Is Derivatives Solutions Investment Banking?
Is working as an analyst in a derivatives solutions group (not trading) a good place to start a career? How much of the job is actual advisory work and what kind of skills would you develop? What does a career progression look like and are there any exit opps?
which shop is this? some are more so like ib and some arent
I'm thinking about applying for SA for 2019 and was trying to put together a list of opportunities outside just M&A. It seems like they're all over the place in terms of IB. For example, Citi places it under Equity Markets. GS says it's in their IBD Financing Group but is it really? . Any insight?
Could be working closely with cross boundary countries and help them to hedge their fx risk. Could also be coming up with derivatives trading ideas. You’re essentially selling a service or idea so it’s IB or Trading. But if it’s for a buyside firm, it could be operations.
It's a derivatives sales role for corporate clients - it's not traditional IB but at some banks this team is not allowed to be on the trading floor, given the deals are usually on the back of some bond issuance/loan
Would it be an interesting place to work? If it were legally part of the investment banking team, how would hours and compensation stack up against traditional IB?
Hours would likely be less than IB. It's a fairly technical / math driven desk (lots of CFAs). Depends on the bank, but you would most likely identify ways to hedge out interest rate risk in bonds / loans or lower interest rate payments through swaps without having to re-issue debt. It is much closer to the markets than traditional IB, but still on the private side (IE not on the trading floor). It will most likely not have the traditional exit ops of other IB coverage groups, as what you do is very specialized. That being said, people enjoy the work, its a profitable desk, and you'll be paid the same as your IB counterparts at least as a junior.
How do they bring in revenue? Is it through some fee structure or the spread on any of the derivatives they end up selling?
Also you mention compensation is the same at least as a junior. How does the compensation progression look like, especially if they're aren't the traditional exit opps as another option. Even if only a small percentage of people actually make it to VP or MD, it'd be interesting to know what that looks like
Not really sure about compensation as you progress, sorry. They make fees through the spread as you mentioned. Typically less sophisticated clients will get charged higher fees than a company that's more sophisticated. For example, some companies have their own in-house derivative experts on their treasury desk and they only need the bank to execute the trades for them.
That's one thing I forgot - Your clients would all be on the treasury desk at Fortune 500 corporations, so that could be an exit op down the road
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