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What is your specific role within munis?
Do you see people transition from public finance to other muni roles (sales, trading, investing)?
I’m in public finance, doing geographic coverage. It’s a mix of general govies and essential purpose revenue bonds (water/sewer, transit).
People do transition I’ve seen PF->Buyside AM, Institutional Sales->Banking, Banking->Desk Analyst/Credit Analyst.
Thanks, SB'd.
How is a desk analyst/credit analyst different from banking?
I'm currently working in local government, will be starting my MBA later this year and considering pivoting into public finance. To my knowledge only MS and GS hires MBA associates for pub fin. Are you aware of any other paths in, such as networking with any specific boutiques, for example?
Do you see yourself staying in munis long term?
Related, do you personally consider the discount in comp to be worth the (presumably) added WLB?
Yeah, I fucking love it lol. I’ll grind it out to MD I would only leave to do entrepreneurship through acquisition.
My WLB is infinitely better than my M&A counterparts. I unplug on vacations, I seldom work after 6:30 and weekend work is vanishingly rare. Most importantly I’ve got a clear path to origination.
What does a MD in public finance do on a day-to-day basis?
any interactions with the hf that trade munis like old orchard or the muni prop desks that are still lurking around the street - always curious how fast money muni guys trade
None at all, they’d be covered by sales. I interviewed with one a while ago that focused more on high yield munis. I think that they investors in that space can be smart and creative, I wonder if we’ll ever see the development of DL for non-IG muni names e.g. distressed hospitals.
Also have always been curious about this as well, I know their is some element of hedging with swaps and the associated muni arbitrage. Maybe some ETF arb type stuff as well. There is for sure a lot of strange techincals in the market that you can exploit if you know what you are doing. If any muni traders or buy side guys who know how these guys work, would love to hear it.
So disclaimer I'm still in school and the familiarity with valuation / anything in a 10K and investor pres / modeling courses is the most exposure I have to finance. Could you please provide some insight into on what you do exacly on a day-to-day basis, and explain the concept of municipal bonds? I have a basic understanding that it may involve calculating credit statistics for government debt, but I'm not sure how this information is obtained, since governments aren't companies. Or does it involve analyzing interest rates for municipal bonds relative to other countries and making speculative investments based on macroeconomic views, as one might do in sales and trading? It is noted, however, this thread is posted in credit not S&T.
Okay, I read one of your replies above and I gather it is similar to Private Equity (or rather Private Credit) in the sense you looking to analyse CIMs, create PowerPoint decks, write investment memos, convince internal investment committees - is this correct?
Issuers have something analogous to the 10-K the Annual Comprehensive Financial Report or ACFR. That provides credit related information.
On a day to day basis if I’m on a live transaction: I review and comment on legal documents, run the model in DBC, prepare a ratings agency presentation, if needed, prepare internal documents to support the transaction (risk committee memo), due diligence. The level of involvement varies if we are leading or a senior, we will be heavily involved, if a co-manager it’s less work.
Non-deal stuff is looking for refundings for issuers, writing memos, creating update presentations. We respond to RFPs, which are essentially memos responding to questions from issuers that range from describe the firm to what ideas do you have. RFPs vary from really quick and easy to huge and incredibly complex undertakings.
Muni bonds are bonds that are issued for cities, states, nonprofits and sometimes for for profit issuers (industrial revenue bonds). I’m not analyzing rates other than how it relates to clients’ ability to issue or refund bonds. I don’t take macro views either we are sell side bankers.
It isn’t like PE, we are basically DCM for cities, states, and nonprofits. Some people will move to roles on the buyside and some to sell side credit analyst roles, but I don’t do either.
How much of your day is doing independent work at your desk vs. being on calls/meetings?
Would you describe the work as fast-paced?
Do you see people exiting PF into PE Infra? Whether Boutique, MM, or even any MF Infra arms?
I’ve heard of it, but no one I know personally has done it.
Favorite/most interesting subsector and why? (local govts, healthcare, muni utilities, higher ed, etc) Subsector with most interesting current developments and/or growth opportunities? 2023 expectations or things you will be looking at closely this year in Public Finance?
Healthcare, mass transit and utilities, we interact with these in our real lives and they have sometimes really creative structures. Healthcare is going through a really rough year so it’ll be interesting to see if there are any restructuring opportunities.
For subsectors I think this is going to be a tough year for anything that’s operationally intensive e.g. hospitals and CCRCs. Labor costs have risen and there’s a sea of red ink.
As for how 2023 shapes up I think it will depend on the Fed and if they make any aggressive moves to stave off a recession. If rates come back down there might be a spate of refundings. Since most munis are level debt service and amortize over 20-30 years a municipality that did things at attractive rates has the option to just sit there and do nothing. Bullet maturities are rare and so there’s none of the debt walls that are seen in corporate DCM.
Great thread. I work at a similar firm with good regional public finance presence and strong fixed income trading on desk with some mortgage, HY Muni, and corp traders. Being a trader myself, it's interesting hearing your comments on day-to-day. +1SB
I have a Pubfin interview coming up at a BB. Would love if you could walk through a deal you've done before and sort of how the business works. Would also love to know what responsibilities look like for an analyst and what you're looking for in new hires. I know I'm being a bit greedy here by asking 3 questions, but would be grateful if you could answer any one. Thanks!
Deals have a few main steps. First is the RFP/RFQ the issuer will post an RFP or send it out to multiple banks. It’s in the form of a series of questions such as: describe your firm; describe your distribution capabilities; provide case studies for similar transactions and a scale (proposed couponing and spreads to the AAA MMD, a municipal benchmark).
If you’re awarded, I’m assuming in this case as a senior manager, you’ll have a kickoff call, create a timeline and have legal circulate the preliminary offering statement, trust indenture and bond purchase agreement for review by the working group. Comments will go back and forth and finally you’ll have something that you’ll post. In the meantime you’ll usually go through a risk or commitment committee depending on the size or credit quality of the transaction. You’ll be running a rough amortization in DBC, a preliminary model. You’ll conduct due diligence, usually by using DPC, a website that lets you see if the issuer has been timely submitting continuing disclosure and by having a call to go through a due diligence questionnaire.
The POS will post and then there are teach ins for institutional and retail sales. As pricing day draws near there will be a pre-pricing call with the co-managers and you will continue to update the mode. The day prior to pricing the underwriting desk will post a preliminary scale on Ipreo.
The sale begins and you will run numbers throughout the day. The deal may reprice meaning adjust yields if it’s oversubscribed. After the deal is priced you will review the bond purchase agreement, send data for the bond counsel to put into the OS and sign the bond purchase agreement. You’ll do a post-pricing call showing how you did versus comps. Finally you’ll close with DTC and take care of administrative stuff.
For an analyst I want safe hands, someone reliable who won’t screw thongs up. Intelligence matters, so does determination and being detail oriented. It’s an apprenticeship business and the goal at least where I am is to have an analyst become an MD a decade plus in the future.
Typically, how long is the RFP process and how long is the deal process itself?
Can you please allude to your all-in comp progression throughout your years in Public Finance? How does comp compare for larger BB vs smaller shops from a NYC perspective?
Comp grows just like everywhere else in banking, with larger adjustments at promotions and variable comp increasing as a percentage of total. There’s a discount on the bonus compared to M&A no difference for base. I’ve never worked at a BB in pub fin so no idea.
Thanks for doing this, a couple of questions.
1. How are the senior bankers paid in MM muni space? In MM S&T almost all the sales guys are paid monthly on commission, and the traders generally get paid some sort of percentage of their P&L as a year end bonus. I have always felt like being an institutional muni sales guy at an MM with a decent banking presence was a great gig. All the larger guys have to talk to you as they all need the new issue and then you just get a couple of riskless trades here and there and you can work the axes of the guys covering smaller institutional accounts bring to your desk that most the larger dealers won't have. I know not exactly the topic here but if there is anybody doing this gig would love to hear about it.
2. How do you position yourself vs other banks in the space? I get the smaller/more complicated deals might have less competition or need some expertise to get done but you see some of the smaller banks get mandates on vanilla 100MM+ deals and you think why would they pick that bank vs all the other banks that show up and pitch for it. Does this just compete on price, or are banks pitching wildly different structures from one to the next? How much stock goes into will this dealer support this deal once it starts trading? I know their is a relationship aspect of this, but just seems strange to me that a TX school district doing a 100MM+ deal would pick a dealer who does not put much trading balance sheet to work to do their deal.
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