How much do you have to follow the markets in IB?
It's important to know how the markets are in IB since it will impact how the prospects of your deals and even your valuations particularly for comparables.
However I would think that market monitoring in IB would not be as intense as say in Sales & Trading or in Hedge Funds.
How often and how much do you have to follow the markets in IB?
I assume that by default you'd put more focus on the equity and debt markets but might also be following other markets depending on your specialty or coverage (i.e. Oil markets if you're in the industrials sector).
Thanks guys!
@Global Trapstar"
Pretty sure it's fairly dependent on group. Groups like M&A are going to follow markets less than, for example, ECM or DCM, like you suspected. Regardless, it's still a good idea to follow the markets for your long-term prospects, the stock pitch that's often asked, etc. But also interested about how much product groups have to follow their individual market, though..
Hey man thanks for the comment.
Stock pitch? Where would that be more common, well I assume pitching to investors/companies for instance such as sell-side M&A and even buy-side M&A with the IB's pitching to the companies to acquire so and so.
Where else would it be needed in IB? Thanks
In general, you don't tend to actively monitor the stock market as you would say at a hedge fund or in any type of fund management role where you are actively making investment decisions etc. Notice, I compared to fund management as their role is specific to investing in markets. In IB however, you follow the markets to the degree in which they impact your particular segment, or specific companies that are in your coverage. Understanding where the market is, at any given point in time adds value to the role depending on the pitch/idea you are planning on presenting. For example, if you notice that a particular client's shares have been hammered in the markets and thus are trading considerably lower than its peers, then maybe it’s worth looking at opportunities that can be derived with low equity (normal course issuer bids), or understanding the core reason behind the depletion in price (highly levered/poor performance) and recommending pitching capital structure ideas. Also on that note, the company could be a good takeover target where you your firm can be brought in on a takeover defence mandate. Also if a company is planning on raising funds via a secondary offering of equity, they wouldn't want to issue shares at such low prices so you likely would want to know where your clients stocks are trading before walking into the boardroom and advising them to issue in the next 7 days when their equity is undervalued/depleting. Another example is if you are pitching any M&A that includes the use of equity as cash (share exchange) as oppose to fully funding an acquisition with cash (the higher the acquirers share price is, the more advantageous for them given their higher “currency” per say). In addition to monitoring client’s shares, you might want to watch how exchange rates and interest rates are trending. Again, the movements in these markets can potentially affect the company considerably whether it be from a ratings, liquidity, or debt/covenant perspective. Also as you highlighted in the question, if you do work in a particular industry such as Oil/Gas or any that is commodity based, you would tend to follow how that commodity is trading on a daily, from a resources and a political level, given its impact on the overall sector. More tailored to prospective analysts, having a general idea of what is going on in the markets and how certain companies are trading relative to their peers or any given index provides for good discussion points when networking and meeting prospective employers.
Sorry for the choppy response but I hope that sheds a little clarity for you!
Hey man,
It's not choppy at all and quite comprehensive, bookmarking this. SB for me!
Cheers!
Following markets: relevance to i-banking (Originally Posted: 01/31/2011)
To validate this somewhat, I'm at a top target and have interviews. In all the posts about i-banking interviews, it seems that the technical focus is all about "following the market."
I'm not an insider, but this makes absolutely no sense to me. It would make sense if the interview was for a hedge fund, but isn't i-banking all about valuing firms, evaluating industries, and running company financials? Doesn't saying whether the market is going to go up or go down and talking about exchange rates and inflation have less significance on what i-banking is about than talking about companies themselves?
Maybe I'm misunderstanding what i-banking is about. Frankly, the WSJ Markets section is boring as hell to me. I couldn't give a shit. Does this mean i-banking is not for me? But the WSJ and Economist Business sections are fascinating. Evaluating industry trends, technologies, competitive landscapes, individual companies and finding opportunities for event-driven or long-term value is what is interesting to me.
If an interviewer asked me what I think about the state or future trend of the financial markets I would have nothing to say and would be disinterested. But if he asked what company will win in X industry and why, it's another story. And since i-banks are basically selling companies to investors based on their prospective value and future potential, isn't this important?
isnt the state of the market important for valuations?
dont you think state of the market at all affects the values of companies?
I used the words less important...obviously the state of the macro-market affects valuations, but the relationship between the two isn't exactly rocket science (and for low beta there isn't much of a relationship). Much more important is operational performance, financial benchmarking w/industry, etc. For valuations, you analyze the market in the context of a company or industry. I have little intellectual interest in the short-term price fluctuations in the capital markets. For a derivatives trader like yourself, what I just described as less important is most important.
u don't have to follow the markets. i never got asked a markets question, except by a newly minted associate from goldman socks (used to be an accenture consultant pre mba), which i thought was incredibly pretentious.
i think its more to show some level of interest in finance in general rather than because its that important for the job.
as aruubato said, its more about gauging your interest in finance, and you are much more likely to be asked about deals that interested you, not short term price fluctuations. I have never heard of an ibanker being asked about a trade idea for example.
Either way, just look at the FT markets section a couple days before the interview and you are sorted, who cares if you dont enjoy, just suck it up. Its not like everything you will do on the job you will enjoy doing.
does investment banking give you broad exposure to the markets? (Originally Posted: 11/14/2010)
interned at VC, loved learning about new technologies and where things were heading in the future.
do you think i-banking fufills the same experience? i know you usually stick to a certain industry, but even so, i think learning everything there is about just one industry would be pretty cool.
is banking for me? is this related to consulting? or maybe some investing role?
sometimes you are too busy with modeling to even pay attention to the markets. You do pay attention to your clients and their surroundings.
Relationship between Following the Markets and Investment Banking (Originally Posted: 09/08/2015)
Why is it important, as an investment banker (M&A), to follow the markets? As an investment banker, you are working on spreadsheets, projections, presentations for an acquisition or a merger between two companies. How does this tie in with knowing about the markets?
Many people constantly tell me that I should be following the markets, but why?
Note: This is a sincere question, I promise.
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