#baml interview
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Also liking the post of her graphic artist friend who made pregnancy belly in rubber and that person knows Bill too. Someone even made comparison and its shape matched her belly at BAML premiere. Also her suddenly running away to SA, yet never ever announcing birth date. Yet on her first pregnancy, she commissioned articles in Sweden about Billida welcoming Oona. I guess surrogate was involved. so strage.
This video covers some of the issues in regards to the fake belly that was made by ingelaviolamakeup on IG. An account that Alida was following at the time (and may still be following) and they were mutuals. Other than this odd fake belly (conveniently the right size it needed to be and finished the very day of the Burn All My letters Premiere) other situations involving this pregnancy are highly sus.
The clearly staged surprise baby shower for Alida and a handful of her friends (which only appeared to be set up for the post but no one actually stayed very long)
The sudden move to South Africa at the end of her pregnancy. Why would a woman move to a country with worse healthcare to have her baby right before giving birth?
The suspicious due date of the baby which was changed at least once and the lack of announcing when the baby was born. More than likely so people can't narrow down the timeline of conception and prove that Alida couldn't have been with Bill
The growing, shrinking, and moving baby bump which Alida seemed to forget to wear or only have to show off when it was convenient for a photo op
The copious amounts of alcohol Alida was drinking while pregnant for a second time (or appeared to be drinking but most likely was drinking)
The nervous way she rambled and insisted that the baby was super planned and Bill was super happy about it (despite no actual commentary from Bill that has been verified during this time period)
There are many issues with this pregnancy. If Alida did happen to physically get pregnant, with her age and lifestyle choices (aka: alcoholism, substance use, and partying) one would consider that would not be a healthy environment for the fetus to grow. However, the inconsistencies in her pregnant body as opposed to the first child which stayed very consistent, wasn't hidden, and she stayed in Sweden to give birth to, make things even more open to speculation.
There are very few reasons why Alida would rush off to a country with substandard healthcare (compared to her own) where she doesn't even fluently speak any of the languages to have this child. There are many reasons she would get "confused" about dates and not openly announce when the child was actually born. The movement, silence, and behavior at the end of the pregnancy denoted that there was something about this baby she wanted to hide.
Though her stans will claim that it's because she is a "private person", this can easily be negated by pointing out that she literally had a tabloid article printed about the full name of her second child. Not to mention that she went out of her way to do several interviews about being pregnant and even gave away the location of her holiday with Bill which was supposed to be a secret. That's what makes her silence on the birth of Minou so suspicious. She was public about everything else and only goes private for those few months? Then reappears showing off Minou any chance she gets? Was it a surrogate? Was the child not actually Bill's? Did she get invitro and she's desperately trying to hide that Bill won't touch her anymore so she had to go the artificial route? Was the baby concieved when she claimed or was she just trying to steal the spotlight from her ex-friend Suxxen?
As much as I doubt any of these questions will be answered, it raises a lot of red flags. Far more so than the already existing issue of the paternity of Oona, where maybe people think that Filip Berg is the father and not Bill.
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Don't know whether to major in ORFE, COS, or ECON. I really love the financial sector in NYC and always wanted to work as an analyst in nyc for a group like goldman or jane street. Do you guys have any suggestions? I'm looking to major in something that will prepare me with the skills needed for finance jobs.
Response from Sulpicia:
Literally dozens of graduates from each of those majors go to jobs like the one you want every year, and so I wouldn’t consider one necessarily “better” than the others. I think that the most important thing is taking coursework across all three departments (plus other relevant departments) that will give you the skills you need, rather than just picking a major. Have you looked at the Finance certificate yet? That might interest you.
Since you can basically go into finance with any major and there’s a lot of crossover between the ones you picked (e.g. it’s totally doable to be an Econ major and get a COS certificate), I would consider which discipline/department you would feel the most comfortable spending two years with. Do you want to be AB or BSE? AB will likely provide more flexibility, but if you have a lot of AP credit BSE might let you take more classes in your area of interest and fewer in random distribution areas. Do you have friends in any department? Ask them what their classes and independent work are like. What sort of academic work do you imagine yourself doing? Ultimately, you major doesn’t matter THAT much because of the flexibility of Princeton coursework, so pick the place where you feel like you will be happiest and most engaged.
Response from Sushi:
Sulpicia ninja’d me but I hadwritten all of this already so I will add it here.
Iwill defer to Pichu, Edamame, Maybach, Harvey, or other contributors if theyhave different opinions on this question since they have more experience in thefield. They are free to delete my answer if they think it’s wrong/insufficient,but I wanted to provide some input from a not-completely-finance perspectivesince you asked about COS as well. I am speaking from the position ofinterviewing at companies such as Goldman/similar companies, as well asinterviewing at trading companies such as Jane Street/similar companies. I alsodid a Princeternship and another program at Jane Street, and lastly, I haveworked at a similar company in the past.
First,I think that you have to define which jobs you are interested in within the“financial sector.” There are hundreds of different kinds of niche jobs infinance. Investment banking is very different than private equity, working fora venture fund, etc. Since you asked about Goldman and Jane Streetspecifically, I will speak to my knowledge of those.
Ananalyst at places like Goldman is very different from being an analyst atplaces like Jane Street. This is evident even from the interviews. I have foundthat Goldman/similar interview is very focused on financial knowledge(terminology from ECO 362 but information from beyond ECO 362). If you applyfor a quant position at Goldman/similar, you will also have to demonstratebasic coding skills (my friends passed the bar with just COS 126). But you doNOT need COS at all for a job at Goldman/similar. You may have to do some extraself-studying because the knowledge gained by the finance certificate is notenough, but it’s mostly just qualitative econ knowledge that you have to know.
Onthe other hand, a Jane Street recruiter told me that they don’t look atpeople’s resumes unless they’ve already taken probability theory (ORF 309 here)for trading positions or functional programming (COS 326 here, they also lookfor algorithms COS 226) for software engineering positions (or have done theequivalent and have sufficient evidence to prove that, such as high level mathcompetitions for trading and a coursera/etc. course and sufficient sideprojects for software engineering). Also, at one of the companies similar toJane Street, a recruiter told me that they don’t even care whether you have anyfinancial background, they just want you to have the problem-solving ability,modeling/statistical analysis ability, and coding ability to take on a positionthere, and they will teach you all the finance when you join.
AlsoI think another consideration in choosing a company that you will ultimatelyend up in is the work-life balance. The lifestyles at these companies are alsovery different: I’ll give two different examples here since both Goldman andJane Street are near the middle of the spectrum of no work-life balance towork-life balance. I’ve heard that at BAML interns work 120+ hours a week,whereas at some more tech-focused trading companies like Citadel, there’s morework-life balance and it’s the very typical 40 hours a week workweek.
Sothe first step is realizing that you probably will need a different skillset tosucceed in acquiring a job at either of these companies. The people I know whointerned at Jane Street are COS or Math majors. The majority of people I knowwho interned at Goldman are COS, ORF, and ECO, though I do know plenty ofhumanities majors there too. Goldman also has a variety of positions. Theirtypical summer analyst position compared to more engineering type quantpositions (though if you want to do quant I would suggest not doing it at an IBplace, since you would probably have a better experience).
Second,however, you can get a job in finance regardless of what you major in, as longas you pass the resume screen and interviews, and you have the requisite skillsneeded for the position. As I said before, I know plenty of non-econ humanitiesmajors who get jobs at Goldman. If you want to work at Jane Street, any of themore mathematically-oriented majors would work, as long as you take therequired ORF/ECO/MAT classes to be considered. I believe Maybach has written atlength about this, and you can view it through the search bar, but it does noteven matter if you are math track or frat track econ to get these jobs. As longas you can pass the interview (there are plenty of resources online about this,also check Glassdoor for specific questions for specific companies), you willbe fine. Just choose a major where you can make sure that your GPA is above 3.5(3.6 preferred, higher for more selective companies like Jane Street) so thatyou pass the resume screen cutoff.
Also,I would like to add that if you are 100% sure you are going into industry, youdo not need to consider independent work strongly in your major choice. This isbecause you will spend more time prepping for interviews/interviewing in thefall/recruiting for interviews in the spring than doing your independent work(and most of the people I know who wanted to go into industry were 1) bse sothey didn’t have to write a thesis or 2) just wrote bs independent work so theycould graduate).
Hereare some courses that serve as baseline knowledge for the interviews for thesecompanies:
Goldman/similarANALYST: ECO 362 plus lots of self-study, no cos necessary
Goldman/similarQUANT: ECO 362 plus self-study, COS 126/226
JaneStreet/similar QUANT: COS 126/226, ORF 245/309/524/526, no econ necessary
JaneStreet/similar SOFTWARE: COS 126/226/326, no econ necessary
Response from Pichu:
^yeah sushi’s right for the most part and also why would i delete your answer you wrote so much lol. to OP: i would add ORF 335 to the list of courses for more quantitative roles. it’s the same as ECO 362 except you learn the derivations behind everything and actually understand what everything means.
goldman and jane street are pretty different types of companies, in regards to the types of roles available and culture. it seems like you just threw those 2 names out there because you heard people make a lot of money there. so from that it seems like youre not very intellectually driven, in which case the less quantitative and technical roles are probably more for you. so like investment banking or sales & trading at a bank, but basically everyone wants to do that so you should be prepared for some pretty intense competition (and long hours).
In the off-chance that you actually are intellectually curious and are actually interested in things like applied math (which is the same as ORFE) or math, then yeah like sushi said just get good at probability and apply to prop trading places like jane street or optiver. some will expect you to know some finance, some won’t care. if you put anything finance-related on your resume like a class you took, then be prepared to be asked about it. but yeah the culture there is a lot different than at banks, most people at prop trading firms are math/cs people, kinda nerdy, casual dress code that kinda thing.
but truth be told, no job will be super quantitative, even ones with the word “quant” in the name. if you’re actually interested in real quant work, a masters/phd is the way to go. this comes from multiple sources who are pretty experienced in the “financial sector in NYC” as you like to call it
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Wall Street banks are starting to sound the alarm on a stock-market correction
https://www.vionafrica.cf/wall-street-banks-are-starting-to-sound-the-alarm-on-a-stock-market-correction/
Wall Street banks are starting to sound the alarm on a stock-market correction
Bank of America Merrill Lynch is the latest Wall Street firm to issue a warning about a stock-market correction.
The benchmark S&P 500 hasn't seen a correction, defined as a 10% sell-off, in more than two years.
BAML joins Morgan Stanley in the ranks of big firms that have sounded the alarm this week.
The S&P 500 hasn't seen a correction in almost two years. But a growing chorus of Wall Street strategists says one could be right around the corner.
The most recent firm to sound the alarm is Bank of America Merrill Lynch, which forecasts a pullback of at least 10% — the historical definition of a correction — by Valentine's Day.
And while the firm lays out a long list of sell signals, it highlights a couple of elements as the biggest market risks right now. BAML says the "most obvious catalyst" for a correction would be a spike in wage and inflation data that brings back "fear of Fed."
That's a reference to the bearish sentiment that would be likely to accompany a sudden acceleration of the Federal Reserve's rate-tightening schedule, which includes rate hikes and a shrinking of the central bank's massive balance sheet — two measures that would boost fixed-income yields.
"In our view higher bond yields and higher bond market volatility are necessary to engender a major correction in equity and credit markets," Michael Hartnett, BAML's chief investment strategist, wrote in a client note.
Many high-profile investors interviewed by Business Insider highlighted trepidation about the Fed as the top fear. The unwinding that's about to take place is unprecedented, and there's nothing investors fear more than the unknown.
BAML is also wary of a possible bubble in tech stocks, which could be caused by what the firm describes as the two most important investment trends of the past decade: central-bank liquidity and technological disruption. The bank has long expressed worry about overstretched sentiment and trader euphoria — and those two factors may have helped bring about it.
As such, the so-called Icarus trade may soon come to an end. The term, coined by BAML, refers to the "melt up" in stocks and commodities seen since early 2016 — one it sees as unsustainable in the long term.
BAML's correction forecast isn't the first to come out of Wall Street this week. On Tuesday, Morgan Stanley warned of a sharp pullback in equities, albeit a less aggressive forecasted decline of roughly 5% by year end. Its worry stems from what it sees as a fully priced stock market — with minimal upside and a small margin for error — heading into earnings season.
Morgan Stanley also sees — wouldn't you know it — the Fed's balance-sheet unwinding as a major risk, as well as a lack of follow-through on President Donald Trump's tax plan and a potential reversal in a historically low US dollar.
But Morgan Stanley is less pessimistic than BAML about the first quarter of 2018. It forecasts that by the end of March the S&P 500 will hit 2,700, more than 5% above the index's current level.
While the two firms have differing views on the trajectory of stock-market losses, however, both can agree that whatever weakness transpires, it won't threaten the 8-1/2-year bull market. That would require a 20% pullback — a far cry from what either is expecting.
So rest easy, bull-market fans. It's not yet time to panic.
SEE ALSO: MORGAN STANLEY: A stock market correction is 'looking more likely'
Join the conversation about this story »
NOW WATCH: RAY DALIO: You have to bet against the consensus and be right to be successful in the markets
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Sales & Trading in Canada: Equally Attractive Public Markets Opportunity?
I’ve made several attempts to cover investment banking, private equity, and pension funds in Canada, but sales & trading has not yet made that list – until now.
I recently spoke with a long-time reader who’s worked across different desks in Canada and who’s seen the recruiting process from both sides.
As you’ve probably guessed, S&T in Canada is quite different from S&T in markets like the U.S. and U.K.
Here’s all the information I extracted:
Canada Sales & Trading: Breaking into the Industry
Q: Can you start by giving us a brief overview of your story and how you got into the industry?
A: Sure. I went to one of the “target schools” in Canada (i.e., Ivey, Queen’s, McGill, Waterloo, Rotman, Schulich, and maybe a few others), completed internships in asset management, and then won an S&T internship from one of the top Canadian banks.
Then I converted that internship into a full-time role – but at some banks in Canada, you still complete rotations even in “full-time roles,” so I worked on a few different desks before settling on my current one in a permanent role.
My biggest advantage was that I knew very early on that I wanted to work in the public markets, so I could prepare far in advance and plan my internships.
The recruiting timeline in the U.S. is officially insane, and while it’s not quite as bad in Canada, it has been moving up each year.
Also, competition for jobs at Canadian banks has been increasing because many U.S. firms have had trouble sponsoring U.S. work visas due to the “political situation” there.
Q: Were there any significant differences in the recruiting process?
A: In my experience, Canadian sales & trading interviews tended to be more technical.
There are so many solid undergraduate business programs here that they expect you to know the material quite well.
For example, you could walk into an interview and immediately start getting questions about “the Greeks” and other options-related concepts, but that would be less likely in the U.S. or U.K. unless you brought up the topic first.
Also, while it’s important to be at a target school for investment banking recruiting, it may not matter quite as much for sales & trading; banks here still recruit for S&T roles at “lower tier” schools.
Banks here do not yet use HireVue for video-based interviews to the same extent that U.S.-based banks do, but they do give case studies in interviews, such as securities pitches or risk-management scenarios (e.g., “How would you help an airline hedge its fuel price exposure?”).
The biggest difference, though, is that there’s little job security even if you win a full-time offer because some banks here like to prolong the rotational experience until you’re in the right place at the right time.
By contrast, in New York, banks like GS and JPM hire dozens of students for sales & trading summer internship roles, and there’s enough turnover that full-time spots will open up.
But Canada is a much smaller market, so there are no guarantees.
To win a non-rotational, full-time role on a desk, you’ll have to network to find out which desks might have headcount space, reach out to staff, and impress the senior traders.
At some banks, the process to create “full-time equivalent” (FTE) headcount is very bureaucratic, which adds to the delays.
If you don’t find a permanent role after ~2 years, they might ask you to find a middle or back-office role instead.
NOTE: The description above does not apply to all banks – some may hire you on a specific desk following a summer internship. But it’s less likely than in other regions.
Sales & Trading in Canada vs. the U.S. and U.K.
Q: That sounds pretty brutal.
What else can you tell us about the industry there?
A: The main difference is that it’s a smaller, more saturated industry.
It’s more or less dominated by the top Canadian banks (RBC, TD, Scotiabank, BMO, CIBC, and National Bank), and each one has a big chunk of this smaller market.
As a result, the business pace is slower, and peoples’ attitudes are more relaxed.
The U.S. and U.K. markets are far bigger, which means more competition and more of a go-getter attitude; clients will pick the firm that gives them the best pricing.
But in Canada, “loyalty” to the domestic banks is very strong, and clients such as asset managers often split their business among the banks.
Q: Was it always like this? Did the global bulge-bracket banks ever have much of a presence in Toronto or the rest of Canada?
A: They all used to have trading desks in Toronto, but they’ve gradually shut down in the decade following the 2008-2009 financial crisis.
BAML (and HSBC, to a lesser extent), is the only non-Canadian bank with a significant trading floor remaining here.
The rest have a few people or just salespeople or sales-traders, but not full-service S&T businesses. Banks like Citi also have treasury desks up here to manage their Canadian balance sheet.
Banks like to maintain a sales presence in Toronto for coverage purposes, but they don’t necessarily need to execute trades from there.
Some of the global banks have “Canada Fixed Income” desks, but they’re often in New York rather than Toronto because there’s no need to be in Canada physically.
Also, it’s easier to cross-sell S&T products to investment banking clients if both groups are in the same city. We see this a lot with interest rate and currency hedging products.
Q: Does anything else explain why the Canadian banks dominate the market so much?
A: Besides the smaller market and the decline in sales & trading headcount, the other factor is that many S&T clients in Canada are sovereigns and sub-sovereigns such as the provinces, larger cities, and even some universities and health systems.
For domestic borrowing in CAD, these clients only want to deal with domestic banks, which explains why Canadian banks also dominate DCM.
But these sovereign clients tend to pay lower fees than normal companies, so banks need to find other ways to monetize the relationships.
Those could include secondary trading of the bonds and issuance-related hedging activities, both of which lead back into sales & trading.
Q: You’ve been mentioning Toronto. What about other locations, such as Calgary, Montreal, and Vancouver? Is there much trading there?
A: Trading is concentrated in Toronto, but there is some activity in other cities.
Calgary, as you’d expect, is energy-focused, with many commodities trading desks.
Many international firms still operate there, including Goldman Sachs’ oil and natural gas trading desks and similar ones for the integrated major oil & gas companies.
Most domestic banks and some foreign banks have trading teams in Montreal because there are quite a few large institutional accounts in Quebec, such as pensions, that prefer local coverage.
There are some salespeople in Vancouver and Ottawa, but not a big trading presence.
Vancouver focuses on mining and forestry, and the institutional demand there comes from firms like PH&N (acquired by RBC) and the BC pension fund (BCIMC).
I was open to anything, and I came close to winning an offer on an energy trading desk in Calgary.
Physical commodities trading requires a very different skill set than derivatives trading and opens different doors, and I wanted to learn about the logistics and scheduling required.
Canada Sales & Trading: Careers
Q: On that note, what are the most common desks in Canada?
For example, is FX within fixed income trading more important because many companies pay for their expenses in USD and want to hedge against currency fluctuations?
A: I’m not sure if it’s just my bank, but over the past decade, we’ve been focusing a lot more on the DCM business and related credit products.
As I mentioned before, a lot of borrowers here are sovereign and sub-sovereign names, and we do a lot of rates trading to maintain liquidity for their bonds.
Interest rate derivatives and other FX products also support these markets.
Japanese and Canadian banks have been winning more market share from European and U.S. banks in these areas (though some, like Nomura, have since retreated and cut costs).
In terms of equity trading, everything is becoming more automated, and Cash Equities has taken quite a hit.
In Equity Derivatives, the Delta One business (i.e., desks that trade linear or non-option equity products, such as equity return swaps) has changed significantly because of tax changes.
Specifically, the IRS in the U.S. and CRA in Canada shut down a dividend/tax-arbitrage scheme between pension funds and banks that provided tax savings to banks, so this business lost a lot of its appeal.
Structured notes, i.e., debt issuances that contain embedded derivatives, are also becoming more popular among retail investors.
Options volume and liquidity in many FICC products have worsened even as market transparency has improved, mostly because global macro hedge funds have done poorly.
Hedge funds are “two-way” players in options, but companies using options for hedging purposes are “one-way,” which means that most market makers have identical positions – not great for liquidity.
Q: You mentioned “retail investors” just now, but I assume they’re a small segment of the market.
How would you describe the Canada sales & trading client base?
A: The main difference is that the hedge fund industry is far smaller in Canada than it is in the U.S. or U.K., so there are fewer hedge fund clients and also fewer prop trading firm clients.
The biggest “hedge funds” are within the pension funds, and some of them, such as CPPIB or Caisse, have discretionary trading strategy teams that are similar to global macro funds.
So, our biggest clients tend to be pension funds, insurance firms, bank-owned asset management groups, and government borrowers, including central banks.
Independent, international asset managers (e.g., BlackRock and Vanguard) have some exposure in Canada, but they trade based on pricing rather than loyalty.
The trading volume is also much lower – look at the size and daily volume of the iShares TSX 60 (XIU) and iShares S&P 500 (IVV) to see the difference.
Q: Thanks for that description.
Can you discuss compensation and the S&T career path?
A: When you start, the base salary is about the same as in IB: around $80K to $100K CAD, with a variable bonus that’s some percentage of the base salary.
The difference is that when you’re in the rotational program, the bonus tends to be lower than in other markets and investment banking because you’re on the HR payroll, not the payroll of a specific desk.
Even as you progress, there will still be a discount because Canadian banks’ market divisions are smaller and take less risk.
Canadian banks try to pay closer to market rates in offices such as New York and London, but you’re still likely to earn more at a large, global bank.
My very rough estimates for average total compensation would be:
Analyst and Associate: $100 – $200K CAD range
VP: $250 – $350K CAD range
Director: $400 – $600K CAD range
Managing Director: Just over $1 million CAD
These figures might seem similar to pay at U.S. banks, but these are in Canadian dollars, which are almost always worth less.
From a PPP perspective, you might come out ahead in Toronto because the cost of living is lower than in London or New York (even in our rapidly inflating real estate markets!)
But past a certain point, the lower bonuses may start to outweigh the lower cost of living.
If you work at a Canadian bank, you’ll earn less, but you’ll be in a friendlier environment and you’ll have better long-term job security, relative to S&T in other regions.
The career path and progression are similar to those in the U.S., and at the top, there are still “management” MDs and “sales/trading” MDs.
Turnover tends to be lower because fewer professionals at the mid and top levels leave voluntarily, so you may not be able to advance any faster in Canada.
Q: The Volcker Rule killed prop trading in the U.S., but it was never officially banned in Canada, right?
Couldn’t that make compensation higher?
A: In theory, yes, but in reality, most prop trading desks here have also shut down.
RBC still runs one, called “Global Arbitrage & Trading,” but that’s about it.
It is a very well-regarded group with dozens of professionals in Toronto and New York – but even that group is still running only because U.S. regulators rejected a plan to spin it off into a separate hedge fund.
There are no official regulations against prop trading in Canada, but banks still have to comply with international rules and regulations if they want clients and operations in other countries.
Also, even if prop trading did still exist, compensation formulas have become much murkier and are no longer as simple as “you earn X% of your P&L.”
Banks also factor in performance across other departments and the industry as a whole, and there are additional funding, compliance, and technology costs, meaning that each $1 on the P&L is split into more pieces.
Sales & Trading Exit Opportunities and Final Thoughts
Q: Thinking about everything we discussed, who would be a good fit for sales & trading in Canada? And who would not be a good fit?
A: I tend to agree with your conclusions in the sales & trading vs investment banking article: if you know you want to work in the public markets, you’re more quant-oriented, and you want to do it for the long term, S&T could make sense.
It can still be a lucrative career, even though it’s less appealing than it once was.
But if you’re not sure what you want to do long term and you want career flexibility, I’d recommend against it.
This advice is even truer in Canada because it’s harder to move around to other fields after working in sales & trading.
Q: Speaking of that, what are your options if you want to leave the field? And what are your own plans?
A: People tend to stay in sales & trading, go to an asset management firm, or join a pension fund’s trading team.
Besides those options, many of the Analysts and Associates from my class have switched to investment banking industry groups or markets-based groups like ECM or DCM, and some have moved into fintech, which is a booming industry in Toronto.
If you’re willing to take an initial pay cut in exchange for potential future upside, there’s a huge demand for people who know both finance and technology.
As for me, I still like the markets and trading, but I don’t think the long-term outlook for S&T is great, so I am thinking of moving to an asset management firm or pension fund eventually.
Q: Thanks for your time!
A: My pleasure.
The post Sales & Trading in Canada: Equally Attractive Public Markets Opportunity? appeared first on Mergers & Inquisitions.
from ronnykblair digest https://www.mergersandinquisitions.com/sales-trading-canada/
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BANK OF AMERICA: Bitcoin is the 'most crowded' trade Getty Images / Carsten Koall Being long bitcoin is the most crowded trade in the world, according to a fund manager survey conducted by Bank of America Merrill Lynch. The cryptocurrency has exploded higher in recent weeks as a handful of exchanges have started transacting it, offering an increased level of legitimacy. Large fund managers can't help themselves from chasing the explosive returns offered by bitcoin . Their surging interest has made owning the scorching-hot cryptocurrency the market's most crowded trade, according to a Bank of America Merrill Lynch survey of 203 fund managers overseeing $558 billion. That so many traders are rushing to get bitcoin exposure should come as little surprise, considering its astronomic rise in recent months. The cryptocurrency has increased roughly 1,800% versus the US dollar this year, growing its market cap to more than $300 billion, according to CoinMarketCap.com . To be specific, 32% of investors surveyed in December said they viewed being long bitcoin as the most crowded position. Coming in second place is the long FAANG (Facebook, Amazon, Apple, Netflix Google) + BAT (Baidu, Alibaba, Tencent) trade, with 29% of responders mentioning it, BAML's data showed. Bank of America Merrill Lynch Bitcoin's rise in recent weeks has been aided by measures that will allow its adoption to be more widespread, including the recent launch of futures trading by exchange group Cboe Global Markets. Just this past weekend, CME Group also commenced the trading of futures, while Nasdaq is preparing its own launch for the second half of 2018. Still, there's a growing chorus of market experts who don't see bitcoin as a viable long-term investment option. Last week, Belinda Boa, BlackRock's head of active investments for Asia-Pacific, reportedly said the cryptocurrency is showing " bubble-like valuations ." That echoed comments made by outgoing Federal Reserve Chair Janet Yellen, who called bitcoin a " highly speculative asset " at a recent press conference. Further, Nobel Prize-winning economist Paul Krugman told Business Insider in an interview last week that bitcoin is a more obvious bubble than the most recent housing crisis. Rounding out the top three most crowded trades in BAML's study is the short volatility trade — one that's also been flagged by pundits as a potential weak spot for markets. While the trade itself is essentially a wager that the market will continue to sit still, many pundits have highlighted it as reflecting a potentially dangerous level of investor complacency. The following chart shows the evolution of the BAML survey's most crowded investment, with bitcoin re-claiming the reins in December after two months of being overtaken by the long-Nasdaq trade: Bank of America Merrill Lynch Sign up here for Crypto Insider , BI's roundup of all the bitcoin and cryptocurrency news you need to know today. NOW WATCH: Why bitcoin checks all the boxes of a bubble December 19, 2017 at 03:59PM
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The number of men behind bars in the US is mind-boggling
The number of Americans in prison jumped over the past few decades amid the tough-on-crime policies of the "war on drugs" era.
The share of the male adult population of former prisoners has risen from 1.8% in 1980 to 5.8% in 2010, according to data from Bank of America Merrill Lynch.
High incarceration rates are likely to have contributed to the US's decline in prime-age labor-force participation rates relative to other countries.
The United States is an outlier when it comes to putting people behind bars. It has the second-highest incarceration rate in the world as the number of Americans in prison has surged over the past few decades amid the tough-on-crime policies of the "war on drugs" era.
In a recent note to clients, Bank of America's Michelle Meyer and Anna Zhou illustrated this with a chart showing current or former prisoners and felons as a share of the adult male population in the US from the 1980s through the 2010s.
The proportions have increased substantially over the past several decades. According to data cited by Meyer and Zhou, the share of the male adult population of former prisoners has risen from 1.8% in 1980 to 5.8% in 2010.
"The growing number of incarcerations has left more people with criminal records, making it difficult for them to reenter the workplace," they wrote. "Digging into the details by demographic cohort, we find that men mak e up nearly 93% of all prisoners, of which one third are between the ages of 25 and 34."
BAML
High incarceration rate policies have two key economic problems: They don't create alternative and better opportunities for those living in communities with high crime rates, and they don't address the question of how people should create new lives once they're out of jail.
And these high incarceration rates are likely to have contributed to the US's decline in prime-age labor-force participation rates relative to other countries.
"Incarceration policies affect participation rates directly by removing workers from the labor force for a period of time but also long-term as the stigma of incarceration can reduce demand for the labor services of the formerly incarcerated even years after their reentry into society," the Council of Economic Advisers under the Obama Administration said last year in a report on the long-term decline in the US's prime-age male labor force participation.
In fact, people who have been imprisoned are 30% less likely to find a job than their non-incarcerated counterparts, according to the Center for Economic and Policy Research, cited by Meyer and Zhou.
Occupational licensing rules or other restrictions on the hiring of those who have been incarcerated legally bar such individuals from a number of jobs, the CEA added. And even when there aren't legal restrictions, employers are less likely to hire someone with a criminal record. Several studies have shown that when companies receive two job applications that are identical, except that one candidate has been in prison and the other hasn't, the formerly incarcerated candidate is less likely to get an interview.
A "potentially large fraction of this group is not participating in the workforce as a result of their incarceration, likely due to both discrimination and the degeneration of employment networks, resulting in long-term employment and earnings losses," the authors of the CEA report said.
"Those who emerge from the criminal justice system suffer stigma, hiring restrictions, and potentially reduced ability to work as a result, reducing the demand for their labor."
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New Post has been published on OmCik
New Post has been published on http://omcik.com/stanchart-brings-in-senior-talent-to-fuel-u-s-expansion/
StanChart brings in senior talent to fuel U.S. expansion
By Carmel Crimmins and Sumeet Chatterjee | NEW YORK/HONG KONG
NEW YORK/HONG KONG Standard Chartered (STAN.L) aims to expand its U.S. presence with a local hiring push and by bolstering its team in the country with senior staff from its main regions of Asia, the Middle East and Africa, its top bankers said.
The world’s top economy contributed $661 million to Standard Chartered’s operating income in 2016, or 5 percent of the total, making it the smallest of its major markets – Hong Kong, China, India, and the United Arab Emirates.
“We really view the Americas as a growth area. When I say that, we are not looking to be JPMorgan or BAML (Bank of America Merrill Lynch) or Wells Fargo,” StanChart’s Americas CEO Torry Berntsen told Reuters at the bank’s New York office.
“We think we have a special calling card in terms of what our network looks like.”
The plan is to offer StanChart’s trade finance, transaction banking, cash management and forex market products to large U.S. firms, senior bankers said.
This push comes about five years after StanChart reached a $340 million settlement with U.S. authorities over transactions linked to Iran. The bank is due to stay under supervision until end-2017, although there are concerns this could be extended.
Higher interest rates, healthy corporate loan growth, and hopes President Donald Trump’s lower taxes and plans for lighter financial regulation would boost banking sector growth provide the right backdrop for expansion.
“It’s more of a new focus and it is as a result of Bill and Simon coming in … We think it is a great growth prospect for the bank,” said Berntsen, referring to CEO Bill Winters and former HSBC banker Simon Cooper who joined last year as chief of corporate and institutional banking, the bank’s largest unit.
Since joining, Cooper has made changes to turn around the bank that had been hit by losses from bad debts and slowing economic growth in its major markets, including hiring senior external bankers like Berntsen, who came on board in October.
StanChart posted its first annual loss in 26 years in 2015.
Cooper has also expanded industrial sector coverage and streamlined the bank’s mammoth workforce to get a bigger share of the traditional banking businesses.
In the last few months, StanChart’s senior external hires in the United States included former Morgan Stanley (MS.N) banker Jens Andersen, who has joined the bank as head of its financial markets and trading forex in the Americas.
Internally, it has relocated global head of financial firms Jeremy Amias from Hong Kong as co-head of global banking for Americas, and Singapore-based head of transaction banking for banks Anurag Bajaj as head of transaction banking in Americas.
StanChart has traditionally been focused on helping its clients based in Asia, Africa and the Middle East to do business in the United States. It still makes most of its profit in Asia, but is now looking at the other side.
The bank’s U.S. assets were at $47.6 billion at the end of 2016, accounting for 7 percent of its total, versus 21 percent in Hong Kong and 13 percent in Singapore.
“We’re not trying to conquer the U.S. market,” CFO Andy Halford told Reuters in a interview in April.
“We’re saying for those businesses in the U.S. who have or might have interest in the emerging markets but have never heard of us, we should be making ourselves more visible.”
(Reporting by Carmel Crimmins, Sumeet Chatterjee and Lawrence White; Editing by Clara Ferreira-Marques and Himani Sarkar)
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BAML
My experience at the Bank of America Merrill Lynch was an extremely helpful and and useful one. Right when we entered, we had a presentation given to us that went over the basics of Bank of America and what set it apart from its competitors. We then went onto a panel of female analysts who were willing to take the time out of their day to speak to us about their roles and how they came into them, and ended with a networking session with many people of varying levels in the bank and with very diverse roles and backgrounds. From the presentation, which was given by the Chief Operations Officer of the company, Maureen Lesak, I learnt that Bank of America's acquisition of Merrill Lynch had made it the largest wealth management firm in world, and a huge player in the investment banking sector. Their goal is to make financial lives better as a whole, and are the number one global research firm in the world and in the top 50 best companies for diversity. Lastly, we learnt about different functions in the company and the opportunities they had for sophomores.
Next, from the panel, we learnt a lot about interview tips, skills and strengths that BAML looks for in its applicants, and life at BAML, including mentorship, the culture, and the people of the firm. We had a chance to hear what the panelists thought the character of an investment banker was like, but also about how each one of them had come from different backgrounds and that diversity was very highly valued at the company.
Lastly, the networking session was a great time not only to see whether we would fit in with BAML's people, but also a great time to talk to people from all over the firm who each had their own unique experience and idea of what BAML meant to them. From this networking event, I was able to piece together my own holistic view of the company, and decided that this would definitely be a place where I could see myself working after college. The entire experience was incredibly valuable, and in my opinion, was a great mix of a corporate presentation, a question and answer session, as well as a networking session. I would most definitely go back if I had the chance, and hopefully someday I will!
Manasvini Rao, Och Women in Finance Trek to New York
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The Definitive Guide to Leveraged Finance (LevFin): Deal of the Century, or Last Century’s News?
The Leveraged Finance group is not a big deal; they just happen to close big deals.
And as a result, the Internet seems to be in love with this team.
It’s not just because of those big deals, though; there’s also the perception that Leveraged Finance is “one of the best” groups for exit opportunities into private equity.
You do credit analysis, you work on leveraged buyouts, and you might get more deal experience than bankers in industry or M&A groups.
What’s not to love?
Let’s just say that you should read the fine print before assuming that Leveraged Finance is the best group ever:
(Special thanks to Kai Liang for his expertise on the Leveraged Finance discipline.)
What Do You Do in Leveraged Finance (LevFin)?
At a high level, it’s similar to what you do in Debt Capital Markets (DCM): Provide strategic advice to companies on raising debt.
That means pitching to current clients and prospective clients, executing debt issuances for clients, and working with other groups to provide critical market information and transaction case studies.
The key difference is that DCM focuses on investment-grade debt issuances that are used for everyday purposes, while LevFin focuses on below-investment-grade issuances (“high-yield bonds” or “leveraged loans”) that are often used to fund control acquisitions, leveraged buyouts, and other transactions.
“Below-investment-grade” means anything with a Ba1/BB+ credit rating or lower.
Firms in this category tend to be riskier than “blue-chip companies,” with less consistent operating results, higher leverage, and a higher chance of default.
As a result, their debt issuances must offer higher yields than those of investment-grade companies.
Because of this difference, most of your clients in LevFin will be companies or private equity firms rather than sovereigns, agencies, or supra-nationals.
Common uses of debt for LevFin clients include:
Leveraged Buyouts – A private equity firm uses a combination of cash and debt to buy a company, improves it, and then sells it again. It’s house-flipping on a much larger scale.
Mergers & Acquisitions – A company identifies another company or business unit it wants to acquire, raises debt to do the deal, and holds the target for the long term.
Capital Expenditures – If a company wants to build a new factory or develop a new asset that’s not a part of its everyday business operations, it might raise debt to do so.
Leveraged Recapitalizations – The client wants to raise debt to repurchase shares or issue dividends.
Refinancings – If a company’s debt is about to mature, it almost always raises new debt to pay off and replace the old balance.
Since each deal may be a special case, the analytical work in Leveraged Finance is often more involved than in DCM.
You must understand not only the credit markets and companies’ operations, but also how major transactions affect companies and their credit profiles.
It’s more about presenting custom solutions to clients rather than offering the same products with slight variations.
Leveraged Finance vs. Other Groups
Since we just explained the differences between Leveraged Finance and DCM, we’ll now compare it with a few other debt-related groups.
LevFin is different from corporate banking because corporate banking involves debt such as Revolvers and Term Loans that goes on a bank’s Balance Sheet, while Leveraged Finance deals with more junior and syndicated debt.
There is some overlap with the Financial Sponsors Group (FSG) because both teams work with private equity firms.
Financial Sponsors may focus on maintaining relationships with private equity firms, while Leveraged Finance might do more of the credit/LBO analysis for deals.
But the work varies heavily by bank, and different teams “run the model” at different firms.
There is some overlap with Restructuring as well, but LevFin works with different types of companies: those that are highly leveraged but not yet in distress.
Banks with strong Balance Sheets also tend to have strong Leveraged Finance teams because they can take on more risk for clients.
In the U.S., for example, JPM and BAML tend to be among the strongest banks in this area, followed by the other large commercial banks.
At some banks, LevFin is more of a markets-based role, and some firms label it “Leveraged Debt Capital Markets” or “Leveraged Finance Origination & Restructuring” or other, slightly different names.
At other firms, Leveraged Finance might be classified under investment banking and work more closely with the M&A team.
Working in a markets-based team won’t necessarily kill your exit opportunities, but it’s less than ideal if your goal is private equity.
Leveraged Finance Interviews: How to Enter the Leverage Zone
Not much is different about the recruiting process for LevFin groups.
Recruits include students who interned in the group and received full-time return offers, bankers transferring in from different groups, and sometimes professionals with experience in credit rating agencies, corporate banking groups, or other credit roles.
The main difference in the recruiting process is that you’re likely to receive a higher percentage of technical questions, especially since there are so many courses, books, and guides that teach these concepts.
You’re less likely to receive questions about macro topics, such as the activities of central banks, trade policies, or FX rates because Leveraged Finance is more “micro-focused.”
However, you should still understand bond analysis (covered in the DCM article), how to build an LBO model, and how companies make financing decisions.
We cover these points in the IB Interview Guide in the Equity vs. Debt section and in more depth in the Excel & Fundamentals financial modeling course.
You should also be prepared to discuss debt market trends; you can find some good resources via the links below (search the name and the current year to find more recent versions):
PwC – European Leveraged Finance Update
Thomson Reuters – Year-End Leveraged Loan Update
LCD Market Primers – Syndicated and High-Yield Bonds
To understand leveraged loans at a high level, take a look at the primer on LeveragedLoan.com.
And to prepare for deal discussions, take a look at the list of high-yield deals on CreditMarketDaily.com and research what you find there.
Finally, if you’re in networking mode, you can go to conferences such as the ones hosted by:
Cornell High-Yield and Restructuring Club
S&P US Leveraged Finance
Workstreams, Projects, and Sample Assignments in Leveraged Finance
You complete similar types of assignments in Leveraged Finance as you do in DCM, and investors in both areas care most about avoiding losses since their upside is capped.
If you’re interested in credit analysis, you can find great examples in the DCM article.
The main differences are:
You Do More In-Depth Financial Modeling – Since you work with less creditworthy companies, you must put more effort into stress-testing them by examining different scenarios and seeing how the company’s credit stats and liquidity hold up.
You’ll spend more time building different financing scenarios, such as subordinated notes vs. mezzanine vs. preferred stock, and comparing the results. Finally, you’ll also build models for transactions such as leveraged buyouts and M&A deals.
You Focus More on Credit Documents, Credit Amendments, and Other Agreements – This part may seem less interesting than financial modeling, but it’s even more important because you must understand the terms of debt issuances if you want to do any credit analysis. And there is no way to “learn” these skills other than by reading through dozens of examples.
You Work with Financial Sponsors as Well – In DCM, your clients are almost always the companies or other entities issuing debt. But in Leveraged Finance, financial sponsors (mostly private equity firms) might also hire your bank to fund their deals. As a result, you also learn how PE firms execute transactions.
Here are a few examples of different types of analysis from Leveraged Finance teams:
Leveraged Buyout / Take-Private Analysis:
In this one, you build a 3-statement model for a company, assume the PE firm uses a combination of debt and equity to purchase it, and then sells the company at the end of a 3-to-7-year period.
You focus on the IRRs and cash-on-cash multiples and attempt to show that the deal works under different scenarios, such as Base and Downside cases. Here are a few examples from some leading leveraged finance teams:
Leveraged Buyout Analysis by Barclays
LBO Financials by Citi
Take-Private Analysis by Morgan Stanley
One difference in Leveraged Finance is that you’ll pay more attention to the credit stats and ratios because you focus on the financing of deals.
Even if a deal produces reasonable equity IRRs, lenders might reject it if the EBITDA / Interest ratio falls to too low a level (N.B.: This is but one consideration).
Lenders do not benefit at all from a high equity IRR, but they do stand to lose a lot if the company defaults on its debt.
Market Conditions / Update Presentations:
In these presentations, you show the [potential] client information about recent issuances, net flows into high-yield and leveraged-loan mutual funds, prevailing interest rates, issuance volumes, and other market stats.
The goal is to say, “Now is a great time to pursue a transaction!”
After all, if you are a banker, any time is a great time to pursue a transaction.
Here’s an example from Barclays:
Summary Commentary by Barclays
Deal Case Studies:
With these, once again, you present evidence that now is the right time to pursue a deal.
In this case, it’s because other, similar companies have raised debt at similar terms and had successful offerings.
Common information includes the transaction value, multiples, credit ratings, and debt terms (interest rates, yields, original issue discount, LIBOR floor, call premiums, etc.).
Here are a few examples:
Case Studies by Barclays
One-Page Summary by Merrill Lynch
One-Page Summary by Credit Suisse
Internal Memoranda:
Similar to the documents outlined in the DCM article, you’ll also produce quite a few memos in Leveraged Finance, primarily to provide a narrative for transactions.
For example, you might describe your client’s industry, its growth prospects, its products/services, its competitors, its customer concentration, and its percentage of recurring revenue.
You’ll also describe the transaction itself, including a Sources & Uses schedule, a capitalization table, post-deal credit stats and ratios, and the operating metrics and credit stats/ratios for comparable companies.
These memos might be used internally to win approval from your bank’s credit committee, or they might be used externally to help the sales team pitch new syndicated offerings to institutional investors.
Credit Amendments:
You might also take a look at an existing loan, review the terms thoroughly, and file an “amendment” to change its terms on behalf of a client.
You file this amendment most often when a company needs additional time to repay a loan; in that case, you might offer lenders a higher interest rate in exchange for additional years until maturity.
Credit amendments are not complete transactions in the same way that leveraged buyouts or M&A deals are, but they still generate fees for the bank.
Debt Deal Mania: How to Get a High Yield with Your Leveraged Loan
We covered the key terms of debt issuances in the DCM article, so refer to that for a summary.
In most cases, you’ll be working with high-yield bonds and leveraged loans in LevFin.
“High-yield bonds” is a broad category, but it generally includes bonds that are junior to Senior Secured Notes, Term Loans, and Revolvers that also have fixed coupons (e.g., 7.0% rather than L+200 bps) and incurrence covenants rather than maintenance covenants.
“High-yield” refers to any below-investment-grade issuance that offers higher interest rates as a result of higher default risk.
Within that category, there are various types of issuances, such as Senior Unsecured Notes, Unsecured Notes, Subordinated Notes, and Mezzanine, each with slight differences.
For example, Mezzanine sometimes has equity warrants attached, which allows investors to receive a small percentage of company equity upon exit.
Leveraged loans are different from high-yield bonds because the coupon is generally floating, they carry maintenance covenants, they are secured by assets, and there may be a small amount of amortization.
They’re closer to Term Loans, but traditional Term Loans are for investment-grade companies with less leverage, and they carry lower interest rates.
The main point here is that the terms vary far more in Leveraged Finance than they do in Debt Capital Markets.
For example, if a highly leveraged company wants to refinance but might have trouble meeting its cash interest payments, you can’t just propose new debt with slightly different terms.
Instead, you might think about the yield that current investors are receiving and propose a significantly different structure that would still provide a similar yield.
For example, you could propose a new loan with a lower interest rate, a portion of Paid-in-Kind (PIK) interest that accrues to the loan principal, and a small percentage of equity upon maturity.
The annualized cash yield will be lower, but the IRR to lenders might be similar (assuming the company survives).
You would be unlikely to propose this type of deal in DCM because investment-grade bonds do not have PIK Interest or equity warrants.
Culture, Lifestyle, Hours, and Pay
Even though Leveraged Finance can sometimes be a “capital markets” group, the hours and lifestyle tend to be worse than DCM and ECM and more in-line with those of M&A and industry groups.
That happens because there’s a relatively high volume of deals, the analysis can be more in-depth, and you work on transactions that are more complex than simple debt or equity issuances.
Also, many of your clients will be private equity firms.
Everyone in private equity works long hours, so they also expect their bankers to work long hours, which results in a lot of late nights and last-minute requests.
At some large banks, the hours in LevFin are slightly better, so you might have a bit of free time on weekdays and more free time on weekends.
However, these groups also tend to do less modeling work and are closer to markets-based teams.
At the Analyst and Associate levels, compensation in Leveraged Finance is similar to compensation in any other group.
The pay ceiling for Managing Directors and other senior bankers is a bit higher than in groups such as ECM or DCM, so a good result would be in the low millions USD.
However, some people also argue that a long-term career in Leveraged Finance is riskier than one in DCM because if there’s a recession, high-yield issuances will decline more than investment-grade issuances.
Leveraged Finance Exit Opportunities: Credit-Related Anything?
The Internet seems to be in love with Leveraged Finance, with countless threads and articles arguing that it’s a great way to get into private equity.
There is some truth to this claim because LevFin is a better option than DCM or ECM.
However, it’s still not as good an option for private equity exits as solid M&A or industry teams.
You focus on the credit side of deals in LevFin, which is important, but not the #1 factor for most PE firms from ronnykblair digest https://www.mergersandinquisitions.com/leveraged-finance/
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Equity Research in Brazil: The Best Way to Apply Economics to Real Life?
What happens if everyone in your family is an economist?
You might want to follow in their footsteps… but maybe do something a bit different.
One good option is equity research, where you can combine your economic skills with finance and the capital markets.
Our reader today came to the same conclusion as he navigated his way into equity research in Brazil – from a family of economists:
Out of the Central Bank and into the Investment Bank: Getting In
Q: How did you first become interested in equity research?
A: I was born in “Economist Land:” My immediate family (plus cousins and others) all worked in economics or finance in some way.
One of them had worked for the IMF and the Brazilian Central Bank, and another family member had owned a small broker-dealer company in Brazil in the 1990s.
I saw how the high inflation and the currency fluctuations made the capital markets a high-risk, high-reward place, and I knew I wanted to get into the industry from a young age.
Q: So, you majored in finance or economics, and then…
A: No! I did an undergraduate major in engineering, completed a Master’s in Finance degree, and worked in various fields before entering equity research: Risk management and the back office, a family office, and FICC-related sales & trading.
After a few years in those roles, I applied for MBA programs, won admission to a top business school in the U.S., and joined the sell-side equity research team at a large domestic bank in Brazil.
I gained experience there and in a corporate finance rotational role, and now I’m looking to get into buy-side equity research.
Q: Good luck!
What was the sell-side equity research recruiting process like?
A: It’s far less structured than it is in the U.S.
Banks still hire students out of undergrad and incentivize them to stay for the long term, but the entire process happens more slowly, and firms don’t necessarily make you go through a specific set of steps.
People who network their way in tend to come from related roles, such as sales & trading, corporate finance, and investment banking. But it gets very difficult to network your way in after more than a few years of full-time work experience.
My story of winning an offer during an MBA program is quite rare.
Interviewers focus heavily on your soft skills and your ability to fit in with the team. As in other regions, you need a demonstrated interest in the markets, and you must be able to discuss recent trends.
The ER industry has become more competitive because there are so many Brazilians with MBAs from top schools, so the CFA is also becoming more important for setting yourself apart.
The technical questions and case studies in interviews are the same as those anywhere else: Expect 3-statement modeling tests, accounting/valuation questions, and stock pitches.
On the Job at a Large Brazilian Bank
Q: Can you tell us about the equity research industry in Brazil?
A: Since Brazil has the largest economy and capital markets in Latin America, it has a well-developed equity research industry as well.
A mix of international bulge-bracket banks, “In-Between-a-Banks,” and domestic Brazilian banks cover companies here.
Middle-market and boutique firms (whether regional or “elite boutique”) don’t do much yet (as of 2017 – 2018).
Pretty much all the international BB banks cover companies here: JPM, MS, Citi, CS, GS, BAML, and DB.
Of the “In-Between-a-Banks,” the European and Japanese ones have the strongest presence – firms like Santander, BNP Paribas, Mizuho, and Sumitomo all have solid coverage teams.
Three major domestic banks control most of the investment banking market: Itaú, Bradesco, and BTG Pactual.
They all have a strong presence in equity research as well, which you’ll see if you look at any of the Institutional Investor rankings.
That might change in the future because of the corruption scandal(s); the political climate could give smaller domestic banks and international firms an opening.
Q: Thanks for that summary.
What are the most common industries, and does any of the analysis differ from what you do in other regions?
A: Brazil has a diversified economy, at least compared with the smaller countries in Latin America, so research teams cover a mix of industries.
Some of the biggest industries by market cap are commodities (Oil & Gas and Metals & Mining), financials (Commercial Banks), and consumer staples (Food & Beverage), so many of the companies we cover are in those sectors.
Financial modeling is financial modeling, so you’ll still see quarterly and annual projections of the three statements, valuations using multiples and DCF analysis, and industry data to support initiating coverage reports.
The main differences include:
Brazilian GAAP vs. IFRS – These have been converging over the years, but if you look at older reports and filings, there will be discrepancies. Some of the differences relate to subsidiary accounting, dividends, and exchange rates and borrowing costs.
Lower Liquidity and Market Capitalization – Since there is far less liquidity, and since firms are much smaller than they are in the U.S., you have to dig into companies in a lot more detail to understand them.
It’s much harder to skim through a company’s financial statements and build a model just based on the documents; you have to get to know management and speak with sources on the ground.
Currency Fluctuations – Since the BRL/USD exchange rate has been volatile and since the Real has fallen so much against the Dollar, sometimes research analysts will present financial projections in both BRL and USD side-by-side.
If you want to see a few sample reports for companies and industries, check out these examples:
Brazil Retail & Consumer Goods Research – Santander
Brazil Macro & Market Research – Generali Investments
LatAm Universe Coverage Book – Santander
NOTE: We found all these reports with simple Google searches. Many firms make reports and updates publicly available if you search for the right keywords.
Q: Thanks for explaining that.
Previous interviewees in research have said they spent more time speaking with investors and management teams than they did on financial modeling.
What was your experience?
A: I agree with those previous comments; you do a lot of modeling for the initiating coverage reports, but not quite as much after that.
In my role, I spent more time getting to know the management teams and putting them in touch with institutional investors.
I didn’t speak with the investors as much as the salespeople did, but we still interacted a fair amount because sales always wanted our views on various issues.
You split your time more evenly between company management and investors in buy-side equity research since you have to understand what everyone else in the market is doing.
Q: What are the compensation and long-term prospects of this role? Do most research analysts stay there for a long time?
A: Post-tax, post-living-expense equity research compensation in Brazil is about 20% lower than in New York.
Individual income taxes are about 15% lower in Brazil, companies pay for 100% of your healthcare, and the cost of living in São Paulo is ~30% lower than in NYC.
However, salaries and bonuses are also lower, so you can expect to earn about 20% less after taxes and living expenses.
Regarding exit opportunities, most sell-side research analysts either stay in the field or move into investor relations at companies they have covered.
A few may go into private equity or mutual funds, which is possible because recruiting is less structured than in NY and London.
But traditional ER exit opportunities are more limited because there are relatively few hedge funds here.
Q: Thanks for explaining that.
You mentioned in the beginning that you’re looking to move into buy-side research now. What’s your long-term plan?
A: Buy-side research was my plan all along.
I like buy-side research because it combines analytical/introspective work and communications with investors and management.
In most roles, you tend to do one or the other (investment banking skews heavily toward analytical work at the junior levels), so it’s rare to find that balance.
Also, the compensation and working hours are quite reasonable if you find a good team.
Finally, I like the importance of communication skills in research.
You publish reports and speak with different parties all the time, and, coming from a technical background, I’ve always wanted to do more of that.
Q: Great. Thanks for your time!
A: My pleasure.
The post Equity Research in Brazil: The Best Way to Apply Economics to Real Life? appeared first on Mergers & Inquisitions.
from ronnykblair digest https://www.mergersandinquisitions.com/equity-research-brazil/
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Investment Banking in Latin America: Never-Ending Internships or Never-Ending Bonuses?
Should you go straight to the source?
In other words, if you cover emerging markets such as Latin America or Africa, is it better to be based in those regions, or to work in the nearest financial center, such as New York or London?
You might think it pays to be local, but that’s not always the case.
And the classic example of that is investment banking in Latin America, where being “on the ground” creates some interesting trade-offs – as our reader today found out:
Breaking into Banking: The Never-Ending Internship
Q: Can you tell us your story?
A: Sure! I completed my degree in Latin America, did several internships in valuation and M&A, and won a one-year-long “internship” at a large international bank in a Latin American country.
I won a full-time offer from the internship and have been here ever since.
Q: I know you don’t want to describe your background in detail, so let’s move on.
What is the IB recruiting process like in Latin America?
A: You have to divide the process into “Latin American coverage groups in New York” and “Actual IB teams on the ground in Latin American countries.”
In New York, the process is the same as in any other group: Banks recruit students from target schools. If you’re at one, you apply and win interviews/offers like that, and if you’re not, you go through a huge networking effort to get in.
Many people get hired in the New York coverage team and then transfer to regional offices.
If you start out at a regional office, the process is completely different because banks offer internships of 1.0 – 1.5 years before awarding full-time offers.
I’ve seen people work for 2-3 years before receiving a full-time offer.
Each office of a “large bank” in a place like Lima, Buenos Aires, or Santiago might have only ~10 people and might hire only one person every two years.
The exceptions are Brazil and Mexico, which have bigger offices, more openings, and real product and industry groups.
Q: OK. And I assume you have to be at the top university in each country to have a chance?
A: Banks tend to recruit from the top 1-3 universities in each country.
So, in Brazil, they recruit from schools like Insper, Fundação Getúlio Vargas (FGV), University of São Paulo (USP), and several others since it’s the biggest country.
They recruit from Pontificia in Peru, and in Chile, they recruit from Pontificia (different one) and Universidad de Chile. Countries such as Colombia and Argentina follow similar patterns.
As in the U.S. and Europe, most people who get in tend to major in Business, Economics, or Engineering; I’ve rarely seen candidates with History or Literature degrees win offers.
I also haven’t seen many people get in from foreign (U.S., European, or Asian) universities, but plenty of MBAs move back to the region after working abroad for a while.
Q: Somehow, investment banking sounds even more elitist there.
With these extended internships, when do they tell you whether or not you’ll get a full-time offer?
A: If it’s a 10-month internship, they might tell you by Month 4 or 5; the team will review you and say whether or not they’re happy with your performance.
If they’re not happy, the internship will last a few more months, and then you’ll be gone.
If they are happy, you’ll complete the internship and, if nothing goes wrong, receive a full-time offer at the end.
Q: Are there any differences in interviews?
A: Interviews tend to be less technical than they are in the U.S. or Europe, and the technical questions you do receive will be less complex.
Bankers care more about “fit,” including the social circles you’re in, your connections to the country, and your commitment to a long-term future there.
Bulge Brackets vs. Domestic Banks vs. Elite Boutiques in LatAm
Q: What can you tell us about the overall industry there?
Let’s start with the bulge brackets vs. the big Latin American banks, such as BTG Pactual.
A: The bulge-bracket banks tend to work on the largest M&A deals and any deals with non-LatAm buyers/sellers.
Latin American banks focus on IPOs, debt issuances, and regional M&A deals; for example, if a Brazilian company is buying a Colombian company, a Brazilian bank might win that mandate over an international BB bank.
JPM, BAML, CS, MS, and Citi all tend to do well here, with the exact rankings and industry strengths changing from year to year.
The In-Between-a-Banks, such as Santander, HSBC, and BBVA, are strong mostly in ECM and DCM.
Among Latin American banks, the Brazilian ones tend to dominate, with the top three there – BTG Pactual, Itaú, and Bradesco – always ranking well.
The elite boutiques have less of a presence than they do in the U.S. and Europe: Centerview and Perella Weinberg aren’t here at all, Evercore is only in Brazil and Mexico, and Moelis only has a São Paulo office.
The exceptions are Lazard and Rothschild.
Lazard has offices in all the major countries: Argentina, Brazil, Chile, Colombia, Mexico, Panama, and Peru. The offices outside of Mexico and Brazil came from MBA Lazard before it was acquired in full by Lazard.
Rothschild, meanwhile, often ranks well in the M&A league tables because it advises many European companies buying assets here.
Then, there are dozens or hundreds of regional boutiques, so I won’t even attempt to name them all.
A few well-known ones include BR Partners (Brazil), Inverlink (Colombia), and VACE Partners (Mexico).
Q: Thanks for that information dump!
If each country is so small, why do banks even use local teams?
A: Because bankers outside of Mexico and Brazil all cover multiple countries.
For example, a banker in Panama might also cover the rest of Central America, and someone in Chile might also cover Argentina and Peru.
Also, many of the product MDs for groups like M&A, ECM, and DCM at large banks are based in NY and travel to the countries here frequently.
Q: OK. What about the most common deal types and industries?
A: Deals tend to be much smaller, with the possible exception of Brazil.
A $1-2 billion USD deal is “normal” in the U.S., but it would be huge here.
Many deals range from $20 million to $50 million USD in size, with occasional deals over $100 million (depending on the country).
Most of the economies in Latin America are commodities-driven, so natural resources, infrastructure, and power deals are very common.
Many countries still lack basic infrastructure, so private equity firms have been popping up to do infrastructure deals (though the deals can be hard to find and close).
Banks often win or lose mandates via Project Finance work, so European and Asian banks have an advantage there.
There’s a lot of deal flow in consumer/retail, but less in consolidated industries such as telecom (There are just 2-3 major players in many countries, which leaves little room for M&A).
Real estate is a developing segment, and we’ve seen more movement in RE deals over time.
While REITs have existed in the U.S., Europe, Australia, and other developed countries for a long time, they are relatively new here.
The “FIBRA” (Fideicomiso de inversión en bienes raíces) offers a similar structure in Mexico, and REITs will become more widespread in the other countries here in the long term.
New York, New York… or Latin America?
Q: Thanks for all that information.
Based on what you know of Latin America and developed countries, where would you recommend working?
A: I think it’s better to be in New York if you want to advise on Latin American deals because there are more exit opportunities, and you gain more exposure to various Latin American markets rather than the localized approach in the regions.
Also, investment banking in NY is less “prestigious” than it once was, and banks face serious competition from hedge funds, private equity firms, and even technology companies like Google and Facebook.
The top performers have many options, so banks have less bargaining power.
But in Latin America, there are few real hedge funds, and there are relatively few PE firms (except for Brazil/Mexico), so investment banking is still an appealing long-term career.
As a result, banks have more power and the rules may be slightly more stringent than in developed countries.
Q: I see. So, exits into private equity are not that common?
A: They’re pretty rare except for Brazil and Mexico, where the private equity industry is more developed.
But there are fewer PE firms in the smaller countries here, and you might also take a significant pay cut if you move from banking into private equity.
To give you an idea, you might earn 40-50% less at a domestic PE fund in some cases.
The same applies if you go into corporate finance or corporate development.
As a result, bankers in smaller countries tend to stay in banking or move to the U.S., Europe, Brazil, or Mexico to gain more opportunities.
Q: Thanks for that explanation, and for your time. I learned a lot!
A: My pleasure.
The post Investment Banking in Latin America: Never-Ending Internships or Never-Ending Bonuses? appeared first on Mergers & Inquisitions.
from ronnykblair digest https://www.mergersandinquisitions.com/investment-banking-latin-america/
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Wall Street banks are starting to sound the alarm on a stock market correction
Bank of America Merrill Lynch is the latest Wall Street firm to issue a warning about a possible stock market correction.
A correction is technically defined as a 10% sell off, and the benchmark S&P 500 hasn't seen one in more than two years.
BAML joins Morgan Stanley among the ranks of big firms that have sounded the alarm this week.
The S&P 500 hasn't seen a correction in almost two years. But a growing chorus of Wall Street strategists says one could be right around the corner.
The most recent firm to sound the alarm is Bank of America Merrill Lynch, which forecasts a pullback of at least 10% — the historical definition of a correction — by Valentine's Day 2018.
And while the firm lays out a long list of sell signals, it highlights a couple elements in particular as the biggest market risks right now. In BAML's mind, the "most obvious catalyst" for a correction would be a spike in wage and inflation data that brings back "fear of Fed."
That's a reference to the bearish sentiment that would likely accompany a sudden acceleration of the Fed's rate tightening schedule, which includes rate hikes and a shrinking of the central bank's massive balance sheet — two measures that would boost fixed-income yields.
"In our view higher bond yields and higher bond market volatility are necessary to engender a major correction in equity and credit markets," BAML chief investment strategist Michael Hartnett wrote in a client note.
Indeed, trepidation around Fed has been highlighted as the top fear by many high-profile investors interviewed by Business Insider. The unwinding that's about to take place is unprecedented, and there's nothing investors fear more than the unknown.
Bank of America Merrill Lynch
BAML is also wary of a possible bubble in tech stocks, which could be caused by what the firm describes as the two most important investment trends of the past decade: central bank liquidity and technological disruption. The bank has long expressed worry about potentially overstretched sentiment and trader euphoria — and those two factors may have helped bring that about.
As such, the so-called "Icarus trade" may soon come to an end. The term, coined by BAML, refers to the "melt up" in stocks and commodities seen since early 2016 — one that it sees as unsustainable in the long term.
BAML's correction forecast isn't the first to come out of Wall Street this week. On Tuesday, Morgan Stanley warned of a sharp pullback in equities, albeit a less aggressive possible decline of roughly 5% by year end. Their worry stems from what they see as a fully-priced stock market heading into earnings season — one with minimal upside and a small margin for error.
Morgan Stanley also sees — wouldn't you know it — the Fed balance sheet unwinding as a major risk, as is a lack of follow-through on Trumps tax plan and a potential reversal in a historically low US dollar.
But Morgan Stanley is less pessimistic than BAML when it comes to the first quarter of 2018. They forecast that the S&P 500 will hit 2,700 by the end of March, which is more than 5% above the index's current level.
Yet while the two firms have differing views on the trajectory of stock market losses, both can agree that whatever weakness transpires, it won't threaten the 8 1/2-year bull market. That, by definition, would require a 20% pullback — a far cry from what either is expecting.
So rest easy, bull market fans. It's not yet time to panic.
Markets Insider
NOW WATCH: Debating the odds of a stock market correction
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