Wednesday, October 7th

Justin Van VleckCo-President of Operations

Jeff SmithHead of Educational Series

Ruoting SunStock Selection Committee

Felix PopescuVP of Analyst Program

Educational Series Careers on Wall St.

Investment Banking (Corporate Finance)

Student Investment Association Wednesday, October 8th, 2008

Presenter: Felix Popescu

Climate on Wall Street

• Colbert Report - Formidable Opponent

Abridged List of Investment BanksFull Service Independent

Moelis & Company

Main Street America’s Perception of Banking

• Offer depository services such as checking, savings and CDs

• Financing in the form of credit cards, auto loans, student loans, and home mortgages

• Well-known brands like Bank One, Wells Fargo, Bank of America, Chase and Citibank

Today’s Agenda

• What is Investment Banking? • Investment Banking Structure• Investment Banking Hierarchy• Where Do You Fit In?• Why Investment Banking? • Recruiting• The Interview • Helpful Notions

Overview of Investment Banking

• Assists Corporate Clients to raise capital

• Sell side vs. Buy side

Structure of Investment Banking Division

• Industry Groups– Consumer and Retail– Energy and Power– Technology– Health Care– Real Estate– Media and Telecom– Financial Institutions– Financial Sponsors

• Product Groups– Mergers and

Acquisitions

– Leveraged Finance

– Equity Capital Markets

– Debt Capital Markets

– Restructuring

Hierarchy

• Director and Managing Director• Vice President• Associate• Analyst• Intern • Word Processing, Research Support and Other

Secondary-Support Divisions

Analyst Responsibilities

• Financial analysis• Industry and company research• Developing client presentations• Valuation (Financial Modeling)• Marketing materials, management

presentations and road show involvement

What You Should Expect• 12-15 hour days • Very high stress• Multi-tasking• Lots of menial grunt work and micromanagement • Meetings and conference calls throughout the day• Sacrifice your personal life and health for this career • 3 meals/day at work • Very common to be forced to cancel vacations and miss

holidays/birthdays when needs arise

Typical Day

• 9:00 A.M.: Arrive in office, Check e-mail, start work on valuation model

• 11:00 A.M.: Finish up pitchbook for upcoming presentation

• 1:00 P.M.: Conference call with deal team, which may include people from other product and industry groups who work in conjunction on a project with you

• 3:00 P.M.: Put together a set of trading/transaction comparables

Typical Day (Continued)

• 5:00 P.M.: Gather industry reports and put together a working group list for a deal team on transaction

• 7:00 P.M.: Put together a few public information books and balance out discounted cash flow model

• 9:00 P.M.: Make changes to pitchbook before sending it to Managing Director

• 11:00 P.M.: Go Home

Recruiting

• Recruiting Timeline

• For Full-Time Positions

• For Summer Analyst (Intern) Positions

Benefits of Investment Banking Analyst Program

• Significant Learning Opportunities• Learn all elements of corporate finance• Wide variety of industries and transaction types• Significant impact early in your career• Integral part of the transaction team• Dynamic and exciting environment• Entrepreneurial environment rewards excellence• Culture of Teamwork and Partnership

Getting In

• Most banks recruit analysts exclusively from ivy league colleges and select masters programs

• Unless you’re exceptional or have a connection in the business, getting in from MSU will be extremely difficult

Interviews

• Interviews usually consist of:– Two first-round interviews• Either phone or in-person

– Superday interview• Consists of 8-10; 30 minute interviews

• Usually on a Saturday

Sample Questions

• General– Walk me through your resume– Why did you choose Michigan State/ your major?– What do Investment Bankers do? – What is the most striking thing you’ve read today in the

WSJ?– You don’t seem like a very driven person. How will you

handle a job in banking?– Say you are supposed to meet your girlfriend for dinner,

but the MD asks you to stay late. What do you do?

Sample Questions• Technical

– What happens to the three financial statements when you change capital expenditures?

– In what ways can you value a company?• Walk me through a DCF

– All else equal, should a public or private company garner a higher valuation?

• Other– What stocks do you like?– How many Northwest planes will take off in the next hour in the

United States?– If I shrunk you down to the size of a nickel and placed you in a

blender, what would you do?

Useful Courses/ Resources

• Classes– FI 311- building block of Corporate Finance – FI 414- case studies and modeling skills– FI 455- Excel skills and financial modeling– ACC 201, 300, 301, 305

• Resources– Vault Guide for Finance Interviews– Wall Street Journal/ Financial Times – New York Times DealBook

Fact vs. Fiction

• NOT like Wall Street & Boiler Room – Not spending evenings on the yacht & weekends in the

Hamptons• Rarely traveling to meet clients• Yes, the hours are just as bad as you’ve heard…but

the compensation is just as high as you’ve heard, too• You don’t have to be a genius to be a good i-banker…• Connections matter

Things To Do Now

• Solid precedent internships with known firms • Accreditations/standardized test scores help open

doors• Reach out to MSU alumni• Leverage all personal connections you may have • Be willing to jump on a plane to interview/ network• East Coast undergrads have Wall Street in their

backyard

Summary• Investment banking is an intense, life-absorbing career path

that’s not for everyone• Potential rewards attract the brightest and most competitive

individuals from the strongest backgrounds, so getting in is difficult

• It’s definitely worth doing if you get the chance• Decide if it’s for you:

– Work/life balance– Family vs. career– Geography

• Life will go on even if you don’t land a Wall Street job!

Fun Resources:• Wall Street Oasis • Dealbreaker • BankersBall

Sales & TradingPresenter: Ruoting Sun Student Investment Association

October 9th, 2008

“Wages make you a living, Profits make you a fortune.”

And the story goes…

Mantra

• EMH and Sales & Trading

Agenda

• What is Sales & Trading? • Why Sales & Trading? • A day in the life of a S&T Analyst• Becoming a Sales & Trading Analyst• Personal Experience and Advice

What does the position entail?

• S&T Team originates and transacts • Sales: distribution arm for the Investment Bank’s

products – Sales force's prime responsibility is to build and maintain

effective relationships with institutional investors.

• Trading: handles the risk management of the firm’s positions in various financial instruments– Make markets for buying and selling securities

Sales

• Client coverage and relationship management• Knowledge of client asset or liability needs, as well as

industry trends• Knowledge of current economic environment and

market conditions• Knowledge of market opportunities and firm’s

product capabilities• Promotion of the firm’s products and capabilities• Pricing and execution

Trading

• Providing liquidity to firm’s clients• Portfolio management (hedging)• Knowledge of current economic environment

and market conditions• Knowledge of flows being executed in the

market• Maintaining views on potential movement of

underlying instruments• Pricing and execution

How is money made?

• Client driven (Flow Trading) — bid/ask spread, or market making

• Proprietary trading• New security issuances

Why Sales & Trading?

• Global market driven job• BIG firm, SMALL teams• Steep learning curve • Fast-paced, intense atmosphere• Instant gratification• Performance-Based Pay• Work/life balance

Day in the life• S&T Analysts help engineer innovative and sophisticated

financial products

• As an Analyst you will work closely with senior members on your team to attain these goals by:

– Creating client presentations– Participating in client calls/meetings– Assisting in trade execution– Disseminating weekly marketing material to

internal/external clients

• As you work to support senior members on the team you will develop market and product expertise

Schedule of a Junior Trader• 6:30 am: get into the office, confirm all previous day’s trades

and cross-check with the details generated by back office• 7 am: confirm starting positions, be informed of any news

regarding held positions; plot strategy• 7 am – 8:30 am: relay noteworthy trades on ECN’s made

throughout the night to sales-force; morning meeting• 8:30 am – 9:30: economic statistics are released, breakfast,

post indications• 9:30 am: markets open; must be uncrossed and unlocked• 9:30 am – 4 pm: open market hours; take orders, work the

orders, build relationship with sales-force, make good prices• 4:30 pm: head home

Sales & Trading Analyst Program

• Comprehensive training • Organized by sector (equity derivatives, high-

yield bonds, etc.) • Example: Sales – Daily interaction with trading desks’ banking team

to relay client needs

Important qualities of a S&T Analyst

• Insightful, creative, quantitative thinker • A genuine interest in financial markets and in political and economic

developments • Strong communication skills• Strong teamwork skills • Attention to detail • Strong academic and professional backgrounds• The ability to perform well under pressure• A strong stomach• Ability to manage risk• Ability to perform multi-task• Ability to think on the fly• Understand that trading is as much an art as it is a science• Understand how closely integrated different industries are

How to break in?

• Starting early is key – VSE Competition• Read newspaper and business publications to stay

current with the markets• Choose classes that will expose you to different

business disciplines• Choose a specific niche market/strategy you can be a

specialist in (options, high-yield, vol-trading, bottom-fishing)

• Network, Network & Network – SIA is a good start

Questions?

Equity ResearchJustin Van Vleck

Agenda

• Principles of equity research • Equity research products• Hierarchy • Earnings Season• Lifestyle• What will it do for you?• Formula for success

What is Equity Research?

• Produce research ideas (reports) and distributes it to their clients – Buy Side:

• Money Managers at– Hedge Funds– Mutual Funds

• Individual Stock/Bond buyers– Sell Side

• Internal salespeople (sales and trading desks)• Proprietary trading desk

Hedge Funds/MM

Equity Research Department

Sales & Trading Desk

= Think Tank

Equity Research Products

• Industry research reports• Company-specific reports• Notes on importance events – Industry and company related

Industry Research Reports• Overview summary of the industry– Market trend/conditions

• Past and future outlooks

– Current industry leaders and lagers • Quality of the report shows the firm’s and

analyst’s expertise within the industry• This product will usually be associated with an

initiation of a group of companies

Company-Specific RR

• Company-specific RR fall into three categories– Initiation of coverage

• Company information, forecast model, and risk factors– Update

• Explain movement in the stock, change/confirm earnings estimate, news from management

– Change in rating

Company Specific Notes

• Deal with short term events – Earnings release

• Update the forecast for model, qualitative trends– News item

• Could deal with lawsuit, legislation, spinoff, stock repurchase plan, etc.

– Short-term trade recommendation• Increasingly becoming popular due to HF client demand• Will often times differ from long term rating on company

Ratings

• Downgrade (Underperform) – Lower expected earnings power, diminished growth,

turnaround plan suspect

• Hold (Neutral) – Do not expect much growth, potential problems, analyst

and market is wary, perform in line with group

• Upgrade (Outperform) – Better expected earnings, smart acquisition, beneficial

long term trends starting to develop

Hierarchy• Basic Structure – Associate is junior to Analyst– Who gets their name on reports?– Analyst runs the group

• Is the one in charge of making investment recommendations

• Within the Equity Research Department– Structure looks similar to banking– Not all analysts are MD’s– Most regarded talent sits on SSC

Earning Season

Lifestyle

• Travel for research analysts– Meet w/ buy side clients, comp. management teams,

assist with road shows– On average, work less than CF I-Banking

– Initiations, earnings season are long hours

• Associate Salary (est.): – $60K (more if MBA perhaps) + 10-15K signing bonus + 35-

75K year end bonus

What a Career in Equity Research Will Do for You

• Strong training programs provide– Terrific Excel, Powerpoint skills– What the important information is– Writing to grab investors’ attention

• Modeling– Building initiation reports from scratch– IPO Model from scratch– Updating models

• Most importantly, you’ll learn how very smart people think about stocks and the market

Formula for success• Work hard & learn quickly• Comp skills (Word, Excel, PP)• Good writing skills are mandatory • Good communication skills• Good listeners and ask good questions• MBA is not mandatory to advance • Enjoy analyzing companies and trying to

outsmart other people

Questions?

Private Wealth Management

Simon Yu and Jeff Smith

What do financial advisors do?

• Assist client in constructing investment portfolio strategy• Assist Clients in obtaining financing, selling assets, tax efficiencies• Recommend and place trades on behalf of client• Estate and retirement planning• Helping clients obtain financial goals

Sales and Interpersonal Aspect

•Success is heavily dependent on interpersonal and sales skills•Client meetings, phone calls, conferences, networking generate business•Talking clients out of making bad decisions just as important

Downside

• One of the most stressful jobs available• Market takes away gains, hurts your pay and angers clients• Very hard to get established, high rate of failure• Highly competitive work environment, competitors in same office

Upside• Very entrepreneurial business with nearly unlimited upside• Work/Life balance, especially once established• Relationship focused• Geographic flexibility• High demand for wealth management services

Day in the Life7:30am: Arrive at office and read up on the markets, WSJ, etc.

8:30am: Enter in tasks for the day, adjust some asset allocation models, conduct Monte Carlo analysis for a client’s portfolio

10:00am: Make some client calls, buy and sell securities on clients behalf

11:30am: Meet with new potential client to discuss financial goals, risk tolerance

Day in the Life Cont.1:00pm: Watch a wholesaler (Vanguard, Fidelity, etc.) present over their complimentary lunch

2:00pm: Meet with potential referral partner at their office

5:00pm: Analyze client portfolios after market close, touch base with a few clients

6:00pm: Team meeting to discuss day’s activities and prepare for the next day, administrative tasks

Day in the Life7:00pm: Grab a drink with a client and head home

How to Get In• Network• Speak to regional office• Read the WSJ regularly• Take a lot of finance/accounting• Getting Involved (SIA, FMI, SCNO)• Pursue an internship• Build connections by starting in another career and switch to PWM

1) UBS - $1.6 trillion2) Citigroup - $1.43 trillion3) Merrill Lynch - $1.2 trillion4) Credit Suisse - $642 billion5) JP Morgan Chase - $465 billion6) Morgan Stanley - $450 billion7) HSBC - $408 billion8) Deutsche Bank - $249 billion

League Tables

How Money is Made

• Clients give assets to wealth management expert• Managers are paid commissions and fees for selling certain products, achieving gains, etc.• More assets under management and gains results in more fees• Portion of fees goes to parent firm

Questions?