you know analysts who even

if they're at a credit head hedge fund

or if they're at the big name firm you

know they're they're getting like a 700k

bonus if not more um as an analyst. like

it's it's very skill-based and like the

people that have those skills are able

to perform extremely well. Um the PMs

that come on our platform are making

tens of million dollars a year. Like

it's

it's really mind-boggling, but you know

th those folks are quite smart. I think

the archetype for a lot of people that

follow me are not necessarily like the

Jane Street Citadel types. um you know

sometimes they are but like a lot of the

people that follow me like played played

sports in high school and college and um

you know they they just kind of

gravitate towards IB maybe they're a

little more ma a little less mathematic

um you know I think the students who do

have that like mathematical charge and

that capability like they should

absolutely go and do this Citadel Jane

Street type route because the

compensation's insane um even if they

don't stick with it like there's just so

many um exchange street folks who are

now founders at these massive companies.

Um so like I I definitely won't push

back there. Like it's the most it's

definitely the most attractive job. Um

it's just not necessarily like what the

people who follow me are like getting

into. But you know I think hey if I

could do it if other people could do it

then you know I think we'd be more um

inclined to go that route because the

compensation is nuts.

>> I was a physics major and people are

like if you can't do math do physics. if

you can't do physics, do economics. And

you know, there's a lot of money to be

made like all throughout that spectrum.

But it it definitely does feel like

sometimes the um intellectual firepower

that it takes now in the public markets

is pretty insane. And it's like it's

something that I cover a lot, but it's

and people ask me all the time like, why

why didn't you try to go into trading?

I'm like, one, I don't know if I could

have ever gotten a job in it in the

first place. And then two, I I think

it's highly unlikely that I would have

been able to survive given, you know,

it's uncertain to what degree a lot of

the people who are successful are just

winners in the Lucky Monkey contest. And

then the people who truly have edge are

like, you know, it's like watching I

like to say it's like when you play

basketball in middle school and there's

like a 13-year-old who can dunk. You're

like, "Oh, that's the guy who's going to

play college ball." Um like that's

that's sometimes how it feels.

>> Yeah, absolutely. I mean I've worked at

like a pretty um well-known firm and

sometimes like the intellectual

capabilities of people just gives you

some a level of like imposttor syndrome

um and look it's it's tough to manage

and you know it forces you to like work

harder and and you know do your best but

um but you definitely also need to be

smart about like you know what are you

good at? What's your limitation? um like

for any finance professional or student

like you want to play a game that you're

good at like and I think that's how

people should really think about their

career choices.

>> Okay. So, it's about what games you're

good at, what games are still going to

be around. Um I I guess you know we

we've talked a lot. There's a lot of

nuance here. So I would ask you know in

closing if we could sum it up a little

bit like what is your view on the future

of and we'll start with private credit.

>> I don't think all of retail's coming

back. Um you know they've they've just

let they've made a bad impression upon a

lot of retail folks and it's been very

sensationalized. So that's in some

trouble. Um I think for a lot of

institutions the value prop of private

credit is pretty clear. Um, I think a

lot of software deals should be going

pencil down. Now, I still think private

credit's a very compelling career

opportunity because it's taking share

from banks, from public credit. Um, so I

wouldn't get super draconian. Like,

sure, there's going to be fewer seats,

but not that, you know, maybe like we're

talking 10 to 20%, but that's that's

coming that's AI coming for everything.

So, that's just comes with the

territory.

>> Okay. Now on the private equity side,

>> I think people are going to have to

acquire small businesses. Um, you know,

if you're an investment professional,

like you should be saving up for a

million, few million, etc. Like, you

know, work your work your career, like

learn your trade. Um, and then maybe you

kind of want to optimize for a career

where, hey, I can buy a business that's

250k to a million dollars of ibida, um,

and run this for 20 years and then exit.

Like, that'll be my career. Like I think

that's something people should go for.

Um but I think you want to be at a big

shop, big institution or you want to be

at like a lower middle market, middle

market firm that's like actually growing

in fundraising because I think there's

kind of like there's a bunch of

carcasses

um in like the smaller middle market

side that people aren't necessarily

aware of unless you're in the industry.

And I think that's where like the

trouble is like you don't want to you

don't want to put your eggs in those

baskets. like you need to figure out

like do I have a career as a private

equity investor or do I need to like

make sure I'm able to buy a small

business one day and really you should

be planning for both.

>> Okay. Now I I know we're focused on the

buy side but as we said it's it's kind

of the year of the investment banker.

how how much of that is banking is back

in general versus just this environment

with SpaceX and Open AI and Anthropic

and all of this M&A and if if you know

we were to have a a change in the in the

presidency and it's not a Republican and

we start to go back to a tighter um FTC

do do you think that this uh investment

banking renaissance is going to come to

a swift end? So I think what people

forget about like it wasn't that long

ago where people were getting zero

bonuses back in 2022

23 type era um depending on deal flow

depending on your shop like that was the

near the end of credit

um for example like we had a lot of

banks who who went under so things can

get quite dicey in banking you know

there's not that aumum component like

things can things can happen like very

negatively very fast And during that

period, there were a lot of 10 to 20%

layoffs in banking. Um, you know, I've

I've seen layoffs in banking. Like, it's

it's not fun. Um, it happens. It's like

a cyclical business. So, you know, you

can't get too high on the high and you

can't get too low on the low. Like, it's

as long as you're like a top well

capitalized bank, you're going to be

fine. But, um, you shouldn't pretend

that this is something that happens year

after year. Um, so you know, I think I

think people need to recognize like,

yeah, this is a great year, next year

could probably be the same. Like, you

know, if we do get a low rate

environment and you have deregulation,

those are all positives, too. Um, but if

you get more regulation, you have higher

rates, etc., that that's also a

negative. So, um, I I always tell people

to like spend two to three years in

banking or banking research and then go

move on to the buy side. But if you

really like banking, like you know,

someone has to stick around, be a

director, MD, etc. So, you can stick

around, but um you know, you just got to

make sure you're building the right

skill set.

>> Okay. And when those layoffs do happen,

and what does it mean for the buy side?

Do all those people try and jump into

private credit, private equity, are they

able to make that transition? Does it

make it harder for those on the buy side

if and when we do get that turnaround in

banking?

>> When you're laid off, it's so much

harder to get a job. Um, from like a

finance folk perspective, I I haven't

been laid off thankfully. Um, but you

know, from for the folks who have had to

deal with it, I think it's I think it's

a little harder and normally where they

gravitate towards is like some of the

smaller um banks instead as opposed to

making a buy side leap. But but yeah,

look, direct lending and such is is

competitive. Um there's more investment

bankers who are trying to go into

private credit and more people getting

hired out of school and people from

private equity um jumping into private

credit. And it kind of used to be like

you could work at like in corporate

banking or um like you know a nonIB type

of role and work your way into private

credit. I think that's a little harder

than it used to be.

>> All right, Harry. Well, let's wrap it up

there. I want to ask you a little bit

about what you're doing with the buy

side hub and and your High Yield Harry

newsletter. Where can people find out

more about you and uh sign up for these

services?

>> Yeah, absolutely. So, um I'm mainly on

X. Started on Instagram, but you can

just go look at High on X. Um have a

couple newsletters like the High

newsletter, the Wall Street rollup. Just

love talking about financial markets,

careers, stuff like that. So, always

writing. And then Buyside Hub, we have

over 15,000 users. We welcome everyone

from the buy side to bankers um just to

provide extremely robust US compensation

data points across all industries, all

levels and you know here to help you

benchmark your compensation, figure out

if firms are good or not. Um and look,

make sure you're getting paid what you

deserve to get paid.

>> All right, Harry. Well, it's been a lot

of fun. Hope to do it again soon.

>> Thanks, Max. Love being here.