Is there any part of the financial industry that is growing?
So me and my colleagues were discussing over lunch how things are generally worse off in the industry since its heyday.
Investment Banks face more regulations.
Equity research and S&T revenues are dropping (atleast for European banks)
Hedge funds and AM are seeing money move to passive funds
The only places growing seem to be PE and/ or FinTech (though very small right now)?
I was wondering what you guys think about the future of the industry as a whole and buy-side/sell-side?
PE is next... too much dry powder chasing too few deals
VC is in just as bad a place.
Which implies M&A should be growing - to answer OP.
I'm not in IB but IDK why realjackryan was thrown MS. Hasn't 2015 to now been one of the best 3 year stretches for M&A deals in both MM and above? I may be wrong but that's the impression I get.
Compliance and legal were until 1/20/17
lolz. True and Not True. My bank laid off a ton of people last year (because most of our legal compliance implementation projects were completed) but i see your point.
I can see some American Banks benefiting from less regulations, but political risk of EU break up etc offsets it tbh.
I would agree, my friends say the IB & AM analyst classes seem smaller but there are more compliance and legal intern than ever before.
M&A advisory, despite regulatory constraints and shifting economics. When I was at a BB, my boutique firm counterparts were absolutely crushing it.
There will always be a supply of businesses for sale, and a demand to buy them. Whether they are good or bad transactions does not matter. M&A advisory is a profession that is almost always a necessity (in the case of public company transactions) and a highly value-add service for private companies unable to maneuver within the sponsor/strategic landscape.
It is also a profession that takes years of development, so there are high barriers to entry (no one can just become an astute advisor). Beyond financial modelling, advisory requires stamina, strong intuition and negotiation skills that can only be learned through a decade of experience.
Wouldn't that make it have high barriers to entry if it's difficult to enter a market?
Absolutely!
Yes high is what I meant!
Secondary PE has awesome macro trends:
The great irony is that many of the best banking analysts went to primary private equity, and less desired ones into secondaries, but it seems secondary PE is a much riper (and growing) field. Primary private equity today is extremely crowded from both a capital and personnel standpoint.
Second this. Secondaries, along with adjacent fields like FoF and coinvestment will become increasingly attractive to talent in the future. People will wisen up.
But won't these fields also face lower fees? Once primary PE funds decline, a lot of FoFs will also go under as they cannot justify their fees anymore for large mandates and other large institutional investors which could have easily invested in similar PE funds by themselves
Yes and no in my opinion. Currently work in PE secondaries and the amount of dry powder in the space is unbelievable. There's just not enough supply, as PE is typically a "buy and hold" asset class rather than one you trade in and out of easily.
Groups are bidding up the price on portfolios because of leverage to the point where the unlevered IRR they're underwriting to is below 8% in some cases. If you assume more PE dry powder = lower PE returns, then the secondary portfolios which own these now lower returning PE portfolios will also experience lower returns, with an added layer of fees, and a lot of them will struggle to hit their own preferred return (usually 8 - 10%) over the next few years.
That's just my opinion. The space was unbelievable easy to make money in 5 - 10 years ago, as you were buying portfolios at a discount that hadn't been written up at all yet; however, today the space has gotten way more efficient
Interesting to get this color from someone actually in the space. I hadn't realized that demand was keeping pace / outstripping supply for primary PE assets.
There's a somewhat interesting dynamic in Secondaries regarding barriers to entry. Secondary PE is different than "primary" PE in that basically anyone can go out and raise ~$200M and start buying companies. It's difficult to do that in Secondaries because you have gatekeepers, the GPs. A reputable GP isn't going to let just anyone into their fund, they want a known entity, and the GP is free to reject anyone they want really. There's also an issue with access to information. There are many cases where a seller isn't interested in sharing information on a fund, so existing investors in particular funds are highly advantaged.
Long story short, the currently entrenched Secondary funds have a significant advantage over newly started funds. It's not impossible to start a new Secondary group, but its quite difficult. The majority of the increase in dry powder is from established Secondary groups raising increasingly larger funds.
Yes, no doubt, returns are going down. But that's the case across all asset classes (IMO).
Last comment - I'd say for the most part supply is keeping up with demand. As the primary PE market grows, Secondaries will continue to grow. Secondary market transaction value tracks pretty closely to the primary market, I believe 5-7% of the primary PE market will eventually transact through Secondaries. Strong pricing right now also shakes a fair amount of volume loose.
This is due to the fact that MM and smaller PE firms are amazingly targeted, the big players in the PE world are too jack of all trades for the market conditions. In every industry specializing, the big PE players are either ignorant or digging in their heals for the sake of deal prestige. Given that people in PE are some of the brightest people on the planet I would argue it is the latter.
I would have to say Asset Management (at a bank) and private wealth management is a growing area for sure
No it's not. Asset Management at banks is getting destroyed by global asset managers and fintech.
Fair point, but institutional AM is going to be able to introduce HNWI to alternative exposures.
Sure, Betterment will put your grandmother into an index fund for a couple bips, but it's not going to open doors to talented PE or real estate managers. That's the key, in my opinion.
My view might be very limited but here is what I see: Global > Look East (the west has too many problems) Sector > Infrastructure (look at AIIB and Silk Road Initiatives) Function > Project Finance (Regional Southeast Asia)
I want to second Project Finance but expand and say that not only in SE Asia but it's also picking up in Lat Am.
AM/Wealth management. No matter what happens, there will still be wealthy people who need their assets managed.
Don't know about S&T going forward. Technology would scare me in that space, just given the automation trends.
How do you feel about the future of S&T?
I`ve heard about how technology is making that space bleaker for those wanting to get into the industry.
Thoughts?
There's parts of the business that I have no idea how they could survive. Cash equity sales? Basically selling equity product to institutional investors; I don't know how this survives. Cash trading? All moving towards algorithmic low touch execution. I guess overall I think the traditional button pushing execution trading is going away soon.
Relationship driven jobs will always exist. As will any sort of derivative/structured trading.
Lots of appetite in S&T for people that know about balance sheet optimization/efficient use of capital (thinking about prime brokerage here).
Technology is just squeezing the jobs. The funding is still there it's just going to a handful of PHD quants instead considerably more desk jockeys screaming into their phones.
somewhat agree, somewhat disagree. yes, these fields will still be lucrative, but the question is are they growing? I firmly believe that wealth management is not growing because of robo advisors, regulation, and the move to passive.
So this is where things get dicey. Caveat, I'm biased because I work in Alternatives.
I don't buy this entire move to passive taking over active management. Yes, when vol is suppressed for years by CB's, buying the index looks like a genius call. When vol comes back, I think active management comes back in a meaningful way. I welcome the shutdown of funds recently, as its clearing out under performers, so to speak.
Talked with an alum that used to head up sales for some of the largest investment firms and he said he thinks family offices are the place to be. Talk about a plethora of opportunities there....
Unless you are married into the family, it might not be the best place to be. Been with one for close to 5 years. Everything is very owner driven.
Depends on which family office, some owners are very hands off and leave most decisions up to the investment professionals.
The following will be growing in the next 5 years: Restructuring Distressed Turnaround Corporate Development
you think the next 5 years will be that bleak?
Obvious Shitlary Cunton/Bernie Sanders supporter.
Secondaries and infrastructure
M&A will likely stay big. Companies will continue merging together or buying up competitors to stay profitable and create inorganic growth.
FinTech will likely grow. Not sure how fast some advancements will catch on though.
deregulation for banking? And potential tax reform for companies so bring more deals?
trading volumes
Best guess:
Real estate outside of the west. I could see a lot of investment happening in ex-Soviet bloc countries and Latin America as income rises and corruption decreases.
Secondaries, Infrastructure, Distressed, Restructuring, developing country healthcare PE
Venture, especially venture in Asia is growing quite nicely.
Given that I work for a firm currently raising a new fund, we're kind of hoping that dollars invested (and therefore valuations) go down even more in the near future, but it seems to be picking up again. Seems like a good time to be an entrepreneur as well, access to capital is still abundant for quality founders & startups.
Dont know about Singapore-based VC but I would stay away from any China-based VC firms. Everything has been blowing up left right and center. The VC bubble is China is just ridiculous. It is all funded by the government.
bval baby
Venture Debt, Specialty Finance Companies, and Business Development Companies (BDC's). Won't be the bog rain makers, but will definitely be making good money, and more tomorrow than what you were making today. Also setting one of these companies up is a lot less harder and less pedigree required than starting up a fund. I know several founders of these types of companies. One has made ~$8 million the past several years consistently each year, and one at a smaller one makes over $1 million. Also the analysts at these firms are making below IB Analysts, but are working 60 hours a week, breaking about $100k and come from less prestigious schools. Definitely a slept on field.
Can you elaborate? I thought PE = BDC but it's also not my area at all.
Interesting you bring up Venture Debt. Really a great field to be in right now. Seeing tons of activity.
Look up Hercules Capital and its founder Manuel Henriquez. Dude has been making $8 mill on the reg. It's employees are making slightly below PE money, but up there. Of course the big shots in venture debt are no where near the big shots on the buy side, but venture debt has much less barriers to entry and more of us can realistically get a job in the field.
Layoff optimization software.
The era of highly capable single family offices is still just beginning. You think there are a good bunch now but the generation shift of the 1980's PE Fund founders is not over. Many of these men are still in their mid-60's. A number of the $200M+ net worth PE founders are just building out their own family offices right now. And it makes sense too - they are highly flexible, can move fast and while institutional LPs are forcing fund managers to focus on specific strategies and capital structure plays in order to raise funds (i.e. - strict middle market 51%+ LBOs in vertical market software), family offices can take LP stakes in those funds, co-invest along side them and compete against them all at the same time.
quantitative/algo trading
Probably gonna say the weed industry, but then what do I know.
Based on the sentiment here, it looks like the legendary "Crips v. Bloods" thread will get some more traction
Activism / Raid Defense within IB is growing. Lot of BBs / EBs building up their groups.
Pure research boutiques
Surprised that private debt hasn't been brought up yet. Direct lending has been a huge area of growth due to bank regulatory pressures, and the space continues to develop as an attractive asset class for institutional investors. It seems like there is a new direct lender starting up every day (though that may be a bad thing when the cycle turns).
Lending in the middle market still requires a lot of expertise, and it isn't really an easy asset class to automate due to the private nature of the companies, expertise required to understand middle market borrowers, and relatively unsophisticated borrowers.
The lower middle market (EBITDA) has a lot of room to run, though risk for lenders in that space is typically much greater.
bitcoin
Current status and 5-10 year outlook for YOUR sector/product? (Originally Posted: 05/12/2008)
After reading GameTheory's excellent analysis of the Healthcare IB market (//www.wallstreetoasis.com/forums/healthcare-ib-0), I began wondering what kind of untapped collective knowledge we have on the board for other groups. What are your thoughts on the industry or product that you cover?
e.g. Where is TMT heading over the next 5 years? What is the M&A outlook like? Will LevFin ever recover to where it was before the subprime mess? Is Restructuring the new M&A? etc.
TMT is too broad to have a 5/10 year outlook. The M&A outlook is more about when one believes the economy will recover- I say 12-14 months. Yes LevFin will come back to its old levels. Restructuring (like M&A) like M&A is very cyclic, so the inverse of question 2.
ideating - thanks for the comments, although I didn't mean to specifically look for answers to those individual questions; I was hoping to get more "in the trenches" insight from people who work in those groups (or others).
Maybe I should rephrase the main question more clearly: What are you seeing happening right now in the industry/product you cover and where do you see things going over the next 5-10 years?
Yeah I realize that was kind of an asshole answer on my part- I'd suggest you narrow your question to industry only. Also in my experience, you may get a better response if you get the ball rolling on a few industries you are interested in. Ideally, you would have 5-6 long, thoughtful posts for a few different industries but that is not likely.
Given that I work in LevFin I will comment on that sector. Large budge bracket deals will continue to be slow through the end of this year, analysts in this field are lucky to have jobs right now. I think that once the market figures out when the real estate crisis has hit its bottom deal flow will return to old levels. Also large banks need to clear all the hung paper they have on their books, this may take sometime. I would say that the market should show signs of improvement toward the end of the year but LevFin at the large banks wont fully recover( to its glory days) for another 18-24 months. LevFin at smaller middle market and regional banks have, and will continue to, show resilience in this market. It’s much easier to move $150MM of paper than it is to move $1.2B worth of paper. Either way the LevFin prospects over the next 9-18 months are pretty grim. Put it this way, if I make it to bonus season I definitely won’t be wasting it on models and bottles like I did last year.
Thanks cplex, that was exactly the kind of info I was looking for.
Industries ripe for growth over the next decade (Originally Posted: 11/12/2009)
What industries does everyone think will dominate over the next 10 years and who is positioned to take advantage? Personally I think energy and climate change are a given and Macquarie seems to be doing quite well with their infrastructure subset.
What else?
Macq blows.
Groups: Lev Fin, TMT
Thomas Reuters, announced vs. completed wannabebankerman's picture by wannabebankerman User's RSS Feed (Monkey, 58 Banana Points Points) on 11/12/09 at 12:34pm
Maybe someone can help me out with this. I'm checking out the Thomas Reuters league tables and I can't seem to understand the difference between the "Announced" Chart and the "Completed" Chart. The rankings sometimes differ a lot and I was wondering which was more important and what exactly these two differences are? Thanks.
mez you work in an unknown boutique in canada. owned?
you dont even work.
No one can predict what will be the hot industries in 10 years time. But in the near future I'd imagine that Healthcare, Real Estate and Lev Fin will be 'hot'. Not necessarily in the megadeals sense, but in the sense that there will be a significant rebound from what's happening now.
Growth Industries - Other options (Originally Posted: 07/03/2012)
Hey guys - I'm a college undergrad and still have a year left before I have to jump in to the real world. I've been thinking a lot about what type of career I'm looking to have. I used to be focused on finance and had two solid finance options, but ultimately no longer think that's for me. And since I have a major in information engineering, I think I have other options.
So I pose this question to you: What industries do you think are going to see significant growth in the next 10 years, and what do you think the best strategy for succeeding in those industries is?
I'll go first:
1) Predictive Analytics. I think this industry has been around for some time now, but that the recent push towards the internet with search engines, social media, and mobile technology is resulting in SO much more data out there that there is to analyze. I don't know many facts related to this, but I read an article a while back about how Target is able to predict with over 90% certainty when their female customers become pregnant, and adjust marketing strategies accordingly.
Best way to break in: I think a predictive analytics consulting company should give you a broad education of the industry, and let you establish relationships across the industry. I know IBM has a division for this - I imagine Accenture does too, and then I know there are a lot of smaller shops for it.
2) Biomedical Engineering. I think this has been growing for a while since healthcare became such a big area and has received so much funding (from the govt and etc.)
Best way to break in: Undergraduate degree in ChemE or BioE, with research internships or private sector internships at Biomedical companies (I think Pfizer is one)
3) Quantitative Finance related to Healthcare: I was actually talking to a quantitative finance professor about this. She thought she could see a lot of opportunity in optimizing the strategies of health insurance companies, in response to new regulations.
Best way to break in: A quantitative undergraduate degree followed by a masters degree in financial engineering, and internships at a healthcare insurance company.
What do you guys think? The predictive analytics path is the only one that I htink my background really prepares me for....
What the hell, why won't WSO display this topic under 'forum topics'?
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