Product versus Coverage Groups

I would like some opinions regarding product groups versus coverage groups. What are some advantages and disadvantages (i.e. work load, social interaction, upward mobility, etc). Which one do you guys like better and why?

 
Best Response

Every group is different. Some coverage groups are more analytical than their product counterparts, and vice versa. It completely depends on the group. I am in a coverage group at a bulge bracket and we rarely outsource any modeling execution to the product teams, it's almost entirely in-house. As such, our group is more analytical than most coverage groups, and even more so than many on the product side (by virtue of the diversity of product execution held in-house). On the other hand, many (if not most) coverage groups rely on their M&A, Sponsors, LevFin counterparts for analytical and modeling support.

As I said, every group is different. But let me say this, a coverage group that doesn't outsource their modeling analysis is the most valuable IB experience, in my opinion. I like having several accounts that allow me to get intimately involved with the business while also having the added benefit of building the transaction models from scratch, but that's just my opinion.

 

I'm interested in this as well. We talk a lot about where to go if you want strong exit ops, but what are the best places to be (product/industry or groupwise) if you want to stay in banking for the long haul? I guess personal interest and quality of life (in a banking sense) become a little more important?

 

is having the ability to survive economic downturns. For example, although Leveraged Finance is a very hot product at the moment...what is going to happen to leveraged finance teams when the credit markets tank? If I'm a first year associate in LevFin today...I would think my ability to climb to a VP level would be seriously hindered by a market downturn. And when EVERY top shop terminates 50% of its leveraged finance workforce when the downturn hits...where am I supposed to go? Am I supposed to take a commercial lending gig at a middle market commercial bank until the credit markets turn, lol?

 
Monopolisf:
is having the ability to survive economic downturns. For example, although Leveraged Finance is a very hot product at the moment...what is going to happen to leveraged finance teams when the credit markets tank? If I'm a first year associate in LevFin today...I would think my ability to climb to a VP level would be seriously hindered by a market downturn. And when EVERY top shop terminates 50% of its leveraged finance workforce when the downturn hits...where am I supposed to go? Am I supposed to take a commercial lending gig at a middle market commercial bank until the credit markets turn, lol?

Restructuring finance is what happens for LFG people. Also client focus will shift from Sponsors to Corporates. You always need a revolver.

Even though I'm in a product group right now, I think coverage is better for the long-term. At VP level and above is where you start seeing differences in pay for Industry vs. Product. And bigger bonuses go to the guys with the client relationships.

If you do go product though, you have to do M&A or LFG. Anything else becomes too specialized and your exit ops decrease dramatically.

 

I know each case is different, but is there a general rule or guideline as to how much bigger the coverage guys' bonuses are? Someone also told me that product guys tend to have better lifestyles at the higher levels because they don't have to travel as often to pitch deals (commenting more on LFG). Is there any truth to this?

 
broken:
What's "execution"?(Monopolisf)

"Execution" typically refers to actually doing deals (structuring the financing, drafting merger agreements/prospectuses, going on road shows, etc.) as compared to "pitching" which is trying to get a company to do a deal and/or trying to get them to chose you to help them with the deal. As a general rule, the industry coverage groups tend to do a lot more pitching, then once a deal is moving they bring in the appropriate product group to help with the execution.

At the analyst/associate level it is pretty much undisputed that you want to be doing execution, because that's where you really learn a lot and do interesting work rather than just formatting powerpoint and modeling comps. At the higher levels, I'm not sure that it's so clear cut. As others have pointed out, the relationship management component of banking is very valuable (figuratively and literally).

 

I can't generalize for product vs. coverage, but with regards to M&A during downturns, it's supposedly one of the most safe and successful areas to be in - especially for mid-market players. The thinking is that the amount of huge deals may decrease, but the number of mid-market transactions increase significantly and actually serve to boost the market. There may be fewer LBOs and PE deals, but there may also be a lot more cash-rich corporate buyers. Here's an interesting article from a couple of months ago on the subject: http://www.marketwatch.com/news/story/big-year-ma-could-ease/story.aspx…

We're Italian, "WACC" means something else to us.

We're Italian, "WACC" means something else to us.
 

There will be differences of opinion on this topic. I used to work in coverage, but found that it wasn't technical enough for my tastes. Granted, you get a great overview of all of the different products and learn a ton about your particular industry. However, I wasn't especially interested in any particular industry given my lack of experience. Doing industry work, you're doing a ton of PowerPoint editing and industry / company research. Some groups (GS particularly) do their own M&A work, but in most cases you outsource most of the harcore financials to the product groups. In my opinion, product groups (depending on which of course) typically place better. For instance, Tech M&A places much better with PE shops in the Tech space than does general Tech coverage (besides GS because they do their own M&A).

 

I'm interested in hearing about this too. I'm guessing product groups tend to be good for people wanting to go to HF's and coverage groups tend to be good for people going to PE.

I've heard some people say going to a product group pigeonholes you to a product but doesn't the same logic go for a coverage group? You get pigeonholed to a specific industry?

 

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