What Do You Do In Fixed Income Besides Bankrupting Your Firm with Toxic Assets?
If you’re reading this, you probably don’t know too much about what you actually do in investment banking and sales & trading beyond a lot of work, Excel, and models and bottles.
Why else would the articles on Mergers & Acquisitions, Restructuring, and UBS LA be among the most popular ones here?
We’re going to fix that today by teaching you all about Trading, what Traders actually do besides gambling and eating a lot of junk food, and specifically what you do in Fixed Income.
This was written by Jerry since he actually worked in trading before, so direct all questions/comments to him.
Types of Trading
“Trading” is a nebulous term, so let’s fix that by discussing the two basic types first: agency trading and prop (proprietary) trading.
There are far more than 2 types of trading, and there’s always overlap between these, but these are the basic categories.
Agency Trading: You simply execute orders for the client – you’re merely an “agent” doing what he/she wants and do not have (much) freedom.
Prop Trading: You are the principal and can make whatever trades you want, using your own money – within your trading mandate and risk limits.
These are the 2 extremes – no choice, and 100% choice. In between is a generic area termed flow trading where there’s some element of agency trading but also some prop trading involved.
Example: in flow trading if the client wants to buy a stock, you can be the seller – and if he wants to sell, you can be the buyer, so you’re effectively acting as the principal there.
Flow traders can also choose to reject orders and generally have more freedom than pure agency traders.
Note: There is a lot of discrepancy and overlap between all these different types of trading, and each firm is set up somewhat differently. These are just the basics.
Equities vs. Fixed Income vs. Everything Else
Flow trading and agency trading refer to whether or not you have clients. The other main category is what you trade – individual companies’ stocks? Bonds? Currencies? Derivatives of those?
There are lots of different groups within Sales & Trading at a bank, but today we’re going to focus on Fixed Income – anything that involves debt.
“Fixed” Income?
Originally, Fixed Income meant that whatever you traded had a “fixed” income stream – think bonds, loans, or anything else based on bonds or loans (derivatives). If it paid a certain interest rate and was redeemed at the end of a specified period, it was fixed income.
But once clever bankers started creating collateralized debt obligations (CDOs) and other fancy instruments that no one really understood, the term “Fixed Income” lost its meaning – all of those were placed into this category, even though nothing about them was “fixed” other than the potential to destroy the economy.
Prices of these securities are affected mostly by interest rates set by the Fed and by the credit quality of the corporate and government issuers.
FX and commodities traders work closely with those in Fixed Income and they are often classified in the same group, even though nothing about exchange rates or commodity prices is “fixed.”
Types of Fixed Income Trading
Groups are usually divided by the types of instruments you trade – whether they’re relatively “safe” government bonds, more risky corporate bonds, or even more exotic securities. Of course, occasionally traders will venture a bit out of their own turf to trade other instruments if it is allowed at their firm.
Government Bonds
This includes US government debt (notes, bills, and bonds, known as US Treasuries), Euro-denominated German debt, and yen-denominated Japanese government bonds. There are also others like inflation-protected bonds, repurchase agreements, and bond futures.
Usually you only trade the government debt of one country, and if your team is big enough you might specialize in a certain area like 5-10 year bonds.
Although government bonds are “safer” than other fixed income securities, the job itself can be stressful because these markets are constantly trading – even in off-market hours. And that means that you need to follow these markets, even when you’re out of the office.
Since there’s so much liquidity, you can take huge positions without too much trouble (unlike, say, buying 20% of a company’s stock where you would have to disclose it). Traders who bet on the US lowering interest rates in 2008 made small fortunes by betting big.
The Work Itself
You spend most of your time as a junior trader predicting changes in the shape of the risk-free interest rate curve, because that is the #1 factor that impacts government bond prices.
There’s not too much valuation work; usually you just do simple DCF calculations in Excel or on Bloomberg to get prices – it’s not like investment banking or private equity where you use many different methodologies to value companies. Your main concern is DV01, or how much you make or lose for every 1 basis point move in interest rates.
If you like macroeconomics rather than analyzing individual companies, government bond trading may be good for you.
Corporate Bonds and Credit Default Swaps
Corporate bonds are just like government bonds, except companies issue them so there’s always the chance of default – and the yield is higher to compensate for that.
If you’re working with smaller or non-US/European companies, you need to watch the news constantly to stay on top of things – but compared to government bond trading there’s less emphasis on macroeconomic happenings.
Credit Default Swaps (CDS), meanwhile, are like insurance on bonds: they’re derivatives that let you separate the risk of default from the risk of interest rates falling, so you can effectively “insure” yourself against losing your investment.
Most banks combine these two groups, since the value of corporate bonds and credit default swaps are closely related.
The Work Itself
You spend most of your time analyzing the credit profiles of different entities and weighing the bond yield against the risk of default – so you follow both company-specific and macroeconomic news.
You analyze credit profiles by looking at the financial statements of a company, the sector as a whole, and companies’ credit ratings.
Some say the work is more “interesting” than government bond trading because you’re working with different companies and because there are more trade possibilities – buying one company’s stock while shorting competitors’, for example.
These days it would be tough to get a job in this division due to the financial crisis and the sheer number of credit teams that have been laid off.
CDS may become more “standardized” on an exchange, which might improve liquidity and transparency – so opportunities there may return in a few years.
Structured Credit Trading
Of the different Fixed Income groups here, Structured Credit Trading is the most different because they don’t spend all their time checking the market and keeping up to date on the news.
Instead, they price and package complex financial products in Excel and then sell them to investors.
They don’t make trades every day, but when a trade does happen it could be for an amount of hundreds of millions or billions of dollars – compared to the other two groups above, where the size of individual trades is typically much smaller.
Although Structured Credit Trading is the most “quantitative” of entry-level Fixed Income jobs, you don’t need a Math Ph.D. or anything because you don’t actually create the tools used to price complex securities – that’s for the Ph.D.-level quants. You just need to understand the tools and how to use them to create your own products.
You don’t spend much time looking at individual companies, since most of these “financial products” involve hundreds of companies.
The Work Itself
See above. You spend a lot of time in big Excel spreadsheets figuring out how to price different securities. This is more quantitative than what you do in investment banking or private equity – in those fields, you mostly just do addition and subtraction, and sometimes multiplication or division if it’s super-advanced.
Right now it would be very difficult to actually get into Structured Credit Trading because of the financial crisis – most groups have been hit hard, just like everything else related to credit.
However, in the long-term there will still be possibilities here, so it’s something to consider if you’re still a few years away from looking for internships or jobs.
Exit Opportunities
So now you might be wondering, “Ok, so it sounds like a lot of this is repetitive and like you do a lot of grunt work as a junior trader – surely, the exit opportunities must be better, right?”
If you go into investment banking, you could go into a wide range of different fields afterward – private equity, hedge funds, venture capital, corporate development, or something completely different.
In trading, though, you only have 2 options: stay in trading (a similar “up or out” structure exists as in banking), or move to a hedge fund or prop trading firm.
That’s because the skill set you develop is so specialized – valuing companies and performing due diligence is useful in a lot of different fields, but knowing how to trade CDOs would be completely useless at a startup or venture capital firm.
Typically, as you advance you become even more specialized – so if you start out trading corporate bonds for European telecom companies, chances are you will go to a hedge fund that also trades corporate bonds for European telecom companies. You get pigeonholed very quickly as you move to the buy-side, which is one reason I chose to leave and start my own firm instead.
That’s not to say that you can’t move into other fields in finance if you start out in trading – but it is very rare to see a full-time trader move into, say, private equity or consulting following several years on the trading desk.
Up Next
Equity Trading, Day(s) in the Life of a Trader, and more…
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Thanks for a good post! Is there any chance that you can do a similar for asset management? Until then do you have any tips for places like your great blog to find useful info about that field?
Unfortunately there is almost no good information online on finance / asset management specifically… I haven’t seen other informative websites on the topic.
When I started this site, there was literally nothing else about how to get into i-banking online.
Great Post Jerry! You should write more articles about this topic.
“That’s because the skill set you develop is so specialized – valuing companies and performing due diligence is useful in a lot of different fields, but knowing how to trade CDOs would be completely useless at a startup or venture capital firm.”
This comment is misleading considering corporate bond traders, especially on desks that focus on fundamentals, do exactly the activities you mention as being “useful” – analyzing cap structure, likelihood of cash flows, borrower cause, sources of repayment, etc. which are directly relevant to the venture capital, private equity, and corporate development roles you referenced.
If anything, the corporate bond roles have MORE RELEVANT skill sets than investment banking because financial fundamentals are the entire focus of the position, versus the vast amount of pitch work included in an investment banking analyst’s job.
You could this way distinguish between momentum/derivatives traders and corporate securities “traders” (though it is probably more accurate to call them asset/portfolio managers) so as not to misinform people considering both of these roles.
I see what you’re saying, but empirically there are still VERY, VERY few traders who go into anything besides more trading – even if the skill set is relevant, the perception is that it’s not.
Also, a large part of what PE and VC firms do is review CIMs/OMs sent by bankers and then create their own models and valuations of companies based on that… which traders don’t really do.
So there is some merit to what you’re saying, but when all is said and done, 99% of traders stay in trading.
So many people get into trading every year and very few are really successful. Where do unsuccessful traders go? I guess all cant go to hedge fund.
Usually they leave the industry and move onto something else if they’re unsuccessful… hard to do anything in trading if you can’t make money.
“But once clever bankers started creating collateralized debt obligations (CDOs) and other fancy instruments that no one really understood, the term “Fixed Income” lost its meaning – all of those were placed into this category, even though nothing about them was “fixed” other than the potential to destroy the economy.”
Really like this passage ;). Anyway great post. Definetly gives a good overview of Trading. Good Job Jerry.
What about structured products/MBS trading? This is (was) one of the largest facets of fixed income trading at banks.
Well Structured Products are covered a bit above under Structured Credit Trading. Will see if that can be featured more in the future
A bit of a tangent question, but where do you come down on letters of recomendation? Should one ask for them from internships / use them when applying?
In general they are not necessary if you’ve just had an internship and are interviewing around… no one really looks at them. They are more helpful for buy-side but you don’t really need a letter, just word from your MD is enough. Letters are only required when applying to business school.
Is there a large difference in compensation between the different types of traders?
I would assume entry level traders make similar salaries across the board (though I’ve heard of unique cases of some traders making big money straight out of college), but what about earnings potential as one moves up in the trading world? Does it vary greatly depending upon the kind of trading one does?
P.S. Unbelievable site by the way!
It varies mostly by your individual / group performance as you move up – and yes, variances could be enormous depending on what you’re trading and how you’ve done.
At a bank as an entry-level trader you’re never going to make much, but there are some places on the buy-side where you can make a lot if they pay you a % of your P&L… but they never do that at a bank when you first start.
Off topic question. What are your feelings on Equity/Debt Capital Markets? I have heard so many conflicting things about it. Is it a nice alternative to IB connecting s&t to IB, is it simply a division within IB, or is it even something you should never get into?
Thanks, love the site.
It’s a division of IB and has almost nothing to do with S&T – you work with clients and raise money for them, you don’t trade securities.
It’s just a different alternative to M&A or other groups in banking… not necessarily better or worse, just different.
Great post. I’ve always wondered specifically what S&T people does on the job.
Two small questions: would doing a major in a more quantitative discipline like applied math in economics or operations research helps? and I’m currently holding a consulting internship at a brand name (non MBB though) consulting firm. would this be seen as a turn-off for S&T or can I spin it in some way that it benefits me? I’m still a freshman turning into a sophomore in any case. Thanks!
1) Having a quantitative major helps with S&T, but you don’t really need it – just need to show that you are capable technically and get through all the probability questions they’ll give you.
2) If it’s just an internship and you’re that young, you can always spin it so I don’t think it will hurt you at all.
M&I – thanks for the response – still a great post, gotta say I am a big fan of this blog.
What’s the typical compensation like for entry level S&T? What about Mid-level? Is it tough for recent grads to break into S&T? I met a few traders while in NY and they really loved what they did. They described their work as Wealth Management, but on crack (meaning with a much larger investment amount — typically on the institutional end). What’s a typical week like for a person in Sales & Trading?
Entry is about the same as for IBD. Mid-level it varies widely depending on how well your group does / how your own P&L looks… you might make $0, or you might make millions. It’s far more variable than IBD.
Yes, it’s difficult to get into S&T because there are fewer positions to begin with and the economy hasn’t helped things – still possible, but definitely not any easier than getting into banking these days.
Typical week: that’s quite difficult to answer in 1 sentence, but that will be covered in the future. The short answer is you have a few hours of free time at night on weekdays and have weekends free.
Thanks for the response! I’m addicted to your site…..Same as IBD — so about 50-60K Base with a nice bonus?? Where do you suggest looking to break into S&T? Corporate web-sites or recruiters?
yes assuming you’re at a large bank. To break in, start picking up the phone, building relationships, and calling people – corporate web sites / recruiters are 100% useless.
Someone earlier mentioned Debt/Equity Capital Markets and you said it was just another division of IB. Does this mean that analysts in DCM/ECM have a good chance of moving into PE/HF or are their exit opportunities not as great?
ECM it’s harder to PE because you don’t do much technical work. DCM people definitely move to PE because they work with debt a lot (or at least, they used to). ECM it’s more common to go to hedge funds or other opportunities that don’t require as much modeling.
Where do you suggest looking for fall internships in trading? I graduate next year, I’d like some relevant experience when it comes to trading, just to have something on my resume when the fall comes.
You mentioned corp web sites being useless…does that mean that when it comes down to it, applying online for FT in S&T is completely useless?
Yes, online is typically useless. You either go through on-campus recruiting at a top school, or if you’re not at a top school you cold-call and network until you get interviews. There’s a list of regional boutiques on WallStreetOasis and I would start there in terms of where to look and where to cold-call. Anything submitted through a website is ignored because the barriers to entry are too low and they get thousands of people like that – you need to get on the phone and start talking to people.
Does income figures for Institutional Sales vary? Also what are your general thoughts on jobs like Institutional Sales at a pretty solid boutique bank? I am scared of the fact that alot of it can be commission based, but I do hear that you can make a ton — is that true for an entry-level Institutional Salesman?
Not too sure on Institutional Sales but the bonus probably varies a lot.
At the entry-level I think the earnings potential is probably a lot lower – anything commission-based usually limits how much you can make if you’re just starting.
Heyy,
What would be the difference in Pay and Hours between Investment banking and Marketing (Sales, Trading and Research) at JP Morgan? Marketing is supposedly a key area of the deal making process, whereby you actaully create the deal… but do you think the pay and hours reflect this?
I’m not sure I understand what you mean – those are completely different areas, and investment banking doesn’t work with anyone in Sales/Trading/Research.
In general pay is about the same at the entry level, but research may be a bit less… the hours are significantly greater in banking though.
Sorry, That was a terrible question: i’ll define it further!
Im interested in applying for JP Morgan S&T, and in perticular the marketing role within that, but im concearned that the long-term career prospects would not be as good as banking. So would the compensation be less for say a M&A Vice President than a Marketer at the same level?
The difference is that S&T generally gives you less flexibility… I’m not sure 100% on compensation for that role specifically, but if you do banking then you generally have more options in the future. Compensation in S&T at the VP level and compensation in M&A at the VP level may not be that much different, but someone in M&A could more easily move into other fields.
Hey, i got a pretty laymen question abt sales. I saw many posts and articles covering traders’ life online, but very few on sales. Why is that? And what do sales do on a daily basis, i mean, what do they sell exactly, research ideas, trade ideas? Possible exit option for sales?
Thanks! BTW, this is one of the most informative sites on IB i’ve ever seen:)
Its just because Sales is less common and seen as less “sexy” than trading. People in sales… sell securities to institutions and other investors and help win new clients for the bank.
Great post! … but I’d like to ask some further questions since I don’t know when this article was written and under what market conditions.
In such an economic downturn and amid the fierce competition for trading positions, would it be still true that companies don’t especially look for quantitative backgrounds such as engineering, math or computer science?
Also, I heard that interview problems are getting harder and harder for most internships and full-time offers, and having taken a couple of probability classes won’t save you. My friends who took the 1st and 2nd round on-campus interviews last year told me that recruiters asked for option pricings and some more difficult questions. (they might have exaggerated a little, but still..)
This was written in summer 2009. It still helps to have a quantitative background for trading, though you don’t necessarily “need” it to get in.
Interviews have become more technical, but I really doubt you would get Calculus-level questions in interviews… you just don’t use that kind of math in trading unless you’re a Ph.D.-level quant.
I’m interested in a career in one of the other sectors within investment banks (i.e. asset management, technology etc… other than investment banking itself) and wondered if you had any information on the role, and average salary & bonuses?
I don’t have exact numbers on those, but in general they will pay less than investment banking / sales & trading. What you do varies a lot by which specific role you want… running more articles on this soon.
I have heard that the PhD quants are seen as inferior to the rest of the front office (sales/trading/structuring) and end up working longer hours for lower pay, albeit the job has slightly better stability than the rest of the FO – is this true, and if so, why do such highly qualified people want the quant job?
Not sure on that one, though I wouldn’t be surprised about lower pay given that they aren’t “directly” responsible for income / returns. Highly qualified people go after it because it’s a much better alternative than sitting in a lab or being in academia forever.
I guess M&I, why would those people not go directly to S&T/Structuring then?
It can be difficult to get into those if you have a Ph.D – might be over-qualified
It really is amazing that someone can be over-qualified for a higher paying, more prestigious job… It seems very counter-intuitive to me. What about getting an MBA – do you think that can wash the Ph.D. off the books or is it a permananet blemish on the resume?
An MBA would help. The problem with a Ph.D. is that it signals you might be too “academic” for finance, which has little to do with theory and is all about how good a talker you are and how much money you can make.
Any chance of having anything on the “Sales” aspect of Sales and Trading? There’s lot’s all over the web about Trading (the busy rooms and shouting make for far more interesting movies) but nothing about Sales.
What do Sales people do on a day to day basis, pay(?), exit oportunities, lifestyle…
I’ll see what we can add on this topic – not as many people do Sales so there’s not as much information on it.
I agree with Andrew—would love to see more stuff on Sales—-Lots of Asset Management sales jobs out there, and I can imagine they would provide great transitions into the IB, especially when transferring internally at larger banks!
Hi Brian,
What are your thoughts on agency trading in a place like Bank of NY Mellon in terms of pay/exit opportunities. Will I have a shot at the biggest hedge funds or will that be out of my league with BNY. Also, if I am doing a summer internship in agency trading at BNY, is it possible to leverage that into full time trading at a BB?
Thanks. Love your site!
The problem is that HFs are looking more for prop traders from large banks, or from other HFs. It’s not a bad opportunity but it will be difficult to get into large hedge funds. Moving to a bulge bracket trading job would be easier.
Hey, are the tactics of getting into S&T different than IBD or would you recommend the same networking techniques etc as for banking? I’m coming from a semi-target with little to no S&T recruiting, but some IBD, so I network heavily.
I’ve heard its possible to make the switch from IBD to S&T, but not the other way around. Would having this dual background be very attractive if I wanted to eventually move to a HF? More so than having just either/or?
For being an undergrad, I have, and will further build, my finance skill set that relates to IBD, i.e. I will have some decent modeling experience before I graduate, and have always been very strong in math. Will this help me at all getting into S&T, or is there any other skill set I can pick up that would give me a similar leg up as modeling & val would for IBD? I play plenty of poker and invest my own money.
Say I went from IBD to S&T at a BB and worked at both for two years. Would I be able to get back into IBD or PE because I had the analyst experience, or would it be overshadowed by the more recent S&T experience and make it seem like im undecided and bad when it comes to commitment?
I know thats a lot to ask, but thanks, you’ve been a huge help to me.
http://www.mergersandinquisitions.com/sales-trading-vs-investment-banking-part-1-recruiting/
is ‘research sales’ considered part of S&T? Or when people refer to sales do they mean sales-traders? Are sales-traders the only salespeople that get bids for customers?
“Research sales” may be part of S&T depending on the bank but they don’t really do the same type of work as traders… it’s closer to sales. Traders are the ones that actually get bids and make trades for customers based on what they want
so basically the research salespeople pitch ideas to the buyside PM’s who then in turn get their traders to call the bank’s traders when they are ready to buy/sell?
Again, not an expert, but yes, that seems accurate.
Do you get the impression that cash equity S&T is looked down upon by the rest of the bank as being inferior and something you do if you can’t get anything “better”? I tend to be more gravitated towards cash equities than fixed income, but it’d be tough to be looked down on, if that’s the case.
Honestly not sure about that one but I don’t think there is a huge difference
Do you think it’s possible that fixed income trading will be replaced by computers like what’s happening in equities? Or is it not possible since they trade differently? Is there a consensus on this at all? Thanks again.
Not really sure on that one, but it’s definitely possible because everything is becoming more and more automated and computerized. But it may not reach the level seen in equities currently.
Hi Brian,
Great post as always. Just a quick question on career advice – I got an internship offer at a REIT, and wanted to know how it compares in terms of breaking into IB in the future than internships in other industries – i.e. consulting/equity research/(fill in the blank).
Thanks!
REIT is good and probably on par with consulting / equity research. Basically the next best thing you can get outside of banking or PE.
I’m currently in Structured Products Sales and have the opportunity to move over to S&T, however after doing some research, seem’s like SP may have more exit strategies than S&T, and in the long run, the pay in SP is just as good as S&T. Thoughts?
Not really sure on that one – I think either one works. Don’t know much about structured sales firsthand.
M&I, big fan of your site. I did an internship last summer on the trading desk of a mid-level broker/dealer on the equity side..I have an upcoming interview for a junior trading position on the finance desk in fixed income, was wondering if you had any words of advice/crash course on this material? Thanks in advance.
I don’t know much about trading / trading interviews – I would listen to the recruiting / interview podcast we did for some tips:
http://www.mergersandinquisitions.com/sales-trading-vs-investment-banking-part-1-recruiting/
Aside from that, they will ask the usual questions about what a bond is, basic bond math, the fixed income market, and so on.
Great site. My question also relates to sales (institutional equities sales for example). How does the pay compare to trading, particularly bonuses? Does it make a difference if it’s at a big shop, or a small specialized firm (niche securities/region etc).
In general the pay is less for sales because you will only make a very, very small % of the trade commissions that you bring in. The max might be $1 million up to a few million per year, whereas top traders might make tens of millions. The podcast here addresses pay in S&T:
http://www.mergersandinquisitions.com/sales-trading-vs-investment-banking-part-2-lifestyle/
Are market makers considered flow traders?
Are market making and prop trading two very different things?
Yes, market making would be considered flow trading. Flow trading is somewhere in between agency trading and prop trading, you do have more control than with agency trading but not as much control as in prop trading
Then are brokers considered agency traders?
Yes
Thank you!
Dear Brian and Jerry,
Could you tell me a little bit about how market making works? To my knowledge, market makers basically make money off the spread between bid and offer. So when a market maker sees a bid that is slightly above an offer, does he buy the security, actually hold it for a short period of time (a few seconds) and then sell it to the bidder?
Does the market not work without the market makers? That is, can’t the traders just trade securities among themselves without the spread, without going through a market maker?
Also, do market makers have to pay commission to the brokers? If so, wouldn’t that make the spread even greater and disadvantage the traders into an even more of a negative sum game?
I asked the other day whether market making could be considered prop trading. The reason I asked was that most of the top “proprietary trading firms” actually do mostly market making. If market making is flow trading, why is it that these firms call themselves prop trading firms? Is it just because everything is done with their own money?
I honestly do not know much about it and Jerry is busy with moving back to the US / working / business school at the moment – I don’t think market makers are 100% necessary but they may make things run more efficiently in certain cases. Not sure on the commissions and other questions but if you ask on WallStreetOasis you may get more informed views from anyone working full-time in trading.
Hey,
I know that in fixed income trading, you are reqiured to be very sharp at math (solving arithemetic in your head very quickly), if so, do you know of places where I can find such examples, and prepare myself for these questions (for interviews/others). Also, I heard people use differential equations for modeling? What kind of field of fixed income trading require such quantitative math skills. Next, what classes would you recommend me take, if I wanted to get into fixed income trading (I’m going to be a junior-undregrad).
I’m not sure specifically what is required – you may want to look in the WallStreetOasis guide as it has example trading interview questions. For trading if you want to do something really quantitative then try to do financial math classes / go beyond calculus (I don’t know anything more specific than that – you might want to ask on the WSO message board)
Hey M & I,
What banks or prop shops specializing in Structured Credit Trading? I have heard most Chicago shops are about fixed-income but I have rarely heard about Structured Credit Trading? Is there a direction you can point me at as I should look into? Thanks.
Not sure about that one – I would ask on WallStreetOasis and see if anyone there can point you in the right direction
Do you know anything about Goldman’s securities division counterparty risk team? Is this closer to s&t or credit risk management? If it is the latter, what are exit opps like, and how do business schools view credit risk management (assuming I wanted to go to a big 10)?
No idea there, sorry – may want to ask on WSO. Risk management is viewed as below IB/PE/HFs but above something completely unrelated like marketing.
Thanks for yet another great post! In your opinion, how has algorithmic trading and high frequency trading affected the trading division? Would you say the everyday work of a trader has now changed as a result?
http://www.mergersandinquisitions.com/automated-trading-strategies/
Hi, probably off-topic also, but could you recommend any good sites for Excel formulas, like financial formulas and such? Preferably tutorial-like. Thanks very much
http://breakingintowallstreet.com/biws/excel-financial-modeling-fundamentals/
Good stuff, thanks for taking the time to put this aticle together.
How does the bonus structure work for flow traders who do not have PnL? Also what does the future look like for sales traders?
It would probably be commission-based, so you’re limited by how much in trades you actually push through. Not sure about the future for sales traders, but at least they are in a better position than prop traders at banks now.
Hi. I am Chartered accountant (like CPA in US) and a CFA working in financial reporting and regulatory reporting profiles in a Invt bank in India.
I wish to move into front office side, preferably trading, on fixed income securities, even sales is fine if required. I have spend 2.6years under my current profile and this is my 1st Job. I am just 25.
Can you please direct me how can I explore into these areas and what would be the best way forward. Thanks.
There’s a good interview with a reader in India who made a similar move here: http://www.mergersandinquisitions.com/investment-banking-india/
Hi,
I would like to pursue a career in FX prop trading. I come from a totally unrelated field with a comletely unrelated degree (from a very prestigious university though). I started trading forex on a demo account and will switch to live trading soon. I am very profitable, normally double my account every 3 months using a low leverage. Do you think I may approach banks in 6 or 12 months and discuss employment with them if I am consistently profitable? Do they care more about their seemingly inflexible requirements or they care about track record and potential profitability? Thanks for any piece of advice you may have.
Banks would be tough if you don’t have internships. I would go for small prop trading firms instead as they care more about results.
Hi Jerry. Thanks for all the information and congrats on the Wharton school. I actually had a question regarding the your interview with Brian regarding Investment Banking vs S&T. In that interview, you mention multiple times that you recommend that we read books on trading, as there are many good books on trading to read. Are there any in particular that you would recommend to a junior seeking an internship in S&T for an investment bank to gain an insight into trading or even expand one’s knowledge? thanks in advance.
I don’t know offhand; Jerry is busy with b-school at the moment so he hasn’t been on here lately but I would start here: http://www.wallstreetoasis.com/forums/good-books-to-read-to-prep-for-st-interviews
Hi Brain. According to you will it be more easy to get into trading via IBD or Research. Also challanging would it be to move from sales into trading. Thanks.
PLz read 2nd line as “Also how challanging will it be to move into trading from sales profile”. And finally what is the average age by traders retire or are asked to leave..
About the same b/c research has fewer people but also interviews fewer people. Sales to trading is not terribly difficult. Most traders are young, under 35.
Hi there. Could you plz give me perspective as to how different below 3 roles would be:
1. Private Equity
2. IBD
3. Merchant Banking
Also suggest what could be the next logical area to explore, once someone has spent 3-5 years into these profiles. Thanks.
http://www.mergersandinquisitions.com/finance-investment-banking-jobs-tradeoffs/
Hi Brian,
I am based out of India. Can you suggest some noteworthy financial modelling course providers here. Also is it feasible to undergo online cources and which one’s would you recommend in that catagory. Thanks in advance..
Not sure offhand but there are some tips related to India here: http://www.mergersandinquisitions.com/investment-banking-india/
From someone hoping to gain some experience to enter the energy & environment industry (sustainability, environmental policy, research) – out of two offers, one from Citi’s Commodities S&T in Houston which is a rotational program, and one from Accenture’s Management Consulting Development Program, which would you suggest?
In terms of skill building I think Accenture wins, but would love your opinion.
Depends what you want to do in the industry… trading would help you move into energy trading at big energy firms and similar roles but it’s definitely more narrow than Accenture so if you’re thinking about other things that’s a better bet.
hahaha :]]
hanks for an awesome thread.I have another question rearding IS. I am a Chartered accountant and worked in transaction services and corporate finance at a Big 4 firm prior to a midmarket German bank.
I was wondering what the best exit opportunities will be. Going into Leverage finance or Institutional sales. I know its 2 completely different things. In leverage finance I will improve further on my modelling skills and in future work closely with Institutional sales and PE houses. Whereas with Institutional sales I will gain contacts on the bank and Hedge fund side.Which may be interesting on the fund raising side of things. I am an extreme extrovert, and have decided to go for IS first, keeping Levfin as a viable alternative.
I would really appreciate your comments
Thanks
JD
They’re completely different and it depends what you want to do… IS would lead into other sales positions, whereas with LevFin you have a broader set of possibilities. So if you’re certain you want to do sales, IS is better, otherwise LevFin might be better.
Thanks for your response. I have seen many articles on the move from M+A or Levfin to PE or prop trading to Hedge Funds. Are you aware how fund raisers and IS work at a Hedge Fund or PE firm. Where do they recruit from, and how difficult will it be to move into that sector? Thanks again for an awesome website with loads of usefulls stuff.
Mostly they come from investor relations firms, funds of funds, sometimes from ECM at banks as well. It’s easier than “real” PE or HF to get into because it’s less competitive.