Why Should I Work in FIG Investment Banking?
To give everyone esp prosp. monkeys a background of myself. I just finished my 6 month placement internship at GS/MS/JPM in the FIG team with a FT offer based out of London. Some might say I am only a beginner, but the truth I have probably been in banking for as much time if not more than the 1st Year IBD analysts. I recently came across a lot of negative posts relating to FIG such as need to get out of there, too technical, dry and intangible.
I am here to give my 2 cents so that the prospective monkeys have a general idea of the sector.
Financial Institutions Group is a Techincal Group
Yes FIG is technical. I covered the traditional banks primarily focusing on emerging markets. In my 6 months, I was able to work on 4 deals (1 Recapitalization, 2 follow on offerings and 1 debt offering). I might not have done M&A but I was able to do more deals than other analysts with my point being that if you were to join FIG, you would have generally more exposure to a stronger deal flow than your peers in other coverage teams, which is what really counts, and buyside firms look at it favorably. You are exposed to valuations either in a restructuring or follow offering. For the debt deal to be honest, I ended up just making the roadshow presentation so nothing substantial there.
One form of techincal modeling that you will do in FIG is the dividend discount model. Check out a video about this below.
Will FIG Pigeonhole Me?
I don't think one can pigeonhole themselves by being in FIG. My take on this is that buyside firms generally know that most analysts are an excel/ppt processing machine, but FIG fine tunes your mind into understanding/appreciate the finer details. From what I have heard, 1-2 years as a FIG analyst will not "taint" you as a FIG banker. In fact, FIG's rep of being analytically driven etc may end up working to your advantage.
FIG Exit Opportunities from Bulge Brackets
My team is one of the best in London, and so is our counterpart in NY. HOWEVER, I would like to dispel the rumor that other BBs teams would not fare well in terms of exit options. Citi, UBS, DB, ML all have strong franchises in both London and NY. Most people tend to look at the wallet share to gauge an idea of how well the team is doing, but it happens that sometimes banks do deals for free just to maintain relationship. Your MD cares about the money but as an analyst all you should pay heed to is the modeling exposure that you might get. If a deal happens but your bank doesnt paid, you shouldnt care if you got a deal under your belt. Having said that, almost every BB I know of, their FIG team generates the highest % of revenue across the IBD division.
FIG Private Equity Placement
If you do end up remaining in FIG, you should have a decent chance of getting into the buyside albeit FIG. Why? Because there's a decent number of FIG related PE shops (though sovereign wealth funds are big into FIG stuff) and such shops can only hire or only look to hire analysts with FIG background. Every BB and boutique has a FIG team, but that's your only competition.
Some examples of FIG PE shops: Stone point Capital, JC Flowers, Oak Tree Capital, CVC are a few FIG PE shops that currently come to my mind, but there's a high number of shops out there.
If you are currently in FIG and not liking it, my recommendation would be to stick it out for atleast a year and then switch to a different coverage team. That way I believe you would have the advantage of knowing about one of the most specialized sectors (FIG) as well as a generic one (TMT, Consumer, Industrials) Better profile for PE.
Other Thoughts on Being a FIG Analyst
This might be a biased point, but FIG should position you well for b-school. If you are doing FIG in EMEA amidst European debt crisis, where all types of f**ked up s**t is happening with banks (debt deals, equity deals, massive recapitalization), you have sort of different experience to show off from the regular TMT, Consumer banker,
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Spent a couple years in FIG at a "top" franchise so will include some thoughts below as well as answer some questions in no particular order:
FIG can 100% have the impact of pigeonholing you. Anyone who does not tell you this is lying to you. That said, GS FIG places very well into large-cap PE and I believe some of the other top franchises (MS / JPM etc) do as well. The reason that this happens is doing FIG every day does not prepare you to analyze the more common businesses and industries (consumer, industrials etc). that the vast majority of PE firms like to analyze. Ask any FIG analyst when the last time they thought of working capital, accounts receivable, cash conversion cycle or even EBITDA (depending on what sector of FIG they cover) and I bet the answer will be "when we were in training." All this being said, FIG is extremely hard and if one can figure out how to model a bank recap (to the OP's point), analyzing an LBO on a consumer company is that much easier, though every industry has its complexities
FIG is divided into the following sectors (roughly as it differs from bank to bank): Banks, Insurance, Specialty Finance (think Discover, mortgage REITs, Sallie Mae), Asset Management and Financial Technology (exchanges, online brokers, market makers etc). The last two sectors are not balance sheet focused like the others so companies are valued off EBITDA not P/BV, P/TBV and P/BV and ROE regressions. I say this because getting placed in FIG and working in these sectors can yield a cool experience that reduces the pigeonhole effect of FIG (one can say that you work on FinTech not financials and fully understand EBITDA based valuation and hopefully get HHs to push you for non-FIG opportunities). Similarly, insurance (which is wildly viewed by both FIG and non-FIG bankers alike as leading to being pigeonholed the most) has a sub-sector for insurance brokers, which has had a lot of PE interest since it's very much EBITDA based (e.g. KKR just bought Alliant from Blackstone and Onex just bought USI). Point is, there are pockets within FIG that aren't 100% balance sheet focused.
A lot of inputs for models for LIFE insurers (or maybe it's P&C) are provided by actuaries, however I'd note that a lot of the valuation work I've seen in insurance focuses more on P/TBV and ROE regressions. This does not apply to any of the other sectors above though you'll get inputs on rates, curves, loan marks etc. from other product groups depending on what you cover
Not sure about exit opps from the Sandler and KBW (I guess Stifel now) firms but I know Sandler gets mandated on a lot of great projects (perfect example is the Getco - Knight reverse merger where they advised Knight) so take that for what it's worth
In terms of great FIG practices, would also mention that Evercore and Jane Wheeler do very well, primarily in the Financial Technology space. Would note they're building out their other practices but that stands out to me. RBC's banks team (led by Henry Michaels) also does some notable deals and their insurance practice hired Marc Berman from JPM a few years back so I think they would be at least decent
In terms of buyside opportunities, FIG analysts definitely do do other things (like the poster above me mentioned). I've seen FIG analysts who did banks or insurance go on to cover "normal" industries such as consumer or industrials. That said, pretty much all large funds look at FIG deals so if you have a FIG Background, it wouldn't surprise me that you'd be staffed on those projects. I know Warburg silos kids off into industry groups even during recruiting.
If you're in college thinking about summer analyst positions or anyone looking into banking, this is key for you. I would NOT do FIG at a non top tier franchise if you aren't sure you are comfortable with being labeled a FIG guy or gal. In my experience, once you are in FIG, recruiters etc. view you as a FIG person. Obviously at GS FIG for example, that's to your benefit but keep this in mind if you're looking at other places that don't give you such optionality. If you're not positive what you want to do post banking, I'd stick to your traditional coverage groups (industrials, consumer/retail, TMT, maybe healthcare though that has some stigma) and product groups (M&A, LevFin) to not potentially limit the scope of your exit opportunities
Key conclusion here is that being in FIG can pigeonhole you but if you're at a premier franchise, it's easier to break out than if you're not. Obviously these things do happen but i'm making a generalization for simplicity's sake. If you're at a decent but not top franchise, you may have to work a bit (or a lot) harder to get other opportunities but its not unreasonable. That said, if I were to sit here and say you can walk out of a mid-tier franchise and get a job at KKR doing consumer LBOs, i'd be lying to you. It's important to worry about being pigeonholed in an industry you don't like but if you find yourself liking financial services (or energy or real estate or any non-traditional sector), it may be to your benefit to continue working in the sector as there will always be a demand for a unique skillset.
Hope this is helpful.