so called Financing capabilities of non-pure players
Hi gents can someone explain to us what a BoFAML/CS can do for you that a MS/GS can not ? i believe the later also have loan syndication groups so what gives ?!
Its usually Citi / BAML / JPM / DB - the ones with the deposit base
For MS / GS, the cost of capital is quite large and a large part of what was done post GFC was to trim the size of the balance sheets, largely to manage ROE but also to lower RWA.
Banks without large balance sheets effectively take a quite hefty capital charge to fund their lending and balance sheet is a scarce resource for them. That is why the relationship lending business at MS / GS is much smaller. That aside, given the cost of balance sheet, anything that requires balance sheet from straight lending to derivatives trades will suffer and will either be less competitive on pricing or the returns are so abysmal that they just can't get there.
Hi folks, back again to this question. i had an Itw with a pure player and the analyst just ripped me a new one when we talked about this topic. he asked me about how a PWM firm would record its transactions on the balance sheet. My guess was that once invested there would be an "Equity investment in affiliates" account on the assets side and some form of Liability/equity on the other side. then he told me that his bank has 1.3 Trillions in AuM while its balance sheet is only 800B. so what gives ?
Something which i didn't say since the guy did a very good job of stressing me thorough the itw was that these investments could have been somewhat netted against some kind of hedging strategy ? Could someone shed some light on this ?
You're second post looks at a different area to your first.
In any case, assets under management (AUM) - these are not assets on the bank's or the fund manager's balance sheet (except to the extent the bank has a cornerstone or GP stake in a fund). It's all about playing with other people's money.
The assets for a fund sit on the fund's balance sheet. The bank or fund manager manages that fund and owns the Asset Management company/GP. The bank/fund manager only books its equity interest in the Asset Management Company/GP on its balance sheet, not the assets in the fund. The assets in the fund belong to the fund's LPs.
Same thing with PW clients, except they can sometimes invest through a corporate aggregator vehicle rather than an LLP structure.
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