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Investment Banking Discussion Thread - Page 40

post #586 of 619

I think it would be very dependent on what you trade, no?

 

As I mentioned the bond traders I knew were exactly as mentioned about assembly line workers.

 

The people who came in doing the asset backed and derivative stuff seemed to have really variable work in comparison. Most were only no longer trading because they were international and needed the sponsorship or came to the firm post Lehman crash.

post #587 of 619
You guys realize that you don't like just turn around and perfectly hedge stuff, right?

Like your book is always full of mismatches and spreads and whatnot. Even when you trade a purely delta 1 product / just trade directionally, the questions you effectively have to answer are incredibly multifaceted.

Sure it's all zero sum / doesn't cure cancer but it's awfully difficult.

I don't know where the meme of traders making gobs of money just by sitting in a particular seat began but anyone who believes it can open a PA easily enough and try to hop on that gravy train.
post #588 of 619

Never thought about it in two much detail actually. Any good books you can recommend on the subject?

post #589 of 619
Alchemy of Finance is in many ways an amazing book.

Not really a day to day life of a trader thing (which would be a horrible book since it would mostly involve trips to the vending machine) but gives you an idea of what you have to think about in being a macro trader.
post #590 of 619
Quote:
Originally Posted by Cantabrigian View Post

Haha.

Out of interest, otc, what do you think is involved in "just detail work to make money off your area and keep the overall model in check?"


The burnout rate is high because, almost no one gets to go home flat so you think about it all night and all weekend. A large part of the job is managing things over which you have absolutely no control. Running risk is, almost by definition, just an exercise in trying to plan for, as best you can, things you can't fully anticipate.

Fulfilment is usually something people conveniently consider when they get laid off. There's certainly something to be said for doing work you find meaningful (in some way or another) but that's often what people trot out when they quit or are quitted for some other reason.

Are you saying all elite school graduates are gifted? If so lol8[1].gif

Fulfillment is the #1 thing I think of at the moment and I certainly haven't been laid off. I think may workers spend a lot of time pondering questions related to fulfilment and purpose. Saying it's reserved for the quitters or those who have been sacked comes off as a bit of a douchey comment.
post #591 of 619
Most young traders, especially prop traders are trading to their firms model. They didn't come up with the model, that was the guys who started the firm.

I'm not saying it doesn't take skill (welding is also a highly skilled trade...but also a place where despite the level of skill, 99% of the work out there is simply welding the things that someone else tells you to weld) but sitting around trading derivatives is very different from M&A type IBD stuff. You know the score at all times, you aren't thinking about how things will unfold in the future, you aren't pitching clients on your ideas being right, you are just trading away.

FWIW, I see a lot of the fulfillment stuff from people long before they quit or are layed off. They are in it for the money (and are honest about it)...they have some goal in mind. Pay off student loans, make $X money plus b-school tuition, use b-school to transition into a non-trading role. It works because 4-5 years at a prop trading firm (assuming you make it past the trading-assistant roles) can give you a pile of cash while not being such a long time that it limits your post-bschool exit opportunities. And they work 50 hour weeks (usually without weekend time) with lots of time to party.

Maybe it is different in London, but that is how it seems in chicago for the guys trading on the CBOT/CME.
post #592 of 619
Quote:
Originally Posted by Lord-Barrington View Post

Fulfillment is the #1 thing I think of at the moment and I certainly haven't been laid off. I think may workers spend a lot of time pondering questions related to fulfilment and purpose. Saying it's reserved for the quitters or those who have been sacked comes off as a bit of a douchey comment.

I didn't say fulfilment was reserved for quitters.

Countering the assertion that fulfilment was the main reason for leaving, I suggested that fulfilment was often an excuse used when people leave for other reasons.

That said, I'm still a HUGE douche.
post #593 of 619
Quote:
Originally Posted by Cantabrigian View Post

I didn't say fulfilment was reserved for quitters.

Countering the assertion that fulfilment was the main reason for leaving, I suggested that fulfilment was often an excuse used when people leave for other reasons.

That said, I'm still a HUGE douche.

Accepting your douchiness is the least douchy thing you could do -- thus cancelling your douhiness. You screwed it all up, dammit!
post #594 of 619
Quote:
Originally Posted by otc View Post

Most young traders, especially prop traders are trading to their firms model. They didn't come up with the model, that was the guys who started the firm.

I'm not saying it doesn't take skill (welding is also a highly skilled trade...but also a place where despite the level of skill, 99% of the work out there is simply welding the things that someone else tells you to weld) but sitting around trading derivatives is very different from M&A type IBD stuff. You know the score at all times, you aren't thinking about how things will unfold in the future, you aren't pitching clients on your ideas being right, you are just trading away.

FWIW, I see a lot of the fulfillment stuff from people long before they quit or are layed off. They are in it for the money (and are honest about it)...they have some goal in mind. Pay off student loans, make $X money plus b-school tuition, use b-school to transition into a non-trading role. It works because 4-5 years at a prop trading firm (assuming you make it past the trading-assistant roles) can give you a pile of cash while not being such a long time that it limits your post-bschool exit opportunities. And they work 50 hour weeks (usually without weekend time) with lots of time to party.

Maybe it is different in London, but that is how it seems in chicago for the guys trading on the CBOT/CME.


If you're thinking prop shop in Chicago, I can kinda understand why you'd think that, especially if you've never tried trading.

Chi-town is kinda it's own thing. New York has some of those chop shops but I feel like they more grew up around the exchanges in the windy city.

There are a bunch of stories about guys who got staked with a couple grand and turned it into a hundred million dollars. And there are thousands of stories about guys who have gone bankrupt three times before the age of 32 trying to do the same thing.

Chop shop life is - from what I've heard - 10 times more intense than trading at a bank. You have very little capital and strict limits and you basically have to make money every day. The stress must be incredible and I imagine the burnout rate makes banks look stable.

The guys who can do that successfully, and they are few, are basically trading superheroes. I alternately love / hate reading Market Wizards (cheesy name but great book) which is all about those guys. There's some useful advice and lots of chances to look at your life and shake your head in disbelief of your own mediocrity.
post #595 of 619
Internship is actually a full time position, so now I'm an Associate. icon_gu_b_slayer[1].gif

Let's see if I can leverage (lol) this to HSW...
post #596 of 619
What's the best way to source deals for the microcap space as a PE firm? Contacting biz brokers and investment banks is obvious, but the best returns come through buying a company direct. I've heard cold calling owners/CEO's is one method, but have no idea how normal/acceptable that is or how to go about doing it. No idea what the rules are for my current situation on sourcing deals and it's pretty much preventing me from being productive.

Our firm historically has just had deals come to us but I'm trying to be proactive.
post #597 of 619
Quote:
Originally Posted by Khayembii Communique View Post

What's the best way to source deals for the microcap space as a PE firm? Contacting biz brokers and investment banks is obvious, but the best returns come through buying a company direct. I've heard cold calling owners/CEO's is one method, but have no idea how normal/acceptable that is or how to go about doing it. No idea what the rules are for my current situation on sourcing deals and it's pretty much preventing me from being productive.

Our firm historically has just had deals come to us but I'm trying to be proactive.

shouldn't you start by asking the partners first before you ask the internet???

that being said, very few firms have associates source deals. some growth equity firms (summit, TA) are notorious for having their associates spend a significant portion of their time cold calling, but it's generally the partners' job to originate deals. search funds are probably the closest thing in the microcap space and cold calling / sending letter, etc to literally thousands of firms is generally how they get things done, plenty to read about online.
post #598 of 619
Quote:
Originally Posted by kasper007 View Post

shouldn't you start by asking the partners first before you ask the internet???

that being said, very few firms have associates source deals. some growth equity firms (summit, TA) are notorious for having their associates spend a significant portion of their time cold calling, but it's generally the partners' job to originate deals. search funds are probably the closest thing in the microcap space and cold calling / sending letter, etc to literally thousands of firms is generally how they get things done, plenty to read about online.

I'm asking both. They both said it's fine if I get out and try sourcing.

They've been busy and/or out of town so I haven't been able to sit down and go over it in detail with them yet. I'm meeting with banks, other firms, people I know in the industry, etc. but most of our deals are done direct which is the challenge. I'm going to speak with our portfolio company CEO's to see what they might be looking for in terms of add-on acquisitions. Will also give me a chance to get to know them better, as well as the strategies.
post #599 of 619

almost all of our lower middle market deals come via investment banks like lincoln, piper jaffray, hlhz, etc.

post #600 of 619
Quote:
Originally Posted by Khayembii Communique View Post

What's the best way to source deals for the microcap space as a PE firm? Contacting biz brokers and investment banks is obvious, but the best returns come through buying a company direct. I've heard cold calling owners/CEO's is one method, but have no idea how normal/acceptable that is or how to go about doing it. No idea what the rules are for my current situation on sourcing deals and it's pretty much preventing me from being productive.

Our firm historically has just had deals come to us but I'm trying to be proactive.

 

Focus on some sectors, do your research, read market research and trade magazines, go to trade shows and conferences for that sector, shake a lot of hands, follow up with those that seemed most attractive as investments (for many reasons like the business fundamentals or the specifics of ownership/management) and go visit them if they're amenable to it.  Always present yourself as a potential partner for the day they need capital to grow.   You want those guuys to think of you when they think about potential exit - but without pushing those big buttons just yet.  You want them to think that you actually understand their space and are not just a paper pusher with a calculator.  Even better if you know enough about the sector to call/email them with a scoop from time to time ("Hey John, did you see that A bought X for $XXmm?")

 

At the same time, get to know a lot of middle-market bankers - most likely, the deals will come through them.  A board is unlikely to sell direct to some fund without running an auction - for a whole host of reasons.   You want those bankers to have you on your list when they pitch the sell-side, you want them to think about you as a motivated buyer that won't waste people's time in an auction.  It takes time to create those relationships but good biz dev partners at PE funds are ahead of the auction because of their relationships - they know when something is coming long before teasers are out - and they'll work hard to do preliminary work and prepare to hit the auction hard.   And all the work they've done to schmooze the companies directly will pay off big time in the auction - they'll get asymmetric information and inside comments/tips.

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