Hey guys,
Just wanted to share my personal experience as an intern within Securitization for a few months. Headed into the internship not really knowing anything about it, but left holding the group in high regards.
For those of you who don't know, securitization is where asset-backed securities are structured, typically from things like auto loans, credit card receivables, or mortgages. Yes, relevant group for the housing market and crash from approx. 10 years ago.
To cut to the good stuff:
- Hours are FAR less than M&A or other areas of IB. Working 10.5-12 hours a day is the norm, occasionally having to put in a couple hours extra.
- Pay is typically in line with DCM, which is typically in line with IB (or just a slight paycut)
- Much more modeling than DCM due to needing to understand the underlying assets and performance of those assets
- Market is smaller than traditional DCM, typically means smaller team and flatter structure
For those of you who like a mixture of following the markets as well as modeling, this might just be the group for you. Given how little you hear about this group, if you were to reach out and network, you would likely have a much larger chance at success if you actually do your research and show up prepared.
Work at the analyst level is very similar to the other groups - pitching, research, pitching, comps, analysis, and pitching some more. Many people from my group have put 1-2 years in and leveraged the experience to end up elsewhere, so you're definitely not pigeon-holed.
Just wanted to get this out there for those of you who maybe haven't heard of some of the more niche groups within IB. Glad to answer any questions that anyone may have.
What time do you normally get in? How are you bonuses, relative to other groups? Do you find the work interesting (it has to get kind of repetitive over time), what are your exit opps?
Normally got in at 8AM, about half an hour after the core DCM guys and I want to say 1-2 hours after the traders.
Bonus was 30-100% of base, so I want to say in line with other groups. But I was merely an intern so I didn't exactly go around asking everyone about their comp.
I think all work gets repetitive over time, but overall I'd say it was interesting. The work seemed comparable to M&A except less business-specific research and modeling. Still lots of client and investor communication, presentation preparation, and analysis to do though. Exit opps within 1-2 years will be pretty much anywhere within the bank. Many went to traditional IB groups or DCM, I believe some even went into trading. You can always exit to some of the larger companies who have their own in house securitization team.
If you stick around to associate or higher I imagine you risk labeling yourself as a securitization person and you may be a bit more limited in terms of exit opps, however, at that point you're working 55-65 hour weeks and making solid money so who's complaining?
bump- interested as well, what shops are known for this type of group ?
Every BB has good groups probably ranked more in line with their S&T rankings than IB, the French banks are good at this as well
i know within certain banks it falls under S&T while others, it falls under IBD. Typically, securitization is split between Consumer (Auto, Student Loans, Credit Cards), Residential (MBS, RMBS), and Esoterics (Random things being securitized)... I know BAML is one of the best on the street with Barclays in 2nd
I'd put JPM,GS,CS over both of them but maybe I'm biased. I think across the board it's falls under S&T because usually you sit on trading desks. It's good though because you have exposure to a lot of different groups like OP said lot of collab with DCM, FI desks. Hours are same as trading but have the variability with projects and meeting deadlines you see in banking.
bump
I'm interested to hear more just out of curiousity. I had to work on a project that involved some of the more obscure securities (SFRs) in a credit context so anything related to the issue is interesting to me.
Here's my question for what you guys do: as far as the day to day work, what is the balance in terms of knowledge requirements between corporate finance type skills (ala IBD) and market analysis and research skills ( as in S&T)?
I'm on the trading side of abs not so much pure structuring but I'll say what I can. Most structured/securitzed products groups have 3 main responsibilities. I'd say for all 3 the balance is maybe 60/40 65/35 in favor of S&T skillset for average day to day, OP can confirm? Some of the modeling and IB type stuff will just be done by those groups that you are working with. I've learned that DCM guys are clutch. 1. Financing 2. Originate new loans (CLOs) 3. Investor products (Partially funded products like leveraged notes)
In my experience I'd have to disagree with guggroth93 on this one and say it's kinda the opposite. In my group there wasn't very much market analysis and research unless a new initiative was being taken (as in introduce new type of product) or if a deal was pricing soon. Majority of the time was spent doing IB-relevant tasks (modeling, presentations, client communications).
I'm on trading side so I was just going by what I see when I'm interacting with those groups. See what happens when I assume
I would be interested in hearing more about the type of modeling you guys are doing, obviously a lot of cash flow stuff but how are defaults accounted for. Do you work with master servicers at all?
Securitization seems pretty chill. A director in ER told me that you can go from securitization to PE: don't know how accurate this is.
Yeah I don't know how accurate that is either. You certainly develop the typical "IB" skillset at the analyst level but once you really start modeling I can't see it being that useful unless you happen to be joining a PE Shop that has targets which are relevant to securitization.
Do you have any info on BB groups working in securitization? GS REFG comes to mind
Modeling? If you are the structurer, maybe, but what analyst is modeling for an ABS issuance?? You crank out 10-25 page pitch books and set up conference calls. Also, JPM/GS are not even close to Citi in this space. BAML is up there as well.
Sorry, unclear on this: is Citi strong or week in the securitized product space compared to JPM / GS?
Could anyone give a break down of top SP teams on the street?
IMO, BAML, Citi, JPM and WFS are very active in a lot of the more generic stuff - think balance sheet banks (I cover a lot of consumer ABS so not as sure about MBS). Other notable names, particularly in the esoteric space - Guggenheim, GS, and Barclays. Guggenheim is well known for being one of the leaders in the esoteric space, and most of the deals I see them on are quite interesting.
I know some people in this field and they said Gugg does more esoterics but that makes the hours much more brutal. Each deal has some twist to it where you are building / editing models much more often than an auto or card deal for example.
Can you explain more about modelling for securitization? Is Excel and VBA used? Or is Intext the gold standard?
Can you tell us more about this esoteric space?
have a first round interview with JPM Asset Backed Securitization Originations team and wanted to get some context on the group and what might be expected to be known for technicals etc.
Know what a True sale is, bond math, expected values, why companies choose the off balance sheet option.. all basic stuff. I wouldn't expect any technicals, you're interviewing for a markets role.
What type of bond math
I'd agree with SoggyBottomBoys - Also try to have a strong general understanding of all of the parties involved with ABS from the very bottom customer and how any one individual asset flows from origination to the investor
Is the recruiting process similar to general IB recruiting?
So whats the difference between a structurer and securitizer (for the lack of a better word) ?
The structurer does all of the waterfall analysis, stress scenarios, IntexCalc etc. Everyone else either brings in the bacon or cranks out the marketing materials. It is a super cool and easy job.
Any idea how to learn about cashflow modelling with Intex?
So not exactly a Finance job I guess?
It's finance. Put it this way, If I get tired of IB I would lateral to securitization. Its banking for a pool of assets with hours ranging from 7:30-8:00. Comp will be lower, but higher on a per hour basis.
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Can someone please give me an idea about the securitization trends in Americas from 2016 till date by trading/financing/issuance splits?
Are there any good Securitization groups/shops in the south east?
Hey Tour, do you mind if I PM you? I have an interview coming up for a Securitized Products Group internship at a BB. They contacted me so I had no idea this group even existed...
Is this for SA?
Nope. Offcycle
This is for the London office btw
I know this was a bit ago, but how was your interview structured? I also have one coming up.
Typical exit ops?
What is the typical range for comps? Base/Bonus?
Could someone explain what securitizationin the context of this thread is and how it differs from securitization at big 4?
Securitization at the Big 4 is basically audit on the products. So for example the sp team at the banks run stratifications on the pool of assets and the big 4 do as that as well and make sure they match up. They do this also for everything in the offering circular.
bump - What is the typical range for comps? Base/Bonus?
does securitisation fall below IBD or markets
It depends on the bank. In some banks it falls within IBD, I've also seen it fall within Sales and Trading.
could you lateral into M&A or IB FT analyst from being a SA in securitized products?
At the same bank this is highly likely if you're a good performer. Into other banks, this might be a challenge. Securitization skillset is completely different from corporate roles. You don't look at accounting at all, which is why making the switch to an external bank in a different IBD group is challenging.
Sorry, you don't look at accounting at all? What? How do you think their models function?
OP, at my BB tons of people make the switch to coverage / M&A. Many go straight to buyside too.
Can confirm - worked this past summer at a BB in securitization as well.
It's a great product, smaller community (everyone knows everyone in the space), bunch of hopping around from one bank to the other or from the banks to the buy-side firms. At my specific banks it fell within S&T but at the same time sat closest to the banking guys (being private side).
Less hours than the banking team, I think bonus is slightly smaller, can't talk about higher up the pole, but I can say it's a niche product so going from structured credit to Bx or KKR PE probably won't happen - definitely a chance to their credit arms. They pitch their brand to clients, but they don't make full pitch books and analyses for 1 pitch at a shot for a deal like regular IB. Got to see a lot of deals (take a few months from start to end, got to see pieces of lots of them each at different stages).
I actually felt like they were doing less modeling than the banking group on the other side of the floor, spent a lot of time tweaking models, but the models aren't as in depth as M&A because, as mentioned above, accounting is less of a factor in a CLO or ABS. It really just matters if each credit can pay. They don't care about their growth and terminal value, comps, multiples, no LBO analysis or stock dilution. (I'm not sure CMBS modeling might be different because the bank is originating the loan, running the analysis and modeling, and also acting as the distributor of the bonds on the back end, although that is RE and not "sexy" like IB is. Don't know anything else about those groups but for someone looking to get into RE it's a solid gig)
It's important to know why this is true...at a bank they're the ones lending to the issuers who are responsible for really putting together the securitization, it's just the warehouse that the bank is providing, in addition to selling the bonds and making sure that the structure and paper will be able to be sold. So yes they need to model to ensure their warehouse doesn't blow up and that investors will want to buy the stuff, but the banks don't really care about each credit in a CLO or ABS (obviously they care if it's a sanctioned shell company or about to go bust, since they're lending to the issuer to buy it and if it goes to 0 they can lose). But they rely heavily on the rating agencies for that stuff and then just make sure that there is enough cash from the credits to pay the bonds, run different analysis and tests. It does involve a lot of lawyers and paperwork though (I found that part interesting).
It's the issuers (buy-side funds, such as Blackstone's GSO) who are doing more analysis and modeling on each one of those credits. I imagine their skill set of modeling each credit has overlap with banking (cashflow and a cap structure).
I'm not an expert in the field, just did it for one summer, but hope was helpful.
can i PM you?
Do you think working with a coverage group is a better opportunity/less limiting
That is the direction I am trying to go. No direct experience, but reading and talking to mentors, one of them in securitization it all seems to be true.
In general the buy-side stereo-typically has better pay than the banks, but I feel like this is super true in the structured credit side. The difference between being a Director and structurer at a top 10 bank in structured credit vs being a PM or Senior Analyst at a decent sized CLO issuer is big
Really curious - could u elaborate how much?
Hey guys,
Really interested in pursuing internships in structuring & origination / structured finance.
Does anyone know what banks in LDN run specific internships / processes for this? I’m aware of JPM doing so. Anyone able to fill me in on this space?
saved
I'm starting an internship tomorrow in the Securitized Products Group. This was really helpful. Saving it
When you say there is more modelling compared to DCM, do you mean financial modelling? Isn't securitization modeling more for cash flow stressing, prepayment speeds, default rates, etc?
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Yes
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