Love is in the Air: How to Make Top Talent Fall for Your Private Credit Firm
By the beginning of 2024, the private credit sector had already grown to $2 trillion, ten times the size it was in 2009. And while the industry may take some time to reach the $30 trillion that McKinsey estimates to be its addressable market, demand for top investment talent is significantly outstripping supply.
This doesn’t just mean that firms should expect continued upward pressure on compensation; they must also expect that every candidate, even those “off-market”, will have the benefit of multiple suitors trying to win their hand.
So, what can a private credit manager do to increase the odds of landing “the one”?
CRAFTING A CREATIVE OFFER
In the intense competition for talent, it is inevitable that salaries rise. Salaries, after all, are the most easily comparable aspect of a compensation package, yet increasing basic comp is not usually the winning move. There are several other levers that can be used to create an offer that wins. With the most senior hires, in particular, but also with more junior positions, ambitious candidates understand their potential value to the firms that court them. They want to see their compensation linked to the success they expect to generate for the firm—and a discretionary bonus doesn’t go far enough. This means that carry and GP equity are powerful tools. If a private credit fund manager is willing to offer a stake in the future success of the entire firm, that is an exceptionally impactful message to a high-quality candidate. I have seen situations where a firm that offered equity has been able to successfully hire a candidate at a basic salary of $400,000 less than rivals were offering.
DELIVERING ON DIFFERENT
The best candidates are those looking for an opportunity—white space, if you will—to forge their own path and make a mark. I can think of several placements we have made, where one of the most attractive aspects of the proposition, from the candidate’s perspective, was the fact that the role involved building a new business line. But white space can take many forms: Perhaps this is the first time the firm will be investing in a particular region, country, sector or stage of business. Perhaps there is the opportunity to build a new team or forge new partnerships—or reach out to a new class of investors.
Another way firms can win is by taking a good look at the working environment of the target candidate, evaluating where frustrations might lie and showcasing the difference in their own firms. For example, a mid-to-senior-level executive in a large, at a large institutional manager, may spend more time than they would like on reporting and administrative tasks; a boutique manager may be able to punch above its weight by highlighting its agile decision making and lean management structure.
DELIVERING A PROCESS THAT INSPIRES CONFIDENCE
Constructing an offer that overweights longer-term incentives and offers the chance to build out a franchise in a refreshing environment may yet come to nothing if the process is not run well. Managers are often guilty of very basic mistakes during the recruitment process, which can undo a significant amount of hard work and destroy goodwill that has taken time to build.
1. Be clear about the length and number of steps involved and stick to what you say
Make sure you know what the framework is going to be and don’t change it. Also, think about what the length of the process is communicating about your firm—too few steps and you risk appearing lightweight; overdo it and candidates may see you as indecisive.
2. Show the candidate respect
Make sure those interviewing on your behalf are at an appropriate level in the business. Unintentional awkwardness can arise when juniors and even peers ask difficult questions; their analysis of a candidate’s suitability can be important but must be formed through different means than a formal interview.
3. Communicate clearly, throughout the process
The candidate should never have to wonder what is happening and what is coming next—if they do, it’s on you.
THIS IS YOUR NEW LIFE
We spend many hours at work and it is important for candidates at all levels of seniority to feel that they can get on well with their potential colleagues. Outside of the formal interviewing process, it is wise to find the opportunity for less formal social interaction. Extending a dinner invitation to the candidate and his or her significant other can help build rapport. Inviting them to a corporate event where they can meet their peers and get to know other important team members can go a long way to helping someone feel that they “belong” at your firm. And if the role would require a relocation, this is even more important. An upheaval such as moving to a new city can be difficult without the support of relevant family members and this should not be forgotten. Elite sports franchises have whole teams dedicated to smoothing the transition following recruitment and trades; the corporate world could learn a thing or two from this.
FINAL THOUGHT
When courting top talent in a competitive market, the first instinct can be to throw money at the problem, but this is an unsustainable approach for many and assumes that salary is everything. If your firm has more to offer, make it clear—and you have a good chance of standing out and starting a fruitful relationship.