Will be a FT in ECM after graduation and have the option to be in the converts and equity derivatives team instead of an ECM industry group. Does anyone have insight into this type of a role and the expected deal flow in 2024? Also how do the exits/reputation compare to traditional ECM? Thank you!
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Based on the most helpful WSO content, the Converts and Equity Derivatives team is quite technical and niche. The job involves a lot of pricing convert bonds and call spreads, running comparative cost of capital and EPS analyses, and running standard capital markets execution processes. There's a decent amount of Excel work involved, but it's more cash flow and cost of capital/EPS/accounting/delta hedging focused than traditional financial modeling.
As for the expected deal flow in 2024, it's hard to predict exact numbers, but the top four banks in the space (GS, JPM, MS, BoA) handle over 90% of the volume. So, if you're joining a converts team, these banks might be a good bet.
In terms of exit opportunities, they can be quite varied. Some people leave to all coverage groups pretty easily, some go to convert hedge funds, some go to convert advisory shops, and some go the corporate route. However, private equity might not be a typical exit path due to the different skill set required.
As for the reputation, the Converts and Equity Derivatives team is considered one of the most technical product groups in each bank. You'll work with all groups of the bank and will have a good understanding of the interest rate and credit markets. However, the skill set is very niche, which might limit your exit opportunities compared to traditional ECM.
Remember, this is a highly technical role that requires a specific skill set. It might not be the best fit if you're looking for a wide range of exit opportunities. But if you're interested in a more analytical role and don't mind the niche nature of the work, it could be a great fit!
Sources: Converts Desk and Future?, Equity-Linked and Hybrid Barclays
Convert banker here.
Great time to join. Best desk in ECM (I.e. only good desk). Massive amount of the convertible market from the 2020 and 2021 cohort is maturing in 2025 and 2026. Lots of tech names that cannot access debt markets to refi and will have to do a convert repo + new issue to handle the maturity. Probably one of the most insulated desks to layoffs, at least from what I’ve seen.
Just be careful, converts Is a bit niche (could be good or bad), so just keep a pulse on if you want to stay or not and act on that pulse quickly if you want to do something else. Can lateral anywhere in the bank after converts.
What do u see as the most traditional exits from an analyst level? Both internally and outside IB?
What sort of questions can a candidate expect interviewing for a converts desk at the Analyst/Associate level?
You should expect general questions on how converts work, why would companies issue them (vs. straight debt), and maybe even a basic understanding of arbitrage through delta hedging (long convert, short stock on a dynamic delta). You should also understand black scholes and be prepared to answer the standard fixed income related technicals. Most convert people are good at math too so don’t be surprised if you get a math question or two as well (I did).
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