S&T vs Capital Markets Long-Term

I was wondering if sales and trading or capital markets is better for someone who is looking to stay in finance for a long time. I am not interested in the traditional exit opps of traditional IB like PE, VC, and HF. I like how S&T faces the markets, but I worry about automation and decreasing headcount. I was thinking about capital markets since it still faces the market. Which one would be better to pursue long-term? If I want a markets-facing role is S&T the best to pursue even with potential automation?

 

Capital Markets is a sales function of investment banking...and isn't really respected as a revenue generator or where the smarter people go. However, its a more stable career.

S&T has opportunity for serious comp and growth...but also risk of a very short career with no transferable skills. S&T is a risk...so you need to determine if its a fit or not

 
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"Isn't really respected as a revenue generator" and "not where the smarter people go"...?

The idea that ECM/DCM groups at BB banks do not contribute a meaningful piece of IB revenue is completely asinine, so your first point is just flat out incorrect.

Have you seen the magnitude of capital markets issuance/activity lately? Or are you on a different planet?

To your second point - who are you to determine that those groups are not "where the smarter people go"?

 

DCM makes no money? The magnitude and the frequency of debt issuance is orders of magnitude higher than the equity markets. Your 1 time "millions of dollars ECM/LevFin deal" is outweighed by the 20 debt issuances that happened in the meantime.

Spreads WERE razor thin, and then you know, one of the worst crises in modern history happened with spreads blowing out across both corporates and municipals. For fucks sake NYC GO in the belly of the curve was at 100 or so bps last fall and now its around 500. Further, all of the fallen angels to come out of corporates that will struggle to meet debt service after a country wide shutdown leading to record-levels of unemployment will widen spreads out like crazy over the next 12-18 months.

What is it again about razor thin spreads? Read the fucking WSJ you clearly don't know your head from your ass.

 

I have been around the business for a long time from all sides (sales, trading and buyside) think I can provide an interesting take. Worked at BBs and regionals and I have pretty much transacted about every product under the sun both primary and secondary.

Structured products capital markets is the best place to truly learn about a product and a market from all sides. The capital markets bankers I have interacted with are always very impressive. These guys can explain complex structures in simple language, can manage a process with the issuer, discuss the most minute details of a deal with clients (you better believe all the major buy side accounts know all the BBs senior capital markets bankers) and talk current market color for their asset easily. All while managing at least one live deal in the market and a couple of others they are working on. If I was doing this all over again I would start there, feel like you build a ton of knowledge and contacts to move around if need be. I have seen guys go to issuers, go to the buyside, and S&T from those seats all depends what you want to do.

Muni banking might also be interesting but from what I see the BBs don't do the more interesting transactions these days from a structural/credit prospective. The more interesting stuff in muni banking is the smaller issuers who do more innovative structures and the BBs don't really do that b/c the deal sizes tend to be smaller, and the incremental revenue (loans, deposits, secondary bond trades, derivs. etc. is just not there with the smaller issuers). I guess being a housing or transportation banker is more interesting than doing general credits in the midwest but idk. While market conditions have made certain issuers more interesting now, there is nothing all that complex MTA BRIDGES AND TUNNELS or CT Special Tax transportation bonds (2 of the largest deals this week), these entities have a lot of debt outstanding and investors generally know what they are about. I guess setting the cpns, maturity sizes and call dates on negotiated deals can be interesting but mostly you get 4s and 5s with a 10yr call, sometimes if they know a deal will have a lot of retail they will mix in some 3s.

Syndicate in any product is the best risk/reward role in business. Basically you coordinate the process and manage the information flow. You do get yelled at by everybody (sales about allocations, bankers and their clients about pricing, etc.) but its a trading floor people get emotional deal with it. Munis might be a little more volatile b/c you have to manage some risk in that you own the bonds you can't sell but you don't see that too often on negotiated deals and you get input from trading on competitive deals so you only partially own that risk.

 

I work in FX & Rates group at BB. Still under Sales & Trading division but work regularly with the Debt Capital Markets Team (on debt issuance focused on reducing interest rate risk exposure through optionality). The reason you did not see a lot of talk on this group is it is pretty niche in most BBs (for the corporate side you need a large balance sheet where the corporate banking group has lend money to clients or the firm has an extremely international presence). Can go into more detail about the group and exit opps if that interests you. Feel free to PM me.

Day to Day on the corporate side on FX is trade execution (across all majors and minor currencies - including vanialla and non-vanialla options). On the corporate side there is quite a bit more advisory working with the client to find the best stratergy for an acqusition or cash injection etc... More hand holding than the institutional side. Other time I spend my day on tailored market updates for the clients and connecting my research team with important strategic desk clients. Lastly, maintaing internal relationships with the corporate bankers to prospect for more business and expand business with current cliente. On the rates side really assisting clients hedging out their debt whether it is foreign or domestic.

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