Careers In Finance

Vivek Rohra and Eric Alefeld Table of Contents n Careers – – Capital Markets – – Credit Risk – Sales & Trading – Equity Research n Job Responsibilities n Compensation n Career Trajectory n Types of Investment – Bulge Bracket (BB) – Elite Boutique (EB) – Middle Market (MM)

4/22/15 Wall Street Club 2 What is Investment Banking? n Investment bankers do not “invest” money n Bankers help companies in two ways: – capital raising (e.g. initial public offerings and debt offerings) – mergers & acquisitions (M&A) n Strict focus on hierarchy – Analyst à Associate à Vice President à Director à Managing Director n Job revolves around research and financial modeling – conduct industry research – develop financial valuation models – prepare presentation materials – structure and execute public and private market transactions n Split it into either industry group or product group

4/22/15 Wall Street Club 3 Industry vs. Product Groups n Industry Groups – focus on a specific industry, work with all products – Consumer / Retail – Financial Institutions (FIG) – Financial Sponsors – Healthcare – Industrials (e.g. aerospace & defense, transportation, manufacturing) – Technology, Media & Telecom (TMT) – Power & Utilities / Energy n Product Groups – focus on a specific product, work with all industries – Debt Capital Markets (DCM) – Equity Capital Markets (ECM) – Leveraged Finance (LevFin) – Mergers & Acquisitions (M&A) n Group placement dependent on analyst interests and needs n Investment bank structure varies slightly with each bank

4/22/15 Wall Street Club 4 Sample Transactions n Equity Capital Markets Analyst (Product Group) – $22 billion IPO of Alibaba (Technology) – $21 follow-on equity offering of AIG (Financial Institutions) – $9 billion IPO of Kraft Foods (Consumer / Retail) n Execution skill-set: analysts typically work on ~10 deals n Mergers & Acquisitions Analyst (Product Group) – $66 billion sale of Allergan to Actavis (Healthcare) – $27 billion sale of Hilton Hotels to Blackstone Group (Consumer / Retail) n Technical skill-set: analysts typically work on ~5 deals n Financial Institutions Coverage Analyst (Industry Group) – $3 billion IPO of Citizens Financial – $4 billion sale of OneWest Bank to CIT Group n Diverse skill-set: analysts typically work on ~5 deals

4/22/15 Wall Street Club 5 $22bn Alibaba IPO – Case Study

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Equity Client Equity TMT Client Capital contacts Capital pitches chooses Markets TMT Markets various equity group Industry group soluons offering executes Group engaged the deal

n Deal Team n Job Comparison Technology, Media & Telecom Group Technology, Media & Telecom Analyst 1 Managing Director Communicaon with client 1 Vice President Industry Research (operaonal) 1 Analyst Financial Modeling Equity Capital Markets Group Equity Capital Markets Analyst 1 Managing Director Communicaon with investors 1 Vice President Industry Research (market percepon) 1 Analyst Offering terms, structure and pricing

4/22/15 Wall Street Club 6 Compensation and Career n Lifestyle – 80-90 hours per week in Capital Markets products groups – 80-100 hours per week in all other groups n Compensation for 1st Year: – Signing Bonus: $10,000 – Base Salary: $85,000 – Bonus: $40,000 - 60,000 – All-in Compensation: $125,000 - 145,000 n Typical Opportunities after Analyst Program: – Promotion to Investment Banking Associate – Corporate Development – internal M&A team for major corporations – Private Equity (PE) – company buyouts – Venture Capital (VC) – investing in early-stage companies – Hedge Funds (investment analyst position) n Capital Markets groups offer a faster upward mobility, better lifestyle but limited exit opportunities

4/22/15 Wall Street Club 7 Public Finance n Perfect balance between finance and public policy n Instead of corporations, serve non-profit clients – States and cities – Public colleges and universities – Government agencies (e.g. MTA and Port Authority) n Heavy focus on debt offerings (bonds) n Lifestyle: 70-90 hours per week n Analyst Responsibilities: – Perform debt modeling and financial analysis – Prepare presentation materials for client meetings – Interact with various parts of the firm to facilitate transaction execution n Compensation for 1st Year: Same as other Investment Banking Analysts n Typical Opportunities after Analyst Program: – Promotion to Investment Banking Associate – Move to Industry Coverage or Capital Markets groups – Hedge funds focusing on muni bonds – Finance / Treasury role of the government

4/22/15 Wall Street Club 8 Credit Risk Management (CRM) n Investment banks generate profit by lending money to clients n Credit Risk understands the risk of loss if a client cannot pay what it owes n Lifestyle: 50-70 hours per week n Analyst Responsibilities: – Underwrite supporting M&A, LBO, and general corporate purposes – Perform in-depth credit analysis using financial statements – Maintain written credit opinions – Maintain financial projection models n Compensation for 1st Year: Varies significantly with firm n Typical Opportunities after Analyst Program: – Promotion to Credit Risk Associate – Move to Investment Banking groups – Asset Management with a focus on Credit (loans and bonds) – Finance divisions of major corporations

4/22/15 Wall Street Club 9 Sales & Trading n Salespeople and Traders have very different job descriptions n Sales takes orders from asset managers / hedge funds and convey to traders n Traders do not make money simply by buying low and selling high n Analyst experience very different from desk to desk: Fixed Income, Commodities, Currencies, Credit, Equities n Traders at investment banks are market makers and great risk managers n Lifestyle: 50-70 hours per week n Compensation for 1st Year: – Signing Bonus: $10,000 – Base Salary: $85,000 – Bonus: $30,000 - 50,000 – All-in Compensation: $115,000 - 135,000 n Typical Opportunities after Analyst Program: – Promotion to Associate – Brokerage firms – Hedge funds (trading position) – Mutual Funds – Pension Funds

4/22/15 Wall Street Club 10 Equity Research n Hierarchy different from IB, S&T, PubFin, and S&T: – Associate à Senior Associate à Analyst n Each professional follows a set of companies in a specific industry n Write very detailed stock recommendations for institutional clients n Analyst Responsibilities: – Create and maintain earnings, valuation and industry models – Analyze implications of news to companies under coverage – Conduct industry diligence and research through surveys and management conference calls n Compensation for 1st Year: – Signing Bonus: $10,000 – Base Salary: $85,000 – Bonus: $30,000 - 40,000 – All-in Compensation: $115,000 - 125,000 n Typical Opportunities after Analyst Program: – Promotion to Senior Associate – Industry-specific Hedge Funds – Investor Relations – Asset Management

4/22/15 Wall Street Club 11 Bulge Bracket (BB) Banks n Examples – Lynch – Capital – – – – – JPMorgan Chase – – UBS n Deals: >$1bn n Geography: Presence in all continents n Services: Full suite of investment banking, capital markets, sales & trading, and equity research services n Placement: Analyst works in one of the investment banking groups

4/22/15 Wall Street Club 12 Elite Boutiques (EB) Banks n Examples – – Greenhill – – Moelis & Company – Perella Weinberg Partners – Rothschild – – Qatalyst Partners n Deals: >$1bn n Geography: Presence in all continents n Services: Strict focus on M&A Advisory and Restructuring n Placement: Analyst works across all industries

4/22/15 Wall Street Club 13 Middle-Market (MM) Banks n Examples – – Jefferies – Oppenheimer – Piper Jaffray – Raymond James – RBC Capital Markets – Robert W. – Sandler O’Neill & Partners – Nicoulas – William Blair n Deals: $50MM - $500MM n Geography: Strong presence in geographies not covered by BBs n Services: Suite of investment banking, capital markets, sales & trading, equity research, and asset management services n Placement: Analyst works in one of the investment banking groups

4/22/15 Wall Street Club 14 Other Foreign Giants n Industry leaders with very strong franchise in their region but limited presence in US: – BNP Paribas (France) – Credit Agricole (France) – Macquarie Capital (Australia) – Societe Generale (France) – HSBC () – (United Kingdom)

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