What are the reasons for boutiques not trying to expand into different divisions and hold a balance sheet?
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IB Wannabe, bummer your thread hasn't had a response yet. Maybe one of these threads could point you in the right direction:
More suggestions...
Hope that helps.
idk bro. check investopedia, touch grass
No, there’s a reason boutiques are focusing on private capital advisory.
The US doesn’t want retail banks lending to corporates to keep risk away from consumer.
The rise of private capital and private capital advisory will take over corporate lending.
That’s unlikely for the IG corporates, cost of capital is markedly less for the Big 4 banks than it is for a private debt fund. Also they’ve got the ability to monetize other parts of the relationship like treasury management, FOREX and deposits.
Cuz then the office will be filled with back office people
bc not everyone wants to be goldman ballsachs
Cuz they don't want to hire girls
Love every comment here. The honest truth is that there’s so much regulatory bullshit to go through, and then after all of that, how do you get depositors? Who outside of this forum knows about Moelis? Or Qatlayst?
This is probs he best actual answer lol
Also curious about this
Much more prestigious to be a small pack of hyperborean hunters than a village of back office weenies
They're very different business models. EBs have always won on expertise and advisory vs. BBs that win on a combination (top tier win with some advisory and expertise, but many lead with the balance sheet to win mandates). The margins are better on advisory (M&A, fund raising, restructuring, etc.) than ECM and DCM, generally speaking. The work is certainly more interesting in my experience.
I think it could be due to the niche set of capabilities they offer clients. Sure there is profits from corporate banking and other services traditional banks offer but it would limit the ability of the firm to pursue certain opportunities due to conflicts of interest. Since there are already well established traditional banks with extraordinary balance sheet sizes, it doesn’t make sense for boutiques and elite boutiques to enter a market with dominant players and fierce competition (the difference in scale would be a massive obstacle to overcome). Pursuing niche services and offering specialized services focused around M&A, private capital raises, restructuring etc. offers a chance to maintain leaner operations, hold a higher standard of service and pursue mandates traditional banks can’t. The business model also means they aren’t exposed to risks associated with defaults and managing cash reserves in the case of bank runs since they don’t engage in lending. There’s been a ton of bank failures in the United States in particular relative to other developed countries due to the large risk appetites of banks in the market.
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