These days the easy and general way to enter the world of investment banking for anyone is by simply completing an undergraduate degree and then they apply in a bank for the job of analyst program (in order to know about the life as an analyst, read more). Mostly MBAs get job of associates. The work of analysts and associates is within the range of specialized groups but most of the time they do not have authority to control the group for which they have been appointed (analysts specifically). Here we will mention the most common groups that exist within investment banks and also about the task they are into. Fresh graduates attracted to any these fields particularly, you must expand your knowledge then so that they can earn good money and good position, but keep in mind to search for a job as an associate or analyst.
Investment Jobs: Industry Coverage
Majority of big investment banks have an area known as investment banking, IBK, IBD, CIBD, “banking” or something that marks investment banking focused on industry. There are organized product groups of these organizations (for example, private placements) as well as industry coverage groups (for example, aerospace). In order to check out example have a look at banking page of Credit Suisse. In this group you will notice a set of bankers who are senior (Managing Directors – normally known as “MD’s”) who is responsible for maintaining contacts/relationships with their client companies in the field or industry (for example, Boeing, Aerospatiale). There is actually a group of Directors, VPs, Associates, Administrative Assistants and analysts who serve as a backup for these bankers. They extend their ideas and attend client meetings and also prepare pitch books execute transactions, write commitment committee memos and much more. There are two chief kinds of business i.e. M&A (read below) and there is a separate corporate finance group that can carry out task of financings (read below) or performed within the coverage group. Usually, a client team visit in a group for a particular client deal (for example, for issuing of a Boeing Bond). In this group the MD, a VP, an Associate and couple of Analysts are included. This team would join with the product specialist who is from the corporate finance department if for professional and specialized knowledge if required and anyone from Debt Capital Markets (which deals with issuing bonds into the capital markets).
The responsibility of an analyst on any project will normally be to bring together a Working Group List that lists the individuals involved at the bank, at the firm related to law managing the deal, at the client, as well as at other banks, provided if present in an organization.
Normally beginner in the banking field finish up in a coverage group. Apparently, it is beneficial if you enter a field that is interesting to you and at the same time it performing well.
About Corporate Finance
When you are hired for a corporate finance post you would actually be working to assist different companies in raising capital required for both fresh projects as well as operations that are continued. Your work involves finding out the client’s need of amount as well as structure using debt, equity, preferred, convertibles, derivative securities or asset-backs. If you begin your work as an analyst in the field of corporate finance then your job would be on the client team front and you would be responsible for preparing registration statements, attending road shows and in these road shows investors are selling on securities etc. The most recognized powers in corporate finance include Barclays, JP Morgan and Citigroup. Occasionally corporate finance jobs are called or known as investment banking posts.
Create your Job in Capital Markets
This investment job can be also in Equity Capital Markets (ECM) or Debt Capital Markets. Debt Capital Markets (DCM) is mostly divided into two types i.e. investment grade bonds and high yield bonds. At times there are individual desks for origination of sovereign, municipal bonds or supranational. The duty of capital markets officers is to assist companies in originating fresh issues of equity or debt. They receive calls from bankers having such clients who are keen in issuing. With the help of Bloomberg they monitor conditions of the market and on its basis they guide regarding the ideal time as well as form of issuance. There is communication between a DCM or ECM officer with the organization/syndicate desk which acts as the center of any issue that is latest. There is always an interaction between ECM or DCM officer with different experts/professionals that includes currency trading, financial strategy, convertibles, derivatives as well as equity derivatives. The job title for those who apply for entry level post in DCM or ECM is “Analyst” while if the applicant has done graduation or masters recently then the title changes to “Associate”.
Mergers and Acquisitions
By arranging deals where one company purchase and the other sells then fee is charged so the investment banks earn. When this part grows on Wall Street, it has a positive impact on gaining big profits. Your job would be to serve as an advisor to your client, negotiate terms that are favorable, structure deals in a creative manner and value transactions. Around the world the most known leaders in M&A advisory include Goldman Sachs, Morgan Stanley and Lazard. There is direct involvement of investment banks in LBOs, bridge loans and spinoffs and sometimes they their person investment stake (called merchant banking). You would analyze the exact form of participation or involvement in your job. Be ready to run many valuation models on spreadsheets and slowly achieve increase in client focus as you grow.
Deal in Project Finance
Project finance is all about financially supporting infrastructure and for removing oil capital projects from main balance sheet of a company or government. In this specific area some banks such as Deutsche Bank and Credit Suisse perform quite actively. Project financed deals have been considered as the foremost route of foreign capital into different countries like China, Indonesia and Yemen. Project finance always exists even when all the other borrowing sources don’t.
In the field of investment banking, the most in demand jobs include trading and sales. Some key tasks of this investment job would be to undertake dealings/transactions in bonds, equities and currencies (called Forex or FX), opportunities with traders at investment banks, commercial banks as well as big institutional investors. It is not easy to understand trading so you have sound market knowledge as well as about financial instruments and you must be good at understanding human psyche. You must be a story teller to work in this department. On the other hand, for fixed income trading posts you must be able to analyze and manage big amount of inventory. It is important for derivatives traders to possess analytical knowledge (maybe a degree in engineering). The basis of foreign exchange trading is on your ability to predict about politics, markets and macroeconomics. You can find several other opportunities exist in the area of trading jobs like in agency securities, repos and commercial paper etc.
Job Opportunities in Structured Finance
Before knowing about the scenario of opportunities in structured finance first find out about its job description. It is all about making vehicle financing so that cash or money flow cane be redirected to investors (called as asset-backed security or ABS). In the year 2008 this market lost its reputation as one kind of asset-backed security known as–collateralized mortgage obligations (CMOs)—caused the blowing out of property/real estate bubble everywhere, but there are chances that the structured vehicles may continue as usual and sooner or later evolve back. There are some more areas with growth potential like collateralized bond obligations (CBOs), asset-backed commercial paper as well as repackaged asset vehicles. Having sound mix of legal skills, spreadsheet and accounting is a plus point. Majority of students who come out of school do not have sound knowledge related to this area of work; therefore by expanding your knowledge in this area through articles related to this field and getting familiar to the language such as “early-am risk” that you can learn from those who participate in the market on interviews that are based on information. Discover more about the various investment jobs available and the salaries and bonuses for each type of profession in this field.
What are Derivatives?
Derivatives make use of some other primitive security for deriving their value or worth. Some common examples of derivates include options, futures and swaps. There is a huge market for derivatives and based on advance scrutiny. Since there is lot of potential in the business of derivatives in terms of profit and there is high demand of derivatives experts and professionals on Wall Street. There is more to come in the future with more innovations. This will give rise to more job openings in the specialized fields. If you find this field interesting then study math (some must included topics are stochastic differential equations (SDE) as well as derivation of common models such as Black-Scholes). Usually the questions that are asked in interviews are related to models. You must also posses sales skills for this job. There is one more common term “structured notes.” used that is related to it. A structured note is referred to as a foreign exchange loans, forward contracts with choices included and designed as per the need of a client. In short, credit derivatives are not only associated but famous area too.
Serve in Advisory Services
The investment banks offer advisory services to both public as well as private clients involved in financings and M&A. At several investment banks departments like risk management advisory, capital structure advisory and valuation advisory have been quite famous. Mostly the job would be in order to find out value or worth of the client, ways to create their value or on industry conditions of client.
Fixed Income Research & Equity
Security analysts are generally appointed to a region or industry. Your responsibility would be to recommend purchase or sell of stock or bond to investors. You should be prepared to visit companies as well as you would be asked to keep too much telephone communication with institutional investors. Investment banks usually prefer having experience in industry and offer post of analyst (instead of hiring fresh undergraduates or fresh MBAs). For instance, if you work as an executive in restaurant you can also work as a restaurant analyst in the restaurant industry and your pay would be high as well. The main requirements for this job includes complete knowledge of this business, effective communication skills so that dealing will clients become easy and last but not the least he must be able to predict. You would be helping your organization to stay away from the unwanted list of Worst Analysts. Some other names for the position of analysts include quants or fundamental analysts. Fundamental analyst is responsible for making recommendations on the basis of a company’s happenings—like about the CEO, about the earnings and other related things. On the other hand, quants are responsible for monitoring computer programs identifying undervalued markets, securities and entire countries also. When it comes to quant jobs you will notice that there are only few, but they are mostly paid well due to the skills of mathematics and technology that are required for this type of investment job and it is not easy to find such individuals.
Potential in International Sales/Emerging Markets
It won’t be wrong if we say that there is steady growth in international sales. Regardless of several crises in the late 90s such as the crisis in Asia in the year 1997, there was securities issued demand made by investors in potential markets. In order to meet this requirement firms provide sales personnel as well as analysts who are specialized in these zones or markets. There is one more area that is increasingly in demand is in promising markets like Mexico or Thailand. There are many such firms that are in search of such individual who possess particular language skills, as well as they are willing to travel abroad and who have sound knowledge of these budding markets. In terms of growth this area has great potential regardless of your young age. But there is possibility of high risk as well. For keeping track about the current situation Bloomberg’s website is a great source.
Opportunities in Public Finance
The municipal bonds market is quite big and invites traders, analysts as well as municipal advisors. Do not think it is easy to get a post in public finance but you can expect great rewards there. Usually individuals having prior experience in public administration are interested to work in this area of investment banks. The best possibility of growth in municipals is in the area of project finance.
Retail Brokerage / Stockbroker / Private Client Coverage
The job of the Private Client Bankers / brokers is to sell bonds, stocks, insurance as well as other types of investments to people/individuals. There are brokers who specifically deal with people having high value assets there are some who deals with different types of clients. This business is considered challenging to start (this is true when you are quite younger as compared to the clients), but it is quite rewarding for people having good sales skill and if he is good in public dealing. Most brokers earning exceeds $500,000. You must make your first attempt with any firm having good program for training like Merrill Lynch.
In case of institutional sales your job would be to convey information about specific securities to institutional investors. In order to carry out your job you need to be in touch with portfolio managers as well as analysts and traders of your own firm. Having proper knowledge of product and sales skills are vital to serve in this part also must be capable to deal with busy institutional investors. When you start your job in sales for any investment bank (on the selling side) is quite good way to prepare for moving over to the buying side (mutual funds and insurance companies). You may be subjected to abuse and brutality in case of both kinds of jobs. Sometimes it is beneficial to take abuse. Usually the range of average salaries in the jobs of institutional sales can be more than $750,000 per year.