Q&A: Public Finance Banker
Hey monkeys - realized there isn't too much discussion/information regarding public finance on the website so thought I might share some of my experiences/views regarding the sector. I am a 3rd year analyst at a large municipal finance shop (ranked in top 10). Cover power and utilities. Graduated from target school. Cheers!
are the hours similar to traditional banking? Do you plan on staying in PubFin? How are the exit ops?
What is the comp structure like compared to banking?(if you feel comfortable discussing)
Hours are similar to traditional banking, however more in line with DCM. I generally come in 8:30AM and leave around 10-11PM. Once in a while we are there a little later or have weekend work, but not too common. It all depends on deal flow and client needs.
As for now, I do plan on staying in pubfin, however I am always open to new opportunities. I cant speak too much to exit opportunities within my group since most people stay put for a long time, but I have seen numerous folks pursue business school (and all of them went on to MBA business schools ">M7 programs), bond funds, PPP groups, and S&T.
From my understanding, compensation is pretty uniform across the street. Junior bankers across the bank make similar all in pay, however if you make it to VP and higher, I have heard that pay is generally less than industry coverage IBD and M&A. I have heard many mixed things about senior banker comp in pubfin, so cant really comment - would love to hear if anyone here knows.
Do you know how challenging the modeling done by DCM teams in public finance is? Spoke to some people who I really liked, but I'm still trying to figure out whether the work would be a good fit.
Can you talk to margins, a friend was an analyst at a BB and said one of the key challenges on munis was now that there had been awful margin erosion.
Yes..this sadly is a big problem in the municipal market. Despite being such a massive market (~$3 trillion), the fees generated from deals are getting thinner and thinner. Its not uncommon to see $5 a bond these days, when back in the 80s it was $20 a bond - I also think the same problem is occurring in DCM.
To counter this a lot of Banks are making it up in Advisory fees. Or atleast this is where my group is making it up.
Also what are your thoughts on Puerto Rico's muni debt?
Even 5$ is high, you're not going to see that on a lot of frequent high quality issuers, you're looking at low rated issuers with odd structures going at 6.50.
And sorry to hijack but the PR debt deal was a joke for many reasons.
agreed
What got you interested in public finance? What type of work would you like to do once you're no longer an Analyst?
to be honest, i kind of fell into public finance. i studied electrical engineering, but as i neared graduation i became more interested in finance. got an interview and went for it.
I'm working at a BB bank doing pubfin this summer, and I'm somewhat torn about which group I should shoot for. If I'm trying to maximize exit opps, which would be the best group to be in? I've been thinking either energy or healthcare.
Honestly if you are trying to maximize exit ops, I would try to network for full-time recruiting in IBD unless you really like municipal finance and the yield curve. For the summer though, I doubt the specific group will matter that much unless you decide to stay on for full-time.
Public power or transportation are the biggies in terms of deal size and number of issues at least from my end, maybe gritbanker has a different thought. Honestly as a summer analyst though it wont matter you'll spend some quality times on RFPs
i would agree with this. it really doesnt matter where you sit during your summer internship, since some of the firms will randomly place you if you do go full time
Thanks so much for this AMA post! I'll start this June as a 1st yr analyst at a top MM Pub Fin group and I just have a few questions. Can you elaborate on what you do specifically in your role as Analyst? (cash flow analyses, pitchbooks, power points, RFPs???), training, comp/bonuses (is the base salary progression similar to that of traditional IB as you move up?). Are there any big differences in lifestyle and responsibilities as you have progressed? What does a typical day look like in your group? Does your group with with issuers according to sector or by geographic location?
Is it possible to transition from a MM Pub Fin group to one at a BB? Do you plan on staying on at the Associate level?
And also I am trying to figure out how I can position myself to start off strong when I begin in June. Since I will be the most junior person in the office and the most inexperienced, I do not want to seem like a complete idiot. Any suggestions/advice?
Thanks in advance!
What type of modeling work do you do as an analyst? A friend who worked in PubFin told me that its very different from the type of modeling work done as generalist ib analyst.
no modeling except using computer program
The modeling may be somewhat different than what bankers in coverage groups are doing, but its a different animal. At my bank, we do pretty heavy modeling with excel and vba. You might not be doing comps, LBOs or DCF models like the M&A groups, but I would say we do our fair share.
how will the muni advisor rule change the market? would it better off be at a FA shop rather than being an underwriter?
I see no one has answered this. It's going to consolidate a lot of the small FA shops that can't afford all the compliance overhead, likely to be bought out by the big few (PFM, F Southwest). It will also create the need for issuers who do not usually FAs to have one on retainer or use one in a more active role. The days where an issuer and the IB can get the deal done without an FA could be over. I don't know if you would be 'better off' to be at an FA but I think it will help them generate a bit more revenue.
Thanks Cruncharoo. This was a hot topic early this year before I left the industry and I was really curious about the impact.
@"Cruncharoo" In general, what are your thoughts on FA shops? I don't see the topic talked about too much (or at all) on these forums.
I do modeling all the time, sometimes I make my own models if I think it could speed up ways to do thinks. DBC isn't the only thing. MA rule won't change much for the big banks rather the small ones who also will have an FA group will have to choose between the two. And as for the rules about pricing I am willing to say that those will not end up going through as it will greatly harm the market.
does anyone on this forum have any insight to compensation structure at the vp to MD level?
2 apples and 3 oranges
Think DCM but with a hair cut of 20 to 30%. Rainmakers can still make a good chuck of change.
You mentioned that you're at a top 10 shop.. I'm having a hard time figuring out what the top shops are. I know that some of the BBs have public finance groups, such as MS. Where do those groups fall in the hierarchy of pubfin? Do you know approximate comp for Analyst and Associate levels at BB pubfin? My best guess would be normal 70k base but significantly lower bonus than industry coverage groups, for example, but just a best guess.
I appreciate your taking the time to answer everyone's questions.. I'm sure you're very busy. Thank you!
My brother recently received an offer at the analyst level from a BB in PF. Your guess for base is more or less in line from what I could gather (plus a fairly substantial relocation/signing bonus I think). Not sure on performance bonus, but I would certainly be interested to know.
bump
Hey Monkeys,
Got an interview at MM public finance group. Currently doing MBA part time at a regional target in L.A. area. I have ZERO finance background. My background is engineering with experience in designing infrastructure (bridge, highways, water/wastewater). I went back to b school because I've always wanted to work in project finance or infrastructure related.
Anyway... I've searched as much as I could on what type of questions they ask on the interviews, but google and WSO only have so much information. I guess it is a niche market?
So I was wondering if anyone knows how technical the questions are? What do I need to read up to better prepare? What kind of skills can I pick up from public finance? What type of work do I expect to do?
If you don't want to reply on the board, feel free to PM me. Thanks!
I would say at least know bond math basics, know about the current marks of muni debt. Your engineering wont really be useful if youre actually going into banking though. And I have no idea what the MM would ask are you talking about like Stifel or even worse than that?
It's piper... Is it bad?
Just want to echo the sentiment that others have expressed. My dad works for one of the top BBs in pub fin. and he really respects the hell out of the guys at Piper. He said his favorite banks to work alongside are Piper and Macquarie fwiw. This is on the west coast too
Recently interviewed. Here's my 2 cents
Know the different types of bonds (rev vs g.o.) and which you would choose for say a park vs an airport terminal
Know how to value different bonds, how to get a cost of the project, spreads for different projects, different valuations (precedent transaction vs traditional bond math)
Know why pubfin. THIS IS A BIG ONE. Like others have said, it's a niche market, and they need to see you are actually excited for the opportunity and looking forward to work in the group.
SIFMA & MMDs (I think it's an added bonus knowing these).
And tax equivalent yields. Knowing what yield investors will need for tax-exempt bonds (hint: its lower than corporates)
This website did wonders for me prior to my interview: http://www.msrb.org/Municipal-Bond-Market.aspx
And, if you get it, some of the analysts at my firm recommended I read this book: The Fundamentals of Municipal Bonds, 5th Edition by The Bond Market Association
Shouldn't be too difficult. About 35-50% of my questions were technical over the course of 3 phone interviews and 7 interviews during Superday. The qualitative part was where I really connected with the MDs and VPs. My interview room was on the 45th floor, and at a point, 2 MDs were pointing out the various projects they had worked on.
Best of luck!
Also going to be in LA when I start. Maybe our paths will cross, TimTam!!
Oh, and Piper is a great firm. I can't speak for their West Coast division, but their northeast division (very close to an alum who works in piper here in ny) boasts high regards for it. Great firm.
piper is good, theyd be right outside the big guys on my list
if you have any specific questions you can message me if you want
also interested in comp structure at the analyst level...does PF also follow the structure for base-increases like those in traditional IB?
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