Structured Finance & Project Finance
Hey gurus,
What is the difference between structured finance and project finance? Are they the same? Thanks
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Actually depends from bank to bank. At investment banks in the US, structured finance is usually associated with CDOs and other securitized assets. Most commercial/hybrid banks will put all or part of project finance and/or asset-backed finance, structured trade/export, leasing and tax within this umbrella. Just check with the respective bank as some will put project finance outside structured finance.
Structured Finance: you build seemingly complicated products and sell them to people, making bank. Say you sell super-complicated synthetic options for a huge fee because your client is just an idiot: Libyan Investement Authourity v Goldman Sachs judgment (judiciary.uk)
It's more math intensive, like actual math. Source: myself, a math major.
Project Finance (I've worked in Project Finance): you help governments build useful stuff, like prisons, school, courts, toll roads, etc. You also help PE firms make money (suppose you are on the sell-side). I say this because PE firms operate school parking lots. 4 of Ohio State University's parking lots are under PE control. Well it might not be OSU but it's some school in Ohio.
Source: myself. I worked on some pretty damn hard infra models and some high-profile deals like the JFK Airport Terminal 1 expansion. I like modeling, but I don't like infra modeling because when you are modeling 50 years of everything on a quarterly basis (or annual, it doesn't really matter), you want to fuck yourself.
Hey! Quick questions. Where was your team placed within the bank? Meaning, how your group is related with the traditional coverage/product groups? And, what was the background of the people within your team? I am an incoming SA at a BB, and I'm really interested in Structured Finance.
I do not have any structured finance experience. What I can assure you is, the math required in structured finance is elementary math (source: myself. It's really basic math because non-math majors think math equals calculation, where in reality it's probably the least-math thing).
Project Finance: it's a quite niche space. Sometimes you have model auditors / consultants handle the financial models, not the bankers nor the PE firms. I was in one of the top model auditor/consultant shops. In terms of background, all finance related. Some of us were math and/or computer science majors who have very solid financial analysis skills.
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