by Girl Banker® Listen to the iTunes podcast instead. I get asked this question very frequently by people that want to become investment bankers. Investment banks hire candidates from all degree disciplines. Investment banking is not a vocational career like law or medicine where you actually need to study that subject to get a job in that field. Investment banks handle a very broad client base and because of that they like the people that they hire to reflect the diversity of that client base. Every team in an investment bank focuses on a very narrow field of finance and it is unlikely that any one degree will cover everything you need to know to function efficiently on a given team in an investment bank. Most of your learning will happen on the job. That said, the majority of investment bankers will have done finance-related degrees. Doing a finance-related degree shows that you do have an innate interest in finance so when you're asked, "Why do you want to be an investment banker?" You can point at your degree as one of the reasons. Economics Economics is probably the best degree you can do to maximize your chances of getting into an investment bank. This is because it gives you a broad appreciation of how the economy works; it includes modules on finance and it develops quantitative skills. More than anything it also gives you practice in thinking up out-of-the-box solutions to random problems. Accounting Accounting is very specific. People who work in the capital markets section of an investment bank don't need to learn all that much about accounting. They need to understand financial reports and to be honest it doesn't take all that long to learn that. Corporate finance bankers (classical investment banking) do need highly developed accounting skills but not nearly as much as what an accountant needs to know. Corporate financiers also need to appreciate other areas of finance. Accounting does develop quantitative skills but does not provide as broad an appreciation of how the economy works at the macro- and micro- level like economics does. Finance Like accounting, finance is very specific. Whilst a degree in finance will go much deeper than the financial modules in an economics degree you won't use most of that knowledge when you go into investment banking. The team you join will only be focusing on a very small segment of your finance degree and they will take that knowledge to a deeper level. E.g. You might learn about how an interest rate swap works on a finance degree but likely won't learn how to build different types of swap pricing models. Finance does develop quantitative skills but, again, does not provide as broad an appreciation of how the economy works at the macro- and micro- level like economics does. Business
Economics folk view people that do business as people who wanted to do economics but failed to get onto an economics degree....hmmm? Business is less quantitative than economics. It includes some accounting which would be useful on a classical investment banking team and it helps one to understand the concerns of people that run businesses a lot better. However, it won't tend to include any deep finance modules. Maths Develops analytical and of course, quantitative skills but much of that knowledge will not be applied in an investment bank unless you're a quant. However, I would personally rate maths as the second-best degree to do (after Economics) if you want to become an iBanker. If you're in the US you might want to double major in Economics and another finance-related subject. So, there you have it. You can do any degree that you want and still become an investment banker. I have met investment bankers that did Art History, Sports Science, Engineering and even Medicine and they turned out to become fabulous investment bankers.
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by Girl Banker® Listen to the iTunes podcast instead. It depends. If you have no investment banking work experience a hedge fund probably won't even look at you. Hedge funds prefer people to get trained up by the big investment banks before they hire them; they want someone who is more ready to add value. They are generally quite small operations and don't have training resources. If you do have some good quality work experience in investment banking, then the chances of getting hired by one or the other are 50-50. You can always start your own hedge fund Have you heard of James Mai and Charlie Ledley? They started Cornwall Capital with USD110,000 whilst they were in their early 20s and made over USD100 million when the credit crunch happened because they bet against subprime securities. One might argue that they were lucky but this is only one of a string of astute option trades that reaped them great rewards. If you think you have a knack for the markets then making money out of trading is as easy as setting up a brokerage account and getting started! Please subscribe to receive info that will help you get into investment banking directly to your inbox AND you will get Chapter 1 of To Become an Investment Banker for FREE! by Girl Banker® Listen to the iTunes podcast instead. If you want to succeed in getting an investment banking job, you need to stay up-to-date with the news. There is a lot of free news out there. Twitter For very current updates, follow respectable news providers on Twitter. I suggest starting off with: @BloombergNews, @dealbook, @Reuters, @WSJ, @zerohedge and @GirlBanker. Have a look at who each of these Tweeters follows and decide whether you want to add those news providers to your own list. Ensure that you yourself tweet responsibly! Free newspaper
If you are in London, try to get CITY A.M., a free and condensed version of current financial news. They also have a free daily newsletter that summarizes their top headlines. Free RSS feeds and newspapers To get news sent to your inbox or RSS feed, sign-up to: The Wall Street Journal, The FT and CITY A.M. Paid-for news providers Each of the above will probably have news services, online or paper, that they charge for. If you are in university, check if your careers service or the students union has deals on leading newspapers. When I was in Cambridge the FT retailed at £1 per day and a little more for the weekend edition but I used to receive an entire week's series of papers for just £1 because the students' union had a good deal. It was all delivered to my pigeon hole too, you can't get better than that. Any suggestions that you want to add to the above? Please comment.
by Girl Banker®
Listen to the iTunes podcast instead. Good question. There are lots of investment banks out there. Some that you have heard of and some that you haven't. In To Become an Investment Banker, I take you through some criteria that you should look at in deciding where to apply:
Getting paid Working in an investment bank is hard work. If you manage to get into one of the top banks you will be working with some of the brightest people in the world. You need to justify your existence. The profitability of the transactions that you work on will form the basis of how much you get paid. The more deal flow your firm gets, the more likely you are to land on a good transaction. Building a fantastic résumé / CV The market value of an investment banker is based on the transactions they have worked on. The deals you work on determine a) your value inside your bank and b) your reputation and value outside the bank. The more deals you get to experience, the more valuable you become. Meeting people The more people you work with, the more you open yourself up to opportunities. Many deals involve several banks working together alongside lawyers and possibly accountants. All the people that you get exposed to help to build up your brand. The higher your firm's deal flow, the more opportunities you will have for 'branding' yourself.
Okay, so where is all the deal flow? In To Become an Investment Banker you will find a league table for the top 50 banks in All Corporate Bonds Issues in 2011. I chose this over the equity table (also in the book) because it included a much larger volume of deals.
You can find the same information below. For ease of navigation, I divided the list into 'Top 20' and 'Next 30' then ordered each list alphabetically. This list will be refreshed annually. You will find links that take you directly to the careers section of every investment bank here. Please subscribe to receive info that will help you get into investment banking directly to your inbox AND you will get Chapter 1 of To Become an Investment Banker for FREE!
by Girl Banker®
You’re probably thinking, "Well, if I have loads of internships at different banks on different desks that increases my chances, right?" Not necessarily.
Imagine a banker that’s been given 50 résumés/CVs and has been told to select 5 good candidates. Who do you think he’ll find more interesting: the girl or guy with 3 bank internships, or the one that built houses in Africa one summer, climbed Everest the next and has one quality bank internship?
If you sound boring and unidimensional, very few people will want to hire you because they have to work with you for many hours on a daily basis; they want to be able to chat to you about more than just what the latest Bloomberg headline is. So if you're feeling intimidated by friends that have a gazillion investment banking internships whilst you chose to do lots of other things with your holidays, trust me, there is nothing to worry about, you will stand out because of your diverse experiences. Just make sure you do an internship the summer before you want the full-time job and use To Become an Investment Banker, to maximize your chances.
by Girl Banker®
Listen to the iTunes podcast instead. If you want to maximize your chances of getting into investment banking the best time to apply is roughly eighteen months before you need the full-time job! Let me explain... You must do an investment banking internship the year before you graduate. In To Become an Investment Banker, I talk extensively about how you can go about finding yourself the perfect internship. The top investment banks have 8 to 12 week internship programs every summer. This internship is essentially, a long interview. At the end of that period they decide who in that pool of interns has what it takes to hack the world of investment banking. It makes sense because a much more informed decision can be made after observing someone for a few weeks than through a series of short interviews.
Those people that are chosen are offered a job to start the following year, when they actually graduate.
So, if you’re reading this already in your final year and thinking of getting into investment banking when you graduate in the summer, sorry, but most of those jobs are G.O.N.E. You might still get a job but you’re shooting for a smaller pool of spaces. The key here is to intern the year before you graduate; not two years before, not three years before - just the year before. To give you a real timeline:
by Girl Banker®
Investment bankers don’t invest although the name may suggest it. If your day job involves advising people what to invest their funds in: equities versus debt versus real estate and so on, you are an “asset manager”. Asset management is not investment banking.
Investment bankers also don’t give out loans or handle money of any form. Whilst investment bankers might structure loans, they don’t give them out themselves. Handing out loans is the function of a commercial or retail banker. Some investment banks have their own commercial banking units, others do not. Investment bankers fall into two categories: corporate finance bankers (also referred to as classic investment banking) and capital markets bankers (product salespeople and traders). I will describe each category in turn.
CORPORATE FINANCE
Corporate finance is concerned with giving advice on strategy, valuation and financing. I myself spent two years in Corporate Finance at Goldman Sachs in London. Strategy If a company wants to merge with or takeover another company, so called, Mergers and Acquisitions, or if they want to divest a division or find a seller for the entire company as a going concern they would seek the advice of an investment bank. M&A bankers have specialized knowledge of a specific sector and are in a position to relay the best way of going about any corporate strategic initiative. Valuation As part of its strategic considerations, a company will contemplate its own value, the value of a target or the market value of its competitors. Investment bankers are trained in all current, relevant valuation methodologies and would be able to provide this information. Key valuation metrics include discounted cash flow analysis which shows the value of a company on a stand-alone basis and a variety of ratios that show a company’s value in comparison to other similar companies. Relative valuation metrics look at the company’s value relative to sales, or the share price relative to earnings or the amount of debt the company has compared to its cash flow and earnings. Relative valuation tends to focus on companies that are listed or have recently been involved in an acquisition because data is more readily available. However, using less specific assumptions the same analysis can be carried out for a privately held entity. Financing Particularly in the developed world, financing is not as simple as going to a bank to get a loan. There are a plethora of instruments that can be used to fund a business. Loans themselves can be structured in a variety of different ways each of which will have different tax, legal and rating agency consequences. Rather than attempt to secure bank lending, a company can alternatively issue a bond to investors. Bond structures themselves are limited only by imagination. They are bespoke instruments that can be exactly structured to satisfy the goals of a firm, it’s expected growth profile and its expectations of future changes in market variables particularly interest rates and foreign exchange, FX. This brings us neatly to the second category of bankers.
CAPITAL MARKETS
Compared to Classic IB, capital markets banking is relatively new. It took off in the early 80s and has grown massively particularly as internet technology and the ease of communication has improved. Capital markets bankers are financial product engineers. Product specialism is split into Equity Capital Markets, ECM, which includes cash equities and equity derivatives and Debt Capital Markets, DCM, sometimes referred to as Fixed Income, Currency and Commodities, FICC. I have spent the best part of 5 years working in debt capital markets as a derivatives structurer at HSBC. You will notice one difference between corporate finance and capital markets immediately. Whilst there may be many different sectors and country teams in corporate finance, the analytical tools they use are the same. Valuation fundamentals do not change. However, the various teams in the capital markets each deal with a different product so the tools and knowledge change completely from one team to the next. Within capital markets salespeople market and often also price/structure products whilst traders execute any sales and manage the risk/exposure thereof. Some traders trade based on perceived market opportunities rather than off of the back of client orders. These are proprietary traders. Their aim is to generate a return for their bank based on market expectations (speculation) or perceived mispricing (arbitrage). I will very briefly describe a few teams. Cash equities Have a firm understanding of the equity research within a specific sector. Based on their understanding and interpretation of equity research they can give advice regarding which shares are a good buy, which are not and which ones are better than others. Equity derivatives You don’t have to buy shares to gain exposure to a company. Equity derivatives allow you to express your view of a company, good or bad, without buying them and if that view is realized you make a profit. Buying and selling equity options is cheaper than transacting in the shares themselves. Loan or bond origination and structuring Originators have a relationship with investors that are interested in buy bonds (or loans). They use their contacts and their knowledge of current bond (or loan) markets to structure a bond prospectus (a detailed term sheet) that will get a company the most traction with investors. Rates Most companies have some debt on their balance sheet. Rates specialists help companies to protect themselves against adverse movements in rates and to make optimal funding decisions based on interest rates in different countries and the expected evolution of rates over time. FX Many companies, even small ones, have multinational exposure. They might sell goods across several countries, buy supplies or even raise funds from abroad. FX specialists help companies to protect themselves against adverse movements in FX and to manage funds across borders. This can be a very important requirement for a company especially if they have exposure to a country with many rules and exchange controls. China is one such country, in the last few years as they have been loosening their currency controls regulation has been changing rapidly. Commodities Commodity specialists help companies to protect themselves against adverse movements in a given commodity. They also facilitate investors’ desire to speculate on commodity prices. Commonly traded commodities include oil, precious metals and agricultural produce such as wheat. Credit Credit specialists allow investors to buy ‘insurance’ against a company’s failure using ‘credit default swaps’. A huge amount can be written about each function within an investment bank and I provide a more in-depth overview in To Become an Investment Banker. Nonetheless, the brief descriptions above should give you a flavor for how front-line investment banking is structured. If you have any questions please contact me. |
Girl Banker®I created my investment banking blog in 2012 as soon as I resigned from i-banking & published my book, To Become An Investment Banker.
Initially published at girlbanker.com, all posts were later subsumed into my personal website under katsonga.com/GirlBanker. With 7 years of front office i-banking experience from Goldman Sachs and HSBC, in both classic IBD (corporate finance) and Derivatives (DCM / FICC), the aim of GirlBanker.com was to make it as straight-forward as possible to get into a top tier investment bank. I'm also a CFA survivor having passed all three levels on the first attempt within 18 months - the shortest time possible. Categories
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