Name of bank/firm where you interned this summer: Credit Suisse: Real Estate Finance and Securitization Group
Your title: Summer Analyst
How did you get the interview that landed you the internship?:High School (The Dalton School) Alumni Internship/Career network
Exactly what did you do to obtain you summer internship interview and prepare for your interview?: I emailed the contact he told me to come in, interviewed me with a group of analysts, and then recommended me to the program. I was given another round of interviews, followed by one more round. I prepared by researching the real estate markets in the WSJ and NY Times, also I looked for news on Credit Suisse and learned about how the CMBS (commercial mortgage backed securities) market worked. I also read the Vault guide to finance interviews, top 50 investment banks, and the Vault Credit Suisse Guide. All my questions were fit based, nothing technical, though I did get a couple real estate related brain teasers.
Finance Industry Overview
A Guide To Basic Financial Literacy
An essential reading for all students interested in working in finance, A Guide to Basic Financial Literacy was written by Jeremy Sisselman '07, now working at Deutsche Bank in New York.
As one of the linchpins of any traditional investment bank, corporate finance generally performs two different functions: mergers and acquisitions, advisory, and underwriting. On the mergers and acquisitions (M&A) side of corporate finance, bankers assist in negotiating and structuring a merger between two companies. If, for example, a company wants to buy another firm, an investment bank will help finalize the purchase price, structure the deal, and generally ensure a smooth transaction. The underwriting function within Corp Fin (as it is often called) involves shepherding the process of raising capital for a company. In the investment-banking world, capital is raised by selling either stocks or bonds to investors.
The sales unit is another crucial part of any investment bank. Salespeople can be the classic "retail broker" or the institutional salesperson. Brokers develop relationships with individual investors, selling stocks and stock advice to customers. Institutional salespeople develop business relationships with large institutional investors, such as money managers, pension fund managers or mutual fund companies. Private Client Service (PCS) representatives lie somewhere between retail brokers and institutional salespeople, providing brokerage and money management services for very wealthy individuals. Salespeople make money through commissions on trades made through their firm.
Traders provide a vital but less “glamorous” role for the investment bank. They facilitate the buying and selling of stock, either by carrying an "inventory" of securities for sale or by executing a given trade for a client. Traders deal with transactions of all sizes and provide "liquidity" (the ability to buy and sell securities) for the market. The money comes from purchasing securities and selling them at a slightly higher price. This price differential is called the "bid-ask spread."
Research analysts follow either stocks or fixed income securities. Analysts who follow stocks make recommendations on whether to buy, sell, or hold those stocks. Analysts typically focus on one industry and will "cover" up to 20 stocks at any given time. Some research analysts work on the fixed income side and will cover a particular segment, such as high-yield bonds or U.S. Treasury bonds. Salespeople within the I-bank utilize research published by analysts to convince their clients to buy or sell securities through their firm. Corporate finance "bankers" rely on research analysts to be experts in the industry in which they working. Reputable research analysts can generate substantial corporate finance business as well as substantial trading activity, and thus are an integral part of any investment bank.
Syndicates and the Fed
Commercial banks loan out large amounts of money to businesses (sometimes banding together with other banks for especially huge loans to issue what is called a "syndicated loan"), but traditionally could not raise money for clients by managing stock or bond offerings to the public. Commercial banks lend out money at interest rates that are largely determined by the Federal Reserve Board (the Fed). Along with lending money that they have on deposit from clients, commercial banks lend out money that they have received from the Fed. The Fed loans out money to commercial banks, which in turn lends it to its customers in a variety of forms, such as standard loans and mortgages.
Securities salespeople can take the form of a classic retail broker, an institutional salesperson, or a private client service representative. Retail brokers develop relationships with individual investors and sell securities and advice to “the average Joe”. Institutional salespeople sell securities to and develop business relationships with large institutional investors - those that manage large groups of assets such as pension funds or mutual funds. Lying somewhere in between retail brokers and institutional salespeople are private client services (PCS) representative, who provide brokerage and money management services for extremely wealthy individuals. A firm's PCS unit is often referred to as its Wealth Management department. All salespeople, no matter to whom they're selling to, make money through commissions on trades made through their firms.
Some firms call them account executives, others call them financial advisors, and still others give them the financial consultant moniker. Regardless of the official designator, firms are still referring a classic retail broker. The broker's job involves managing the account portfolios for individual investors - usually called retail investors. Brokers charge a commission on any stock trade and also give advice to their clients regarding stocks to buy or sell and when to buy or sell them. To get into the business, retail brokers must have an undergraduate degree and demonstrated sales skills. The Series 7 and Series 63 examinations are also required before selling commences.
As a private client services (PCS) representative, one’s job is to bring in individual accounts with at least $2 million in assets. The PCS job can be exhilarating, exhausting and frustrating - all at once. It involves pounding the pavement to find clients, and then advising them on how to manage their wealth. PCS is a highly entrepreneurial environment. Building a roster of clients is all that matters, and managers typically don't care how PCS reps spend their time - whether it be on the road, in the office or at parties - as long as they're bringing in cash. One typically finds a spirited entrepreneurial group of people in PCS, working their own hours and talking on the phone for the better part of the day.
Careers at private equity firms (which raise funds to invest in private companies) are considered plum jobs in the finance world because of the intellectual challenge and potentially huge financial payoffs. Although private equity is a relatively young business -- the first of today's large private equity firms, Warburg Pincus, was founded in the late 1960s -- now there are more than 2,700 such companies worldwide. The Vault guide brings you information on the major players.
Hedge funds are considered an "alternative investment" vehicle. The term "alternative investment" is the general term under which unregulated funds operate; this includes private equity and real estate funds. Mainstream funds are investment funds that everyday investors can purchase; mutual funds are the prime example of a mainstream fund.
Over the past decade, hedge funds have grown tremendously in terms of assets under management. Despite their growth and popularity, hedge funds still remain a mystery to many people who do not understand exactly what they are and how they work.
Hedge funds vary in size from assets under management from as little as $1 million to over $10 billion. Unlike at a typical investment bank, the roles of the employees at hedge funds are not the same for each hedge fund. Someone entering an investment bank as a trader will likely have a similar role to someone else entering another investment bank as a trader. Traders at hedge funds are likely to have different responsibilities, which are usually determined by the size of the fund. At a smaller fund, the trader is much more likely to be involved with the operations of the trade whereas a larger hedge fund would have a separate operations person to handle this element. A smaller hedge fund may have 3- 4 employees whereas a larger hedge fund may employ over 300 people.
While investment banks shift money from one party to another, venture capital firms ("VCs") are dedicated to investing their own capital in new companies in return for a hefty share of stock and future profits. These Venture capitalists are more than financiers; they provide guidance, services and support to the fledgling business, and expect to be treated as partners. While not all VC activities are centered on new companies, and investors can be found seeking relationships with established firms, the majority of the industry concentrates on bringing new ideas to market. The industry is popular among business school students - the intellectual stimulation and potential for tremendous earnings attracts the cream of the crop of MBA programs across the country.
For more information on these and other industries, please consult Vault which can be accessed via your Hiatt NACElink account.