DCM origination vs. execution?
Can someone within DCM explain the difference/which ones better from a technical and just overall interesting point of view
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Based on the highest ranked content on WSO, the roles within Debt Capital Markets (DCM) can be broadly categorized into origination and execution, each with its distinct responsibilities and skill sets. Here's a breakdown to help understand the differences and what might make one more appealing than the other from both a technical standpoint and overall interest perspective:
DCM Origination:
DCM Execution:
Which One's Better?
In summary, both origination and execution within DCM offer unique challenges and opportunities. Your preference might depend on whether you're more inclined towards the interpersonal and strategic aspects of finance or the technical and analytical side.
Sources: Investment Banking vs. Capital Markets - How different are they?, BB Debt Capital Markets - Exit Opps / Comp, BB Debt Capital Markets - Exit Opps / Comp, Going from IB to ECM or DCM? Anyone made this move?, Investment Banking vs. Capital Markets - How different are they?
I work in DCM. First of all, neither is "better". They are different roles and interesting to different people.
DCM is primarily split into two teams - origination and syndicate.
Origination's job is to "start" the deal (the clue is in the name) and make sure it's ready to be executed. This includes developing the structure of the deal and providing pricing, as well as actively pitching for new business. (For pricing they will liaise with syndicate but ultimately it's the originator's job to provide it.) It will also include making sure all of the relevant "paperwork" is in place, like the relevant approval panels, maintaining insider registers, docs and ISIN or CUSIP if the bank is docs etc.
The originator part of the DCM team is often known as "DCM" e.g. most originators will tell you they work in DCM. This term can also be used to refer to the broader team as a whole. Generally originators are either relationship specialists* or product specialists, once they progress from analyst status. As an analyst you are a bit of a general dogsbody, helping out wherever needed and will spend most of your time on PPTs and sending out the daily pricing sheets.
*This is different from coverage bankers / RMs which is another thing entirely.
Syndicate's job is to act as a go between between the client and investors. They also provide advice to DCM prior to execution and they will work closely with the DCM deal team. They brief the sales team on how to market the deal and gather feedback from their clients, as well as executing the deal itself and potentially billing and delivering the new issue / new bond. They work a lot with their counterparties at other banks. (I'm not going to go into detail on the execution process because there is some degree of variation depending on the region, product and asset class.). Syndicate also provides market updates and advice to clients on a daily basis, so they spend a lot of time monitoring the markets, looking for the best execution opportunity.
The syndicate team can also be split up into two "sub teams" - one of syndicate managers and one of syndicates who focus on managing the execution risk. This varies a bit from bank to bank, some banks don't have this difference and so if you execute it, you rec it and you book it. Some of the larger banks split this out.
At an entry level, they are similar roles. The main difference is that an analyst on the syndicate desk spends more time gathering market intelligence (which they later distil into their daily briefings). A junior's role in the execution itself will vary depending on the bank. For example, some banks might get the junior to rec the book, others won't. The DCM analyst will spend more time updating pitch books and pricing sheets, and maybe putting together some stats post execution.
The bot's answer is generally decent but it is wrong when it says that there is detailed financial modelling involved. That is not the case. If you want to spend your days working with models, DCM (syndicate or origination) is not for you. This and the repetitive tasks at analyst level are some of the reasons that grads / interns / analysts often talk about how "DCM is boring".
First, please accept my gratitude for this extremely detailed answer. Really what makes this site great, so I appreciate you taking the time
Allow me to clarify my post. I was speaking with a Citi DCM employee who told me she works on the execution desk, totally separate from origination and syndicate. Responsibilities were primarily DD, going to committee, etc.
I’m just trying to understand what this is, and as someone like myself who really wants to go from coverage to DCM, is this a good place to be (I’d prefer origination)
This sounds like the "Transaction Execution Group" (or similar). Handles a lot of the legal, due diligence, internal processes and so on (there is a lot to do here), which allows the originators / syndicate to spend more time working with issuers / investors respectively rather than spending time on these things. Not all banks have this group but the big American banks tend to have it, all else equal it helps the origination and syndicate teams run leaner as they don't have to dedicate resources to this part of the bond issuance process.
The reason this group exists in DCM but less so ECM / M&A is because there are lots of bond deals from repeat issuers, which makes particularly IG DCM more of a flow business, meaning it makes sense to invest in this kind of team to optimise the process rather than outsourcing to external legal, or getting internal origination or legal teams to cover it.
You would become an expert in the process of issuing a bond but less exposure to the client side of the business (which in my opinion is more interesting and pays more, as you are focused on bringing in business rather than simply executing the process). With a coverage background you would likely be a better fit for origination in any case, as you may have some overlap in clients / industry which would be helpful.
Ok thank you. Exactly the answer I was looking for. I think you’re correct, experience wise I think I’d fit better in origination, which is where I’d like to be anyway
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