Investment Banking Discussion Thread

[seeldoger47]

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Thanks for your feedback, I certainly appreciate you sharing your knowledge with me. Do you have anymore information or anything else you would care to share with me? I am quite eager to learn more.
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Originally Posted by Nereis

If you want to talk directional betting...
This is where I hoped we’d end up. To me synthetic credit seems like the best way to manage risk, how much money you can lose worst-case scenario versus how much you can make, assuming you can find risk that has been mispriced. It is a bit of a contradiction; I don’t believe synthetic credit should exist, for if you want to manage risk a thorough analysis of the financial statements should be conducted. Otherwise you can have lenders who lend recklessly and then buy protection to cover their ass because buying protection is easier than a fundamental analysis, and society ends up with disastrous results. But yet I want to use it to maximize my returns.

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Originally Posted by Nereis

...that is the realm of hedge funds (unless you're in the JP Morgan CIO).

Speaking of prop trading is anyone else concerned about JPM’s massive $8 billion, last number I saw rumored, loss? For what concerns me is not the gross amount, for it is pocket change to JPM, but the fact it didn’t manage risk properly and what the implications are for Bank of America or Citi Group? The thought makes me shudder.
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Originally Posted by Nereis

I'm not sure if you believe in the efficient markets hypothesis, but from your general remark on that point I'm inclined to believe so.

Forgive me for confusing you and allow me to elaborate further. I believe the efficient market hypothesis, like the mainstream economic paradigm, to be so unrealistic I’ve never taken the time to study it. So when I say, “All markets are irrational however at any point in time the price is always right” I am acknowledging the market's irrationality while also realizing the fact the individual doesn't know the true price either. For example say you receive a margin call from your broker, or an investor requesting his money back, while you are all in because you found an glaring inefficiency in the market. However your broker, or investor, won’t care if you are right and the market is wrong in long-run, they only want their money now. So you are going to have to liquidate assets to raise money and if the trade went against you at all you will have to realize losses even though you were right in the long run. This framework prevents me from being self-indulgent for investing is not an activity that rewards those who are self-indulgent.

Quote:
Originally Posted by Nereis

If you want to talk directional betting, that is the realm of hedge funds (unless you're in the JP Morgan CIO).
I'm not sure if you believe in the efficient markets hypothesis, but from your general remark on that point I'm inclined to believe so. If so, you will have to explain the returns of value portfolios and successfully argue against Fama and French.
As for Fama and French, I see is nothing contentious there. I actually want to be a value investor, however it is my contention that debt and value don’t go together. And while you may find a company that offers a significant margin of safety, it will not prevent you from losing money in this environment (there are outsiders of course like AAPL and RGR) for while there are a diverse number of asset classes there is no diversity in price movement. It is either risk on or risk off as the markets try to figure out whether there will be deflation or inflation. But that being said I am looking for value, this does not mean I am going to buy just yet, in Europe, where we could realize the mother of all bull markets if the situation plays out the way I think it can. There just needs to be the spark that lights the fire....

 

[Hampton]

Delete.

 

[palma]

Hi guys,

I am need of some advice from people involved in the field of Finance, specifically, I Banking or those who were IB and now are in VC

I made this post on WSO and got a few responses. I never thought I would post something like this on here, but it seems there are a few people involved in the industry here and seem to be quite knowledgeable. Your input is appreciated.

Here is my post

My Story: I am 25 years old and completed my undergrad in Life Sciences at Queen’s University (Canada) and am partway through medical school. I had always considered Finance in undergrad, but my premed path left very little room to explore Finance (or even other areas for that matter) and back then I really did not know much about it other than it was a high caliber and well-paid profession. When I went on to medical school without trying Finance, I didn’t really have any regrets. I didn’t know what I was missing out on. While in medical school, I came to enjoy some aspects (research, innovation etc.), but at most times it is rote learning and very static. In undergrad, I was always stronger in the quantitative subjects over the biology/life-sciences courses. But, I wasn’t exactly bad at them either nor did I outright hate them was able to continue year after year through the prescribed course load and pre-med activities. While in first year of medical school I was able to tolerate the work, but was not as enjoyable as some of those undergrad courses that were more dynamic, problem-solving based and quantitative. Now, everything seems so formulaic and is basically a checklist of things that need to be done.

Last year, I felt I needed to take time off school as I have been at it since high school non-stop and wanted to focus on some personal things. On the side, I decided to learn a thing or two about managing personal finances. I took a basic introductory Finance course through Harvard’s distance education program. It was a very basic and well taught course that gave me just a fascinating introduction to finance. With my interest peaked, I decided to go back to my Alma mater Queen’s and took some undergrad courses in Finance (Queen’s is a target school for Bank recruiting and has a solid Commerce program in Canada). I took fourth year level courses in Investments/portfolio management and Derivative Securities. I hadn’t had this much fun learning since the beginning of my undergrad. I had heard about derivatives and their destructive nature, but didn’t know the crucial role they played in risk managements. In fact, risk management was in itself a fascinating exercise in strategy on top of the fun I had learning about derivatives, pricing theories and stochastic properties of price dynamics. What was seen could not be unseen and my doubts about going down the path of medicine really came into question knowing there was a whole field out there that I might potentially enjoy more than medicine.

Unsure of my future, I decided on the side to apply to another target school in Canada. Richard Ivey School of Business where they have solid recruiting as well. It is only a two year program (Junior + Senior year). I got accepted by the program and would hope to land a summer analyst internship next summer. I am thinking about S&T, HC or general Ibanking (followed by breaking into Pharma/BioTech VC) or go for some more schooling (MFin) and end up in risk management. Nonetheless, I am now facing the dilemma of returning back to medicine or continuing in finance. Medicine represents to me an already set path with guarantees of a job and stable income. Finance is certainly a riskier option on all fronts, but it seems like I would be happier in it than medicine. Btw, this notion mostly from reading the forums so if somebody could clarify what sort of risks are involved in this type of work that would be appreciated. Loss of employment or declining incomes? Are they usually temporary and people always find someone else willing to take on people with experience?

So, I would like to hear from other who faced the choice of a career in some other field they were training for and then ended up switching to finance. How much riskier is this choice post-2007 (I saw some topics from before then). I apologize in advance for the lengthy post. Your advice is much appreciated.

Link: http://www.wallstreetoasis.com/forums/medicine-versus-banking-dilemma-my-story

 

[Pennglock]

^Interesting story. I would be hard-pressed to advise you to abandon the MD, as spots in medical school are so coveted. At least in the US. I'm not completely familiar with the Canadian dynamics.

Is there any option to pick up a joint MBA/MD at your school? I know certain programs in the US will offer this... This would allow you to break into finance at the associate rather than analyst level in the US.

Jumping into S&T and derivatives seems like a huge change of pace. M&A in a healthcare group or equities research in a group that covers life sciences sounds more like a path you could leverage.

 

[kasper007]

how much longer would you have to do to finish your MD ?

I think finishing your MD and going into finance wouldn't be impossible. actually, depending on the circumstances, it might be preferable as you'd have the option of going back to medecine if things don't work out (IB annual intake canada wide is probably 70-80 analysts, lower for S&T so you have to accept that it may not work out for you). To be honest, although ~98% of Canadian working in finance have a B.Comm / BBA, what you learn isn't that useful for iBanking and as long as you can show you know the basics (not only of finance but accounting as well, probably as important if not more), you'll be fine. There was an engineer in my analyst class and he did very well. going through med school shows that you are extremely smart, dedicated, able to do hard work in a stressing environment and do mind-numbing tasks without complaining too much which is pretty much what banks look for in an analyst.

health care IB / investing is in my experience the area with the most folks with "industry" knowledge / background and i have met / worked with quite a few MD and it has been a big advantage for them and given them a lot of credibility. Downside of going down this path is that you start your career late (age wise) and unless you have an MBA, at the bottom of the food chain (27 is extremely late to start as an analyst and age is likely to work against you during recruiting).

I've done quite a bit of health care banking / PE investing and ran IB recruiting for one of the CDN bank so feel free to pm me if you have more specific questions.

 

[kasper007]

One last thing, i don't think you should judge careers based on undergrad courses. i'd highly advise you to look try to discuss live with professionals of both fields, while they may appear narrow while you're at uni, there's a lot more opportunities that you'd think and i know a few MD that have very successfully more away from traditional medicine while doing something that they loved and was still related. my cousin is in a somewhat similar situation as you (she just started residency and think she'd rather do research) and she has gotten extremely good advice and support from her teachers / faculty so i'd definitely advice you to look at doing this as well, you definitely not the first med student to have second thoughts.

 

[leftover_salmon]



^Interesting story. I would be hard-pressed to advise you to abandon the MD, as spots in medical school are so coveted. At least in the US. I'm not completely familiar with the Canadian dynamics.
Is there any option to pick up a joint MBA/MD at your school? I know certain programs in the US will offer this... This would allow you to break into finance at the associate rather than analyst level in the US.
Jumping into S&T and derivatives seems like a huge change of pace. M&A in a healthcare group or equities research in a group that covers life sciences sounds more like a path you could leverage.

Agree with this. Moreover, chances are that when your resume comes across people's desks, that's also what they're thinking. In effect, you're going to be "typecast" -- not that it's a bad thing. Certainly your expertise gives you a leg up on monkeys who don't *really* understand the companies they're modelling.

 

[RedLeg]

I would say Kasper is pretty spot on.

I would encourage you to contemplate taking a longer term approach to breaking into finance (unless you absolutely can't stand medicine). Ask yourself what you can do in the medical field to make you attractive to financial firms. IBs won't be lined up to higher surgeons, but a successful hospital administrator could transition to an operating partner at a PE shop. VCs and HFs also speculate on start up biotech and pharma companies, so experience with research and the FDA trial and approval process is a big plus.

 

[indesertum]

Any research analysts on board that cover healthcare or biotech or pharma companies?

 

[chogall]

Any research analysts on board that cover healthcare or biotech or pharma companies?

you looking for sell side research?

 

[Khayembii Communique]

Great thread! I'm looking for more in depth information on Investment Banking, specifically day-in-the-life type of stuff. I'm considering contacting some IB's around my area to get more info.

Anyways, I have a BS in Engineering and Economics from a mediocre school with a mediocre cumulative GPA (though my Econ GPA is higher). I was considering pursuing an MBA at a reputable institution (see my thread on Kellogg's 1-year MBA). Would having such an MBA allow me to move into such a position or would not having a Finance undergrad, particularly from a well-known school, be a big stumbling block?

 

[gdl203]

No need for a finance undergrad if you get an MBA with a good finance program and if you expend a lot of efforts in doing well in finance & accounting, and in preparing for IB recruiting (understanding, networking, interviewing, etc...).

 

[Khayembii Communique]

Might not be relevant to this thread but after getting an MBA what kind of positions would be most readily available and would would income prospects look like? How long would it take to move into a field like IB upon graduating and how tough is it to get into?

 

[gdl203]

You need to do a little bit more homework on the topic - there's guides to read etc... but in a nutshell, banks recruit on campus at business schools for associate positions, generally either for the investment banking program (corporate finance) or sales & trading (more often sales and research than trading). Entry level salaries are available on the web. There are also middle and back office positions for which some banks recruit on campus.

 

[Harbin]



Might not be relevant to this thread but after getting an MBA what kind of positions would be most readily available and would would income prospects look like? How long would it take to move into a field like IB upon graduating and how tough is it to get into?

you would be placed directly into an associate position, and many mba students have a summer associate internship before getting a FT offer. You would make typical associate salary, probably like 150-200k depending on bonuses, dealflow, and if bb/mm/boutique etc