Fundamentals of Finance

The Spectrum of Opportunities

in Institutional Finance
Investment Banking (IBD / Private Side)
Sales & Trading (S&T / Markets / Public Side)
Traditional Investment Management (Asset Mgmt,
Investment Mgmt, Mutual Funds)
Alternative Asset Management (Hedge Funds, Real
Estate, SWF)
Private Wealth Management
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INDUSTRIES COVERED
BARCLAYS GROUP plc
BARCLAYS BANK
plc
BAR CAP
BGI &
Barclays Wealth
COMMERCIAL BANK INVESTMENT BANK ASSET MGMT + PB
Where they all fit in:
The Universal Bank
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FINANCE CLUB IMC
What Is Investment Banking?
Facilitate the transfer of capital from:
Providers of Capital (Lenders or Investors)
to
Users of Capital (Borrowers or Issuers)
Advisory Services:
E.g. M&A, restructuring
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What is Investment Banking?
Typical Investment Bank Structure
Middle/
Back
Office
Operations IT
Risk & Corp
Advisory
HR
Legal &
Compliance
Finance
Investment
Banking
Division (IBD)
ECM / DCM or
Financing
S&T/ Markets /
Securities + Research
Investment Banking Group
"pubIic" arket = investors "private" arket = corporate cIients
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0hnese wa 0hnese wa 0hnese wa 0hnese wa
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What is Investment Banking?
Investment Banking Division (IBD)
Geographic Coverage Industry Focus
Typical Investment
Banking Division
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Product Focus
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Mercers and Mercers and Mercers and Mercers and
AcqusLons AcqusLons AcqusLons AcqusLons
(M&A) (M&A) (M&A) (M&A)
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What is Investment Banking?
Sales & Trading/Markets/Securities
Trading Research
Typical Sales & Trading
Division
ExecuLe Lrades ExecuLe Lrades ExecuLe Lrades ExecuLe Lrades
on behaf of on behaf of on behaf of on behaf of
nvesLor cenLs nvesLor cenLs nvesLor cenLs nvesLor cenLs
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aso se aso se aso se aso se
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research Lo research Lo research Lo research Lo
nvesLors nvesLors nvesLors nvesLors
Fxed ncome, Fxed ncome, Fxed ncome, Fxed ncome,
equLv or macro equLv or macro equLv or macro equLv or macro
( (( (" "" "sLraLecv sLraLecv sLraLecv sLraLecv ) ) ) )
Sales
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nvesLors nvesLors nvesLors nvesLors
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Structuring
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producLs/ producLs/ producLs/ producLs/
dervaLves Lo dervaLves Lo dervaLves Lo dervaLves Lo
meeL a cenL meeL a cenL meeL a cenL meeL a cenL` `` `s s s s
specfc rsk specfc rsk specfc rsk specfc rsk
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nvesLmenL nvesLmenL nvesLmenL nvesLmenL
needs needs needs needs
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ProducLs. ProducLs. ProducLs. ProducLs.
Fxed Income Fxed Income Fxed Income Fxed Income
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0ommodLes 0ommodLes 0ommodLes 0ommodLes
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EquLes EquLes EquLes EquLes
DervaLves DervaLves DervaLves DervaLves
Prop Desks Prop Desks Prop Desks Prop Desks
What is Investment Banking?
Sample IBD Project Life Cycle
Step 1: Consultant advises on strategy: financing vs cost cuts vs spin-off unit
Step 4: Public side of the firm works with investors and get their sign-off that the
recommended transaction will be attractive to investorsBankers do roadshow
to promote offering, introduce client to investors
Step 5: Sales desk distributes offering to institutional investors, traders make
market, supported by sales and research to generate/pitch trade ideas
Situation: Telecom company needs money
Step 2: Telecom banker prepares pitchbook. Coordinates product experts to
prepare sections on product alternatives, e.g. equity vs debt
Step 3: Telecom banker updates financial model of company to provide
parameters to equity bankers to determine how the equity should be structured
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What is Investment Banking?
Market Segmentation
Regional
Evercore
Hawkpoint
Jefferies
RW Baird
Boutiques (Random Sample)
Product
Houlihan Lokey (M&A, Restructuring)
Tibra (Trading)
Chatham (Capital markets advisory)
Unicredit
Santander
BNP Paribas
BBVA
Geography
VTB (Russia)
Troika Dialog (CIS)
EFG Hermes (Middle East)
Middle Market
Industry
Fox Pitt Kelton (financial services)
Delta Partners (TMT)
Hatch (Metals & Mining)
Standard Bank
EFG Hermes
Shuaa Capital
RBS
Bank of Tokyo-Mitsubishi
RBC
Societe Generale
Calyon
Bulge Bracket
Bank of America Merrill Lynch
Barclays Capital
Citi
Credit Suisse
Nomura
Morgan Stanley
UBS
[Lazard, Rothschild, Moelis]*
Deutsche Bank
Goldman Sachs
HSBC
JP Morgan
* Focused on corporate finance/M&A advisory as opposed to other buIge brackets which are "fuII-service"
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What is Investment Banking?
What you should consider: Functions
IBD:
Origination or execution?
Companies or products?
Work/life balance?
Markets:
Sales, Trading, Structuring or Research?
Asset Class?
Region?
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What is Investment Banking?
IBD/Markets Core Competencies
IBD
Analytical Skills modelling,
valuation, accounting
Mental/physical stamina
Project Management /
Transaction experience
Motivation and career drive
Humility
Attention to detail
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Markets
Quantitative Skills math
Markets/macro focus
Quick decision makers
Concise communicators
Interpersonal can survive on
chaotic trading floor and
build relationships with
clients
Marathon vs. Sprint
IBD: Preparations
Follow the news and corporate developments
Get familiar with your target or industry trends, main
players current and likely deals
Learn how corp fin theory is applied in practice
See how your past experience is relevant to IBD
Know the differences between banks and why work for
each
Use our Guerrilla guide
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Markets: Preparations
Follow the markets Market Commentary Blogs, FT etc
Understand competency requirements of Sales vs Trading
etc
Understand the interplay between asset classes
Brush up on your quantitative skills
Learn industry parlance
Use our Guerrilla guide
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What is Asset Management?
AsseL ManacemenL ncudes nvesLnc n fxed ncome and
equLes, hedce funds, fund of funds, rea esLaLe, eLc.
The iob funcLons ncude porLfoo/fund manacers and
research anavsLs (fundamenLa and quanLLaLve).
The dav Lo dav nvoves researchnc and anavznc poLenLa
nvesLmenLs and decdnc where Lo aocaLe funds.
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What is Asset Management?
1. Buy-Side vs. Sell-Side:
Buy-Side: make investments
Sell-Side: advise and support (facilitate buy-side investments)
2. Traditional vs. Alternative Asset Managers
Traditional (e.g. retail funds): highly regulated, with defined investment
mandates that determine type of securities and strategies
Alternative Asset Managers (Hedge Funds, PE, VC, property): less
regulated, with more flexible investment strategies and risk tolerance.
Designed to be uncorrelated with the market (alpha returns).
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1. Investment Objectives (capital appreciation, income, etc)
2. Investment Strategies (passive vs. active, technical,
quant, etc)
3. Asset Classes (equities, fixed income, alternative
investments RE, commodities, FoFs, infrastructure, art,
etc)
4. Sector Specialties (geography or industry focus)
5. Clients (institutional investors, retail investors, high net
worth individuals)
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5 key things to know about a firm
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Billions in AUM (assets under management)
Thousands of employees
Retail and institutional money
Many asset classes
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Large, Traditional Asset Managers
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Large, Traditional Asset Managers
Portfolio Managers
(PM): Decide which
securities or assets
to buy/sell
Sales: Help attract
new investors
External to
Firm
Research (buy-side):
Make internal buy/sell
recommendations.
Generates new
investment ideas
Companies/Issuers:
Investor relations
persuades research to
issue buys
Relationship
Management/
Product Specialists:
Help manage existing
investors
$ $$ $ $ $$ $
SELL-SIDE
RESEARCH: Sell
research to asset
management firms
Investors: Retail or
institutional
Traders: Execute
buy/sell orders for
portfolio manager
Inside Firm
$ $$ $
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vou ncrease vour asseLs under manacemenL, Lhe hours become more fexbe
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Private Wealth Management
Undertake riskier range of activies (e.g. short-selling)
Sophisticated investors
Common strategies include:
global macro anticipate global macro events
directional hedge investment with exposure to equity
markets
event driven or special situations exploit pricing
inefficiencies caused by specific corporate events
relative value exploit pricing inefficiencies b/w assets
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Hedge Funds
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Sovereign Wealth Funds
State-owned investment funds, perhaps held by a
governments central bank
Typically invest globally, not just within own country
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Sell-side or advisory firms
Sell-side research: e.g. Sanford Bernstein, CreditSights,
Pali, Emerging Economies
Credit rating agencies: e.g. Moodys, S&P
Investment Consultants: e.g. Watson Wyatt, Cambridge
Associates
Prime Brokerage: departments within investment banks for
securities lending, capital introductions and other hedge
fund assistance
Fund administration: e.g. Mourant, State Street
International
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What is Asset Management?
A day in the life of
An Analyst/Associate
Check the news, impact on companies under coverage
Morning meetings (with PM or the team) review the news, discuss current
holdings and new investment ideas
Meetings/calls with companies and brokers
Update research and models for companies under coverage, work on reports
Always: reading on the market/industry developments, looking for new ideas
Other: attend conferences, travel to meet company management, etc
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What is Asset Management?
Core Competencies
Excellent analytical (valuation, accounting) skills
Intellectual curiosity
Clear motivation to work in investment management
Enthusiasmfor companies and stocks -may be demonstrated by previous
work experience and/or personal investing
Strong written and verbal communication capabilities - Confidence and
power of persuasion
Ability to think logically, critically & quickly
Ability to work both independently and as part of a team
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Preparing for the Interview
Read the IMC Interview Guide
Prepare answers to the common questions in the Guide
Know every detail of you CV have your story straight
SLarL preparnc vour sLock pLches (aL easL 2-3 sLock buv
deas for nLervews, aL easL one shorL dea)
PracLce!
Research Lhe companv. sLaff bos, AUM, cenLs
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