I am doing a summer internship at a Bulge Bracket in London this year, can choose between the above mentioned groups. Obviously I want to maximise my chances of getting a FTO. Which group would you pick? Which team is more likely to hire given the current environment?
Thanks.
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For job safety definitely DCM. LevFin and ECM see a lot of deal flow when times are good but they also operate in very cyclical markets (right now being a good example of a not so hot time to be in LevFin). Your AAA F500s always need to and can print bonds.
All three of them, amirite
In terms of career stability, I'd say DCM >>> LevFin > ECM
DCM would definitely be the most stable - this is one of the few groups that will always remain active regardless of the economy. During bad times, investors flee to "safe" rated debt which puts DCM bonds under the radar of most funds (like how AB Inbev was able to raise $46 billion in one of the worst starts to the economy in 2016). With that said, I would say that DCM is extremely boring at the analyst level (you're dealing with plain vanilla debt - this is as boring as you could possibly get), be prepared to do a ton of market update slides... Like A TON. I wouldn't be surprised if that's all you end up doing as a summer intern... The plus side to this is that assuming you pursue DCM as a career (and actually do decently well), you typically end up getting client interaction a lot earlier in your career (think 2nd/3rd year associate level) relative to your other peers in coverage (who may not interact with a client till about mid VP level).
The next I'd say is Leveraged Finance. The simple logic is that during a downturn, investors pretty much take the view that every "risky" (aka. non-investment grade) company has a high chance of going bankrupt, so they generally become hesitant to invest in any sort of non-investment grade debt. With that said, keep in mind that LevFin is generally divided into 2 products - LevLoans and HY Bonds. During a downturn, it's true that HY Bond dealflow generally gets wiped out (like in early 2016, when there were almost no issuance of HY bonds / MS failed to syndicate the HY Bond portion of the Veritas LBO etc.) but Leveraged Loan issuance generally stays relatively well enough to provide some sort of deal flow (obviously not good dealflow, but enough for some work to be done), mainly for the higher-rated portion of the non-investment grade debt spectrum (Ba1 to Ba3, BB+ to BB-), whereas the lower-rated debt (triple C's and below) pretty much become impossible to syndicate (ex. Veritas's CCC portion). With that said, generally yes LevFin dealflow does shrink significantly during a downturn.
The last I'd say is ECM. The simple logic is that during a downturn, stock prices generally become depressed so why raise equity when your stock price is super low? Hence majority of companies will hold off any follow-on/IPOs until the stock market stabilizes. We saw this during the first two months of 2016, where pretty much the only equity raises were happening in Asia (at the time, about 80% of all equity raises) and IPOs in the US and EU were literally non-existent (as in like ZERO IPOs). These guys literally live and die by the economy, and I'd argue are the most prone to layoffs during a recession.
A couple things I'd note: - If you're planning to do ECM as a career, you really want to stick to a bank that is top 5 in ECM (GS, MS, JPM, BAML, Citi/CS in the US and GS, MS, JPM, UBS, DB/BAML in EU). When times are good, many banks do decent in ECM but during a downturn when ECM mandates are very far few, really only the top 5 get any sort of mandates and the rest end up just twiddling their thumbs. This applies particularly to ECM, moreso than DCM and LevFin, where mandates are relatively more spread out whether during a upturn or a downturn.
For LevFin, try to join a big balance sheet bank over a smaller-balance sheet bank. Obvious reason is that banks with big balance sheets have stronger capabilities to underwrite risky debt due to their size and cheaper cost of funding than smaller BS banks. I'd say the top 5 for Leveraged Finance are BAML, JPM, CS/Barclays, DB (although GS has been killing it in HY bond financing this Q1 2016, more an exception than the norm though).
For DCM, again big balance sheet banks are in better position for the same reasons above, albeit to a lesser extent (because bonds are generally syndicated more easily so smaller BS banks are more open to taking on investment-grade debt as compared to leveraged loans). I'd say top 5 in the US are JPM, BAML, Citi, Barclays, GS/MS/Wells Fargo, and in the EU, I'd say the top 5 are Barclays, HSBC, DB, JPM, Citi/BNP.
Dang, post was longer than I thought, but feel free to PM me with any questions.
Great, that helps a lot, many thanks for your answers.
To be honest I am more concerned about not getting a full-time offer after the summer, not so much about general job safety after a few years.
Is it fair to say that once the team has decided to have a summer intern, there is headcount for a full-time position in that team, or should you ask around which team will actually be hiring and which one won't? I know people in all of the teams so I could ask them, obviously not writing an official email to HR.
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