Investment Banking _Corporate Fi by chenshu


									              Educational Series
              Careers on Wall St.
                    Wednesday, October 7th

Justin Van Vleck                  Felix Popescu
Co-President of Operations        VP of Analyst Program

Ruoting Sun                       Jeff Smith
Stock Selection Committee         Head of Educational Series
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 Banks
  Full Service      Independent

                                  Moelis & Company
    Main Street America’s Perception of
• 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              • Product Groups
  –   Consumer and Retail        – Mergers and
  –   Energy and Power             Acquisitions
  –   Technology                 – Leveraged Finance
  –   Health Care                – Equity Capital Markets
  –   Real Estate
                                 – Debt Capital Markets
  –   Media and Telecom
                                 – Restructuring
  –   Financial Institutions
  –   Financial Sponsors

•   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
          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 Timeline

• For Full-Time Positions

• For Summer Analyst
  (Intern) Positions
    Benefits of Investment Banking Analyst
•   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
• Unless you’re exceptional or have a
  connection in the business, getting in from
  MSU will be extremely difficult
• 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
  – 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
• 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
• 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
• 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
• 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 & Trading
Presenter: Ruoting Sun
Student Investment Association
      October 9th, 2008

                “Wages make you a living,
               Profits make you a fortune.”
And the story goes…
• EMH and Sales & Trading
•   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
   – 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
• 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
• Providing liquidity to firm’s clients
• Portfolio management (hedging)
• Knowledge of current economic environment
  and market conditions
• Knowledge of flows being executed in the
• 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
• 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-
• Network, Network & Network – SIA is a good start
Equity Research
 Justin Van Vleck
•   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
                       = Think Tank

                 Equity Research

Hedge Funds/MM                        Sales & Trading
       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
• 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
• 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
• 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
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
• 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
• 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
• Highly competitive work environment,
      competitors in same office
• 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 Life
7:30am: 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

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 Life
7:00pm: 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
                League Tables
1)   UBS - $1.6 trillion
2)   Citigroup - $1.43 trillion
3)   Merrill Lynch - $1.2 trillion
4)   Credit Suisse - $642 billion
5)   JP Morgan Chase - $465 billion
6)   Morgan Stanley - $450 billion
7)   HSBC - $408 billion
8)   Deutsche Bank - $249 billion
         How Money is Made

• Clients give assets to wealth management
• 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

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