Actual modeling at large institutions?
Curious for those who have or do work at large shops, how much ACTUAL modeling are you doing? Current at a very large GP and while the analysts are doing the "modeling," all of the models are already built to some extreme capacity. It's more so just a plug and chug, make some minor tweaks, and do whatever the MD wants to see. It is very easy to see how you could easily cruise through this type of "modeling" without actually using critical thinking. When I talk to my friend at smaller shops it seems like they get significantly more responsibility to actually model items from scratch, obviously being at a smaller shop with leaner team. Is this plug-and-chug just a standard thing across the board? More knowing where you input certain items, make tweaks, rather than having to reconstruct/made substantial changes to an existing model. It has been great getting to see how the firm approaches deals and their thesis/thought process behind certain situations, but it has become so mind-numbing doing the same thing over and over with models that are already built, crunching the numbers for you with zero thought.
I think everywhere is modeling off a base model and you tweak as you go. Some are obviously going to be easier than others. For example a core asset with a fixed CMBS loan is going to be a lot easier than modeling a value-add modeling where you buy all equity and put debt on it 2-3 years in (random scenario i made up in my head).
as someone with the experience you reference I would greatly prefer a bunch of “plug and chug” models as you describe. It’s time consuming to do things from scratch and it leads to more errors.
So while it may seem mind numbing to have templates for everything I dont think it matters and any efficiencies to my time modeling would be great.
I think where big institutional models fail is overcomplicating things. Big believer in keeping things obscenely simple on the modeling front.
Plugging in numbers and interpreting the results is modeling. You are modeling the deal through inputs. The critical thinking comes from analyzing the outputs.
College kids and analyst program applicants always think "modeling" means crafting intricate and expansive excel art from scratch because you may have to do that as part of the interview process and it is important to know how things function in order to troubleshoot. But the entire purpose of "modeling a deal" is to analyze the deal, not spend hours refining your if(then) statements.
You are basically saying you’re proud to be inefficient. Yes it can be plug and chug but it if questions arise or a different structure is proposed and you can’t answer it, you will be exposed. the best will still know the model like the back of their hand.
It's certainly not all rainbows and butterflies building out models at a small firm, I can tell that from experience. You're not really learning that much revising and building out a model after the first or second time (besides excel skills, which I think are mostly overrated beyond maybe an intermediate level). Once you build it out a fully dynamic model that functions off inputs properly, you'll never want to do it again, and understand that the output is what is important. People's obsession with 'modeling' and excel skills is so silly.
I used to work for an institutional shop that had a few sophisticated models that were plug and play and we'd have to do minor modifications in edge cases, but we also had managers ask for idiosyncratic analysis tools that required building models from scratch. They weren't usually incredibly complicated, but they did need a detailed understanding of real estate/excel.
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