Weekend Wars: The Senior Managing Directors
Weekend Wars is an idea that's been on my mind a while now. The weekend is the working world's 20 second time out...a breather from the mugs you hate and a chance to forget about things you don't have time for .
Not so on The Street. Especially for the young Investment Banker. You will get to know your cubicle well, your cheap chair will get accustomed to your cheek grooves and you will be seeing a lot of both when most people are snoozing and watching college sports on the couch. You will also (most definitely) have weekends where you seriously consider invading Greenwich, in the hopes of smoking out the vile MD who dictated the surrender of your weekend freedom, demanding his unconditional surrender in addition to vassal status.
That having been said I want to try and break down the IB food chain a bit better for the benefit of some of the younger guys and info seekers. Ideally, through this Monkey Business quoting exercise, I'd like to give guys a view of not just "what", but "who" to expect once they land an internship or a full-time offer. War and horror stories by the veteran crowd are welcomed and encouraged.
Since we've already touched on the VPs , let us start from the very top of Monkey Mountain and the SMDs.
Also known as BSDs and WMDs (of your weekend/free time, that is).
The senior managing directors are at the pinnacle of the investment banking pyramid. They're the guys on the front line. They source business. They scour the world looking for ways to make fees for the investment bank. They approach companies in order to sell them on doing an IPO or raising money through a bond underwriting. They ask companies to buy other companies or to sell themselves. Every managing director's prime concern is to attract clients and bring fees into the bank. That's why they're paid the big bucks. Imagine a handsome gentleman in a twenty-five-hundred-dollar suit. He's neatly shaven, nicely manicured, and his shoes cost more than most people's living room furniture. That's the managing director.
Is this the guy you should expect? Keep in mind the book was written >10 years ago...
Perhaps adding "anxious wrist tremble/facial tick" to the formula would add a contemporary dimension...
I wear $2500 suits sometimes. Senior Managing Directors wear whatever the fuck they want. I have seen some in $1000 Hugo Boss suits, and have seen some in $10000 Saville Row, fully-bespoke ones.
The thing is--not everyone is comfortable around a guy in a Norton & Sons suit. It's just not how business is done everywhere, and I think we Wall Streeters tend to forget that a bit. Generally speaking, pomp and circumstance is simply fluff. For a few people, it will open the door for you. For others, it will result in the door slamming in your face. The things you can get away with in London, Hong Kong and Greenwich are markedly different from those things you can pull in St. Louis, New Orleans, Houston or Denver.
The salient point is this, though: at some level, all businesses are 'hand-shaking businesses.' Some guy has to be out there shaking hands and making deals. And that's infinitely more valuable than the 20 hours you spent spreading comps over the weekend. That guy is a senior managing director. And if it's not a senior MD at your firm who's doing this, then the person who is bringing in the deals is going to become the senior MD. He will eat the current guy's lunch.
That's the problem with juniors--they don't seem to grasp how to make the jump to the next level. Just keeping your head down and doing spreadsheet work is not enough to make you a VP. Past associate (and this works for consulting as well as investment banking), you need to start generating your own revenue. The work you're given as an analyst and associate doesn't just get magicked up like manna from heaven. And at some point, if you want to move up in the business, you need to become the wizard wielding a +1 staff conjuring up work for (clearly ungrateful) juniors whom you won't bring to meetings because they don't know enough not to embarass you.
You're welcome.
Silver banana! How about money management, it's the same? The guy who brings in client's money, is THE guy? :-)
Combing a set of debt covenants on a company, I spotted a stipulation that required the borrower to deploy a certain amount of CAPEX which I thought (wrongly) could go towards m&a. I did ~ 1.5's of extra work on it. When I went over the project w/ my MD & VP I brought it up. I had already made a few minor errors, which I'm fairly certain I would have made anyway on this monster assignment; and my MD was pretty pissed. He quickly told me why the m&a wasn't possible, anytime spent on it was a waste of time, and told me to "do the job we hired you to do,". I'm still learning so not sure when to "follow a lead" and when to just shut the fuck up and do my job. How have you seen analysts "generate" business?
Well spoken, brotherbear. Initially I idolized being the analyst, who handles all the numbers and built all the models, but now having seen some senior bankers at work, it seems rather pitiful for the both of us. As my friend (who has no idea what investment banking entails) says, the analyst is just someone else's bitch. Elegant? No. Accurate? You bet.
But let's not forget that the senior banker is in the same game: he talks to and and hang out with potential clients. You can call this "networking" or "making friends," whatever you call it, he is there to KISS ASS AND BRING IN BUSINESS. In the end, no matter how high up you go in investment banking (until you hit the C-levels anyways), you will always have less freedom and take more orders than the guy who's started his own business making $30k a year.
Is the money worth it? Well, for the $50k differential, all the analysts (myself included) sure are cheap.
Money management is more truly a team. If you are on a trading floor, traders will tend to look down on salesmen, but they manage the relationships market-makers need to make cash. At the same time, salesmen need a product to sell, and traders are that product.
In money management, it is even more the case. You cannot deploy an unlimited amount of capital, so additional AUM doesn't necessarily translate to additional revenues. Similarly, more business in S&T doesn't necessarily mean higher profits. Deutsche Bank does substantially more flow than Goldman does in FX, but aren't substantially more profitable in the same asset class. At some point, you get diseconomies of scale.
This is certainly the case with asset managers. If I ever saw a soft ag manager with more than $100 million in AUM, I would suspect they couldn't put all of their money to work. In the end, too much capital erodes your returns, and the product you sell as an asset manager is your performance. For most funds, it really is a balancing act of raising capital and finding ways to manage it effectively.
The paths for salesmen and portfolio managers within the money management space are somewhat divergent at a base level, but by the time you run a fund, you are primarily an 'asset gatherer' and spokesman for your secret formula.
As a result, some people never want to be fund managers because your responsibilities as a senior MD/partner within a fund take you away from day-to-day investment decisions. Like I said before, at some level, all businesses are hand-shaking businesses. If you never find yourself in that position, you're not really a businessman.
Shouldn't we already start to write a compilation of good quotes on WSO?
This may be the wrong thread, but can you elaborate on why Soft Ag has such a small ceiling?
Soft ag commodity markets are generally not as liquid or have the same amount of volume as say oil or gas markets. Therefore if you were to put all your money to play it would be difficult to play the market without being a substantial portion of the market. Additionally, you could be seen cornering the market like the dude buying all the cocoa beans for physical delivery. http://www.aolnews.com/money/article/stunning-cocoa-grab-could-hike-pri…
In my experience you generally have people that are specialist in a certain commodity and play that one commodity accordingly.
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