Careers in Investments I

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Jobs in the Investments Industry

Bryan SudweeksBryan Sudweeks

Fall 2005Fall 2005

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Jobs in the Investments Industry

I. Investment Banking

• Investment banking, Asset Management, Sales and Trading, Research

II. Financial Planning

• Investment advising, Insurance, and Estate planning III. Corporate Finance

• Pension Fund Administration and Management IV. Financial Consulting

• Pension Fund Consulting

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I. Investment Banking

Objectives

• A. Understand the purpose of Investment Banking

• B. Understand the structure of an Investment Bank

• C. Understand the interaction between divisions of Investment Banking groups (and the recent problems)

• D. Know where the potential jobs are in Investment Banking

• E. Know how to prepare for a career in 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)

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

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B. Structure of Investment 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), 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 Division (IBD)

ResearchSales &Trading

Asset Management

Private Client Services• Work with HighNet Worth Individuals

Industry Groups Corporate FinanceProduct Groups M&A High Yield Debt Capital Markets Equity Capital Markets

Buy and Sell Financial Securities and Derivatives

Analyze allPublic 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 Division

ResearchSales &Trading

Asset Management

Product Group

Industry Group(Corp Finance)

Manage fundsfor institutionsand individuals

EconomicDerivativesFixed Income

EquityFixed Income

EquityEquity CapitalMarkets

Debt Capital Markets

High Yield Debt

M & A

Consumer ProductsTechnologyTelecommunicationsReal EstateUtilitiesHealth CareRetail


Private ClientServices

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C. What is the Interaction 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”?• A “Chinese wall” was proposed and instituted

• Certain divisions are “inside” and others “outside” the wall

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Interaction Between Divisions (continued)

“Inside the Wall” “Outside

the Wall”

IBD

Corporate Finance

Sales & Trading, Research, and Asset Management

Corporate Finance

Corporate Finance

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D. Potential Jobs in Investment Banking

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, telecommunications, real estate, finance, etc.

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Jobs in Investment Banking (continued)

I-Banking Division

Product Group

Industry Group(Corp Finance)

Equity CapitalMarkets

Debt Capital Markets

High Yield Debt

Mergers &Acquisitions


Assistant Analyst

Research Analyst

Analyst

Senior Analyst

Asset Management Division

Research Analyst

Analyst

Senior Analyst

Portfolio Manager

Assistant Analyst

Research Analyst

Analyst

Senior Analyst

Research Analyst

Analyst

Senior Analyst

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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, Sales and 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.

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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 wonderful

opportunities at top business schools and companies

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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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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

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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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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)

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E. How to Prepare for a Career in Investment Banking

Understand the industry, the positions, and the lifestyle

• This is a wonderful but crazy industry

• Are you suited for the lifestyle—very long hours 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

Look to beginning your CFA program

• It is looked on highly in the industry

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A Career in Investment Banking Don’t get discouraged

• Understand yourself and your goals• Work hard and be patient—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 worthy of His

help Remember the Lord’s hand in your blessings

• Always be appreciative of his blessings• Remember to share them with others

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Careers in Investments I