Structured Finance Interview, ABS/CMBS

Funda-mental's picture
Rank: Baboon | 111

Can anyone give me an idea of what I can expect or how to prepare for an interview with a boutique structured finance firm? They deal heavily with asset backed and commercial mortgage backed securities. I thought it would be a lot of fit, since it is a small shop but was told the interview would last more than an hour...

Any input/suggested readings is much appreciated.

Comments (21)

Nov 6, 2012

Fit, probability, brainteasers, etc. Know what negative convexity is as well as the role of structured products in the financial crisis.

Nov 6, 2012

Check out the trade organizations - ASF (All structured), CREFC (CMBS) - they will give you some good info on the big picture items in the industry and will show that you at least had some sense to know where to look. Also check out the data providers Trepp (CMBS data), LoanPerformance (Resi Mortgage Data), they may have some good high-level free info.

Also, lot of people talking about European CMBS as one of the last dislocated markets that offer the best risk adjusted returns of any fixed income market.

Personally think if you go in talking about negative convexity you will get laughed at, but definitely know what it is, as well as duration weighted average life and option adjusted spread.

Nov 6, 2012

Anyone?

Best Response
Nov 6, 2012

Typical day
-size loans for potential deals
-collect documents from third parties
-collect (chase) borrower for data, signatures, forms, etc
-conference calls w borrower, broker and lawyer to move the deal along

Overall CMBS is about the process more than the analysis. Analyzing a deal and sizing the loan isn't all that difficult, it's getting past the goal line that is the hard part.

From what I've seen there is very little modeling involved, shops have thier preset model that you just I out the data into (the skill is assessing the data) not the model itself.

Technical skills
-debt metrics such as LTV, DSCR, debt yield, rating agency LTV

Mezz
-depends on the shop

    • 2
Nov 6, 2012
BKSF47:

Typical day
-size loans for potential deals
-collect documents from third parties
-collect (chase) borrower for data, signatures, forms, etc
-conference calls w borrower, broker and lawyer to move the deal along

Overall CMBS is about the process more than the analysis. Analyzing a deal and sizing the loan isn't all that difficult, it's getting past the goal line that is the hard part.

From what I've seen there is very little modeling involved, shops have thier preset model that you just I out the data into (the skill is assessing the data) not the model itself.

Technical skills
-debt metrics such as LTV, DSCR, debt yield, rating agency LTV

Mezz
-depends on the shop

All correct. I would say as well that process management is key in CMBS.

Be aware that the remark on modelling will not hold true everywhere. In my bank (BB) the US team is very efficient (apparently they rarely manually model anything there, and use internal software to do everything), whereas in Europe we do most of the modelling in Excel, and put together ad hoc structures (comparable to usual IB) for deals. In terms of technical skills, my group - in Europe - would require strong modelling abilities. To give you a rough idea of the level, I previously worked in M&A, and found modelling in CMBS (and RE in general) to be more demanding. Beyond projecting property and loan cash flows, the modelling also involves analysing large amounts of data in a flexible, robust manner (i.e. pivot tables are fine to answer a quick question - but proper output tables must be formula based, and highly flexible).

I would concur that being able to organise, verify, and analyse data is a fundamental skill in this business. Additionally, presenting data well is also great skill to have. Generally speaking, you need to be very strong on both analysis and synthesis in order to cut through sheets and sheets of data to get to the key takeaways.

On the Mezz question, we focus exclusively on senior lending. However, we do sometimes originate pre-placed mezzanine facilities, in situations where we feel this would be appropriate given the debt amount required.

Nov 6, 2012

Thanks. Really appreciate it.

Nov 6, 2012

any updates or new thoughts?

Nov 6, 2012

run.

Nov 6, 2012

I know there's a lot of successful CMBS players out there that do great work. In no way whatsoever am I discrediting them or the loans - because they're a great product. Given the MASSIVE CMBS loans maturing this year and next though I'm not sure it's an piece of the industry I'd be moving into. I'd go bank side over CMBS side. You're looking at (don't quote me on this) an estimated 40% of the CMBS loans defaulting in 2017/2018. These were the 10 year loans made in 2007/beginning of 2008.

Again, make your decision on the job interview and offer but be wary of the impending "doom" that some have said is coming to the CMBS market.

Sounds like an interesting and exciting position though.

Nov 6, 2012

Do you mean defaulting or maturing?

Nov 6, 2012

Had a CMBS research internship..Just from seeing what the group did I'd expect questions on cap rates/absorption/other CRE fundamentals, different valuation methods, current spreads, best markets and property types at the moment.

Nov 6, 2012

What is your background? Is this for a bank or a boutique shop?

Nov 6, 2012

hey bud... i've been trading all over abs/mbs map. where ru interviewing? im sure i know some1. u can get me @ [email protected]

Nov 6, 2012

Holy smokes, this is exactly what I'm interested in. How did your interview go? What sorts of questions did they ask?

Nov 6, 2012
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