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The lack of liquidity in credit markets means mezzanine funds, which fill the gap between equity debt and traditional bank loans, are hot. But the bad news for anyone hoping to find work in the sector is that they’re not doing a lot of hiring.

In a measure of the health of the mezz market, private equity firm Octopus Investments says it’s seen at least twice as many companies as last year looking for mezzanine finance, and mezzanine provider Intermediate Capital saw its profits leap 22% in Q1 2008 compared to the same period of 2007.

Bigger names are now getting involved, with Goldman Sachs aiming for $20bn in its new mezzanine fund, and GSO Capital, a hedge fund owned by The Blackstone Group, looking to raise $2bn for its first venture in this space (Financial News).

Michelle De Angelis, senior director of Fitch’s leveraged finance team, says: “The European mezzanine fund community has already attracted a significant amount of new capital this year, due to the expectation that deals in this post-credit crunch era will represent better risk-adjusted returns than at the peak of the market.”

Jobs for leveraged financiers

Gail McManus, chief executive of Private Equity Recruitment, says mezzanine hiring is steady, and that some funds are making the most of leveraged financiers’ misfortune: “If leveraged financiers have been involved in providing the senior debt into buyout transactions in the market, mezzanine is a natural move. If they’ve been doing corporate leverage, it’s a much harder move.”

Similarly, Guy Townsend, managing director of recruiters Walker Hamill, says mezzanine is currently an attractive option for leveraged finance professionals, but they’ll have to fight for the open roles.

“It’s still a small area and nowhere near as big as traditional leveraged finance. I think it’s an area a lot of people would like to move to but very few will get the opportunity to do so.”