Brainteaser
Question: A hallway has 100 light bulbs numbered 1 to
100 with 100 corresponding light switches. 100 people
walk through the hallway. The first person switches on
every light bulb. The second person flips the switch of
every second light bulb. The third person flips the switch
of every third light bulb. The fourth person, every fourth
and so forth until all 100 people pass through the hallway.
How many light bulbs are switched on at the end?
Brainteaser
Answer: 10 light bulbs
Players of the Deal
September 23, 2014
Pitch of the Week
• Ebay Pitch
Portfolio Applications Extended
• New deadline: This Thursday at midnight (9/25/14)
• Application link: http://bit.ly/1rZVDFY
Players of the Deal
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Corporate Finance
Investment Bankers
Sales & Traders
Hedge Funds & Asset Managers
Research
Corporate Finance
Main duties:
• Managing and allocating capital
– Short term cash management
– Long term investments and projects
• Financial reporting
– Public company reporting
– Internal auditing
• In-house M&A and valuation
Finance Departments
Cash Management
Financial Planning & Analysis
Treasury
Corporate Development
Investment Bankers
Types of Investment Bankers
Coverage
•
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Industrials
Consumer & Retail
Tech, Media, Telecomm (TMT)
Real Estate
Financial Institutions (FIG)
Healthcare
Energy & Power
Product
•
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Mergers & Acquisitions
Restructuring
Leveraged Finance
Capital Markets
– Debt Capital Markets (DCM)
– Equity Capital Markets (ECM)
Investment Bankers
So what do they do?
• Advisory:
– Give advice on how to best structure the deal
– Help companies through the different processes of deals
• Road shows, regulatory requirements, etc.
• Valuation:
– Use to help gauge the price of a company
– Third-party fairness valuations of companies
• Underwriting:
– Help companies raise capital by first taking it onto the bank’s
balance sheet before selling to institutional investors
Sales & Traders
Players in the Secondary Market
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Clients
Sales
Traders
Structurers
Research Analysts
Risk Management
Investor
$$$
Investment
Bank
Corporation
$$$
Sales & Traders
The secondary market provides liquidity
• Now that the investor has the bonds what does he do?
1. Buy more bonds
2. Sell bonds
3. Swap bonds for
other bonds
Investor
Investment
Bank
• What else can you trade? Bonds, CDS, Futures,
Options, Interest Rates, FX & Forwards
Sales & Traders
Product Structure
Investment
Bank
FICC Trading
Emerging
Markets
G7
Interest Rates
SPG Trading
FX & Forwards
Interest Rates
MBS (Agency
& Non Agency)
FX & Forwards
ABS
Equities
CDO’s
Cash Trading
Credit
Derivatives
Investment
Grade
High Yield
Sales & Traders
Salespeople: So what do they do?
• Client-facing business:
– You are the competitive edge that differentiates you from
your competitors
– This means getting the best price for your existing clients,
and winning business from competitors
– It is your job to satisfy your firm’s clients, this includes:
• Road shows, dinners, conferences, golfing & sports
• Assisting the Traders:
– Help traders get out of “Axed” positions
– Help facilitate flow when markets are stable
Sales & Traders
Traders: So what do they do?
• Business of Risk Management:
– Take a position on behalf of the firm to facilitate client flow
– Job is to make money off of bid/ask spreads
– Building up inventory and getting lucky is not a successful
tactic in this business
• Qualities of Traders:
– Analytical, quick, high risk appetite
– Deep insight into the markets they trade; know who your
clients are, what they’re buying, and what they’re selling.
Sales & Traders
Front Office – other roles
• Structurers:
– Client business that requires intense problem solving
– Tailor make a solution for a specific problem
• Risk Management:
– Stress-test across different parameters to make sure the firm
never breaches its risk limits
• Research:
– Produce sell-side reports that explain changes in the markets
– Usually split by product and can require econometrics,
valuation analysis, or statistical and mathematical modeling
Hedge Funds & Asset Managers
• Various types of Hedge Funds
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Multi-Strat
Long-Short
Managed Futures
Merger Arbitrage
A Roadshow
Investment Banker
IPO Company
e.g. Alibaba
Venture Capital
Hedge Fund / Asset
Manager
Private Equity
Why do you need them?
• Money
• Pricing
• Marketing
– (Imagine if Buffett invested in your company)
Research
• Sell-Side Analyst
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Cover a specific sector / industry
Create financial models and research reports
Interact with corporate executives
Introduce buy-side analysts to corporate executives