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An overview of Investment Banking (IB), its various divisions, and the skills required to succeed. Learn about Merchant Banking, Investment/Wealth Management, Markets, and Investment/Equity Research. Discover the roles and responsibilities of each division and the structure of Goldman Sachs. No strict degree or experience requirements exist for most divisions.
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and what skills do you need to succeed
rebutting misconceptions
Investment bankers help businesses, institutions and governments to raise capital and execute transactions such as mergers and acquisitions. They also may provide market-making and security trading services.
These are all front office roles. These are the roles with the highest salaries and the best career progression opportunities.
There are also middle office roles such as risk management - the bank doesn't directly profit from these roles, but they help the front office to perform their roles better and drive revenue.
Back office roles include HR, finance, and software engineering, for example. These roles exist regardless of revenue generated and exist in most industries.
Source: Mergers and Acquisitions Article
Let's use the structure of Goldman Sachs (top investment bank) to understand this better.
Merchant Banking is the private equity arm of major investment banks. These tend to be fairly new, and smaller divisions, and conduct similar work to a private equity firm. This work entails using a little equity and mainly borrowed funds to buy a company, and then building it up to eventually sell it off at a higher price. Typically, merchant banking and private equity roles expect candidates to have prior IBD experience. This division works on the buy-side , while all other divisions are on the sell-side.
Investment/ Wealth Management refers to managing the holdings within a client's investment portfolio and trading them to reach a specific investment objective. These clients might be individual investors, or institutional investors such as pension funds, insurance companies, or governments.
Source: Investopedia Article
Markets , also known as sales and trading at other banks, is the division responsible for making markets in stocks, bonds, and derivatives. In this division, you work with asset managers, hedge funds, insurance companies, and other buy-side investors to pitch ideas and buy or sell securities or derivates. People in markets tend to specialise on a product such as fixed income, or equities.
Source: Wall Street Prep Article
Be aware that this is only the structure of Goldman Sachs 2019. Each bank has its own structure, names for divisions, and choices for industry and product groups. It's common to also have sector groups for different geographical regions. Generally, bigger banks have more divisions, whereas a lot of boutiques have their analysts cover all deal types.
Roles of Investment Bankers
According to GS, this is a day in the life of an investment banking analyst:
Great video for more information:
https://www.youtube.com/watch?v=Zyo2adpByRE&ab_channel=PaulPignat aro