Jobs in the Investments Industry I: Investment Banking
Bryan Sudweeks Fall 2008 1
Jobs in the Investments Industry
I. Investment Banking • Investment banking, banking, Sales and Trading, Research
II. Investment Management • Asset Management
III. Financial Planning • Investment advising, Insurance, and Estate planning
IV. Corporate Finance • Pension Fund Administration and Management V. Financial Consulting • Pension Fund Consulting 2
I. Investment Banking
Objectives • A. Understand the purpose purpose of Investment Banking • B. Understand the the structure of an Investment Bank • C. Understand the the interaction interaction between divisions of Investment Banking groups (and the recent problems) • D. Know where the potential jobs are in Investment Banking • E. Know how how to prepare prepare for a career in Investment Investment Banking
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A. Purpose of Investment Banking
An intermediary between the capital markets (investors) and corporations (borrowers)
Offers strategic advice and financial analysis on Mergers & Acquisitions, Divestitures, and Capital Structure
Offers Equity and Fixed Income Underwriting (e.g.. IPO’s, High Yield Offerings) Offerings)
Provides asset management advice to high net worth individuals and institutions
Provides Sales and Trading of Equity (Stocks), Fixed Income Securities (Bonds), Derivatives (Options).
Offers research and advice on publicly listed stocks and bonds to institutional and individual investors investors
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B. Str truc uctu turre of of Inv Inves esttme ment nt Banks
Major investment banking divisions include: • Investment Banking • Intermediary between the capital markets • Advice and analysis on M&A and Capital Structure • Equity and Fixed Income Underwriting • Asset Management • Provide asset management services to investors and institutions • Sales and Trading • Sales and Trading of Equity (Stocks), (Stocks ), Fixed Income Securities (Bonds), Derivatives (Options). • Research • Provide research on public stocks and bonds
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Structure of Investment Banks (continued) Investment Bank
I-Banking
Asset
Sales &
Division (IBD)
Management
Trading
Industry Groups Private Client Corporate Finance Services Product Groups • Work with High M&A Net Worth Worth Individuals High Yield Debt Capital Markets Equity Capital Markets
Buy and Sell Financial Securities and Derivatives
Research
Analyze all Public information in order to give advice to investors and sales and trading group
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Structure of Investment Banks (continued) Investment Bank
I-Banking
Asset
Sales &
Division
Management
Trading
Industry Group (Corp Finance)
Product Group
Equity Capital Markets
Debt Capital Markets
High Yield Debt
Manage funds for institutions and individuals
Private Client Services
M&A
Equity
Consumer Products Technology Telecommunications Real Estate Utilities Health Care Retail
Research
Fixed Income
Derivatives
Economic
Equity
Consumer Products Technology Telecommunications Real Estate Utilities Health Care Retail
Fixed Income
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C. What is is th the In Interaction be between Investment Banking Divisions? Investment
banking meets the needs of different clientele • Companies wanting to list equity/debt • Individuals/institutions wanting unbiased research for investing • Strategic and asset management advice for companies/individuals
How
should it be structured to maintain no semblance of “conflict of interest”? interest”? • A “Chinese wall” was proposed and instituted instituted • Certain divisions are “inside” and others “outside” the wall
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Interaction Between Divisions (continued) “Inside the Wall” Corporate Finance
IBD
“Outside the Wall” Wall”
Corporate Finance
Sales & Trading, Research, and Asset Management
Corporate Finance
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D. Po Pote tent ntia iall Jo Jobs bs in In Inve vest stme ment nt Ba Bank nkin ing g Where
are the jobs in Investment Banking?
• Most investment banking jobs are in analysis • Equity market analyst • Debt market analyst • High Yield analyst • Mergers and Acquisitions • Industry Analyst • Consumer products, telecommu telecommunications, nications, real estate, finance, etc. 10
Jobs in Investment Banking (continued) I-Banking Division
Asset Management Division
Research Analyst
Industry Group (Corp Finance)
Product Group
Analyst Senior Analyst Portfolio Manager
Equity Capital Markets
Debt Capital Markets
High Yield Debt
Mergers & Acquisitions
Assistant Analyst Research Analyst Research Analyst Analyst
Analyst
Senior Analyst
Senior Analyst
Consumer Products Technology Telecommunications Real Estate Utilities Assistant Analyst Health Care Retail Research Analyst
Analyst 11
Senior Analyst
Senior Analyst
Jobs in Investment Banking (continued)
What are the different types of analyst positions? • Analysts position vary depending on who they are doing research for, i.e., sell-side versus buy-side research What are sell-side analysts? • Analysts whose work is used for selling securities to investors, i.e. Research, Research, Sales and Trading, Trading, etc. Analysts prepare the research for potential investors in the hope that investors will buy and sell companies through the I-bank What are buy-side analysts? • Analysts whose work is used in the process of buying securities for specific portfolios, i.e. Asset Management, Private Wealth Management, etc. Analysts prepare the research and then act on that research to buy companies. 12
The Analyst Position (continued) Why
are Investment Banking analyst positions so hard to get? • They provide instant exposure to senior management teams of the largest companies in the world • They have the highest exposure, learning potential, and salary of any job in the Financial Services Industry (out of college) • They give opportunity to work in small teams, with learning from senior partners • After you have built experience in the field, it offers o ffers wonderful opportunities at top business schools and companies
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The Analyst Position (continued) What
are the skills gained as an analyst?
• Financial modeling and strong quantitative work • Solid Understanding of Corporate Capital Structure & Capital Markets • Solid understanding of companies and industry composition and structure • Professional presentation analysis
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The Analyst Position (continued) What
are the responsibilities of an analyst?
• Financial Analysis and Modeling • Discounted cash flow and Free cash flow analysis, • Comparable company • Precedent transactions, and • Leveraged buyout • Client Exhibits and Presentations • Market research and competitive analysis • Client interaction • Roadshow execution management 15
The Analyst Position (continued) What
type of work do Analysts do?
• Company Analysis (both buy and sell side) • Financial forecasting • Strategic analysis • Industry Analysis (both buy and sell side) • Strategic analysis • Portfolio implementation, construction, and reporting and attribution • Investment policy statement • Portfolio construction and management • Portfolio reporting and attribution • Whatever is needed to attain company goals and objectives
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The Analyst Position (continued) What
are the criteria used to select analysts?
• There is a record of achievement • A strong academic record • A balanced individual with extracurricular activities • A good employment history
• Strong communication skills • Evidence of being a team player • A tireless work ethic • Attention to detail • A strong analytical capability (with examples) 17
E. How to Prep epaare for a Career in Investmentt Banking Investmen
Understand the industry, the positions, and the lifestyle • This is a wonderful but crazy industry very long hours • Are you suited for the lifestyle — very
Start building your contacts • Meet with as many of the visiting speakers as possible
Do well in your classes • A strong GPA is important • Have a good financial analysis project to leave with potential employers as an example of your best work work
Look to beginning your CFA program • It is looked on highly in the industry 18
A Career in Investment Banking
Don’t get discouraged discouraged • Understand yourself and your goals • Work hard and be patient — — Faith Faith precedes the miracle Keep your priorities in order • Obedience is the first law of Heaven--do what you should • He will help take care of the rest Follow the Spirit • Stay worthy of the Spirit • He is your competitive advantage--stay advantage--stay worthy of His help Remember the Lord’s hand in your blessings blessings • Always be appreciative of his blessings • Remember to share them with others