Beginning Your Career in a Recession
Mod Note (Andy): adding this to the frontpage because of the quality of comments, not because we are in a recession :-)
Inspired by geoffblades's post this morning (http://www.wallstreetoasis.com/forums/still-want-the-job-are-you-prepar…), I started thinking how starting a career in investment banking during a recession differs from starting at the beginning of a long boom cycle.
No matter your personal view on the market and economy, we appear poised for at least a small recession in the next few years. As I am starting as a Summer Analyst within a tech coverage group this year, I am interested in the experiences that the more experienced members of this board had during the most recent recession.
Specifically, 1) How does a recession impact the Summer Analyst/Analyst experience? 2) How does a recession impact advancement within the bank to Associate and exits to PE? 3) Does a recession, and likely smaller Analyst classes, create opportunities to more rapidly advance in IBD or PE to senior levels?
You are really overthinking this whole summer analyst thing.
Pham-Hammer is right- there's a big difference between a recession and a bear market. Also I may be mistaken, but it seems like if you're in the advisory arm you should be okay (correct me if I'm wrong) going forward if you get a FT offer.
Agreeing with @phan-hammer" above in that recession gets thrown around too much and most of the people around today hear recession and think the last shit show of a recession. I'm not predicting recession or not but I highly doubt, or at least greatly hope, the next recession isn't anything like the last one. That was on a scale altogether different than anything since the Depression but there will be another recession sometime. There always will be.
I've been through a couple of recessions now, and have been in and invested in sectors that hit really bad cycles (tech, re, telecom, etc) over the past 20 years that have basically had their own mini depressions and all I have to say with regard to a career is that shit happens beyond your control so you need to concentrate on what you can control. Develop skills and experience that make you valuable in being the person who doesn't get laid off or who can get hired right away if you do, build as deep and wide a network as you can forever (it's not just something you do in college to get your first job), perhaps get certifications that could help (CFA or whatever in your field, just make sure it's applicable and worth the time you're going to put into it), keep a good attitude, realize the worlds not coming to an end if shit starts getting bad or you get laid off, and be flexible in your career. Realize that at 22 you may "know" that you're going to do 2 yrs in IB->PE->H/S/W->big swinging dick PE career at BX (or whatever your career thoughts are, IB->the next Uber->billionaire baller) but that even if the roses keep blooming over the next 15 years, there's a good chance that exact career path won't happen. Ask people who enter their 2 yr analyst stint thinking along those lines who by 12 months in say fuck this and want nothing to do with that career path even without external factors like recessions. Now throw in bad markets, recessions, not getting that awesome next step or whatever and there's a good chance your career will be different than your well thought out 22 yr old plan.
Do as well as you can in your current position, have a long(ER) term plan with which you're willing to be flexible and have a Plan B in mind-not necessarily a job you can start next Tuesday (unless there are definitely layoffs coming) but a plan that could land you something relatively quickly. And always have a cash cushion that can take you through a decent amount of time with no income. Shit can hit the fan by means of the economy and world falling apart or by your department having layoffs in the best of times. The quality of your career and the success you have in it are results of your ability to roll with the punches in a controlled and well thought out manner.
Holy fuck it's an internship. Can someone from CA or who goes to Berkeley explain why basically everyone who went there is weird?
You think that's bad you should visit Portland.
Serious explanation? Kids growing up without the influence of a good male role model. What most of these "weird" males have in common is that they're very feminized.
Trends in your coverage area will be far more impactful to your experience / career than the performance of the broader economy - except that at bulges the broader economy will impact revenues across the bank and thus impact comp. e.g. See the european banks. Barclays / UBS etc may have the best damn (insert industry) coverage group on the street and kill it year in and year out but when the broader bank is in the revenue / regulatory shitter, you probably aren't getting paid as well as your buddy in a "worse" coverage group at a domestic bank that isn't facing the same issues. And sure, if you are in a commodity sensitive coverage group (energy) and oil is in the shitter then that will impact the group.
But these issues are far more important / relevant for incoming associates / those who intend to make a career of banking.
Recession is an easy catch-all term to use to get at the point of how does the investment banking industry change when the economy as a whole or markets are not performing well. No matter what terminology you prefer, I am still interested in the general questions of how the industry changes and how to best succeed when there are (presumably) fewer opportunities available.
well, at least you did not say that we are definitely heading towards a recession in one of your interviews
1) How does a recession impact the Summer Analyst/Analyst experience? Hours will likely still be bad, but your workload will shift, so much less deal work and much more pitching, as banks and MDs become more desperate for business. On the deals you do manage to win, success rate will decrease because of the weakened financing environment, buyers become nervous/risk adverse, underlying businesses aren't as good as you weren't as picky up front, etc. This typically means lower fees, lower bonuses, etc. not to mention if you're at a BB, then anything IBD does make is likely offsetting losses in other departments (e.g. S&T). If you're at a spot with a good restructuring practice, you're hedged against a downturn.
2) How does a recession impact advancement within the bank to Associate and exits to PE? The hardest part during a downturn is getting the initial foot in the door vs. advancement. During a recession there may be a few less associate spots to move into, but banks will always need analysts and associates to do the grunt work, and with the banks now starting to favor A2A promotes vs. MBAs, I'd be far more worried about getting into a bank vs. moving up within one. The real worry during a recession is at the VP level, as that's the first level to get culled, as they cost the most of any non-revenue generating employee, and an SVP/Director combined with any good associate can run the day-to-day of a deal.
PE is a different story. It's a much smaller field at the junior level, and funds always need associates for portfolio monitoring (which becomes a real issue during a recession), add-ons, etc. regardless of whether or not new deal flow drops off. It's also far more stable than banking as instead of relying on advisory fees, you're getting your 2% on committed capital to keep the lights on and keep everyone paid, so while some funds may hire 1-2 less associates per year when deal flow falls off a cliff, it's never going to be as bad as banking.
3) Does a recession, and likely smaller Analyst classes, create opportunities to more rapidly advance in IBD or PE to senior levels? It won't necessarily speed up advancement, but it will provide more opportunities down the road. Graduating in 2008/2009, the hardest part was getting the initial foot in the door. There were hiring freezes at most places across the street, and the banks that were taking on new analysts had drastically reduced their class sizes, and so really only the top candidates could break into the top banks and groups. However, fast forward a few years and suddenly there was a supply constraint for associates as there were now far fewer experienced analysts on the street than normal to direct promote, and other candidates (e.g. MBAs) had become disillusioned with banking after the recession and went into other fields (e.g. tech). Those that got in the door ended up seeing associate roles from almost every BB, elite boutique, and MM shop out there over the past couple of years.
Graduating into a recession can cost you $5MM (Originally Posted: 04/10/2008)
http://www.businessweek.com/magazine/content/08_15/b4079059579345.htm?c…
I think it'd be worse to graduate into a great economy and then go through a recession as an MD.
Don't worry, you'll never make MD anyway. I can bet my house on that since the odds are so on my side, even without and especially without knowing anything about you.
Read the article. It only costs you if you get a shitty job. Thanks for posting this, dick.
This article is basically the same thing everyone knows: it's harder to get a good job in a recession. i.e. if you take a job at Mattel instead of Morgan Stanley, and you assume that you would stay at either job for 10+ years, the difference in comp will be millions of dollars, yes. However, if you actually get the job at MS in a recession, I bet you would be no worse of 10 years later than if you had gotten it during a boom. Boom or bust, Mattel pays less than MS....so what?
I also agree with JJC's point. At the Associate level you are talking about a variance of maybe $300K tops between boom and bust. At the MD levels you could be forgoing millions of dollars during a recession. At C-level in banks you could be forgoing tens of millions.
I've thought about this quite a bit, good call for bringing it up. It's true that you would be forgoing more income during a recession at upper levels.
Another issue is that of exit options - as analyst classes will slimmer, when the economy finally picks up there will probably be less competition. It's like being part of an NFL draft class that is half the size of the one before. 6th round picks start moving up.
I think this is fair - people who still make it into IB during a recession are of greater quality (not everyone, but overall) and their ranks will be trimmed by layoffs, only leaving the very best. These people will then exit into a prime job market. Of course timing makes all the difference, but more or less I think this is what happens. If anyone disagrees with me then please voice your opinions as I think this is a pretty interesting topic.
the guy in this article is a good friend. he did get an offer at MS, but not in the group he wanted, so he's doing corp. dev. for mattel.
No way that guy is 25......... I feel bad for him if he is.
I was thinking the same thing. The guy looks about 40, and he hasn't even started working 90 hour weeks yet.
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