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Investment Banking

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Industry Overview

What is investment banking?

Investment banking is essentially all about making money. Big money! These leviathans of the banking industry buy and sell financial instruments (any type of asset to be bought or sold) on the financial markets on behalf of their clients, as well as for themselves (on the proprietary desks). This really is one of the premier areas of the banking and finance world; it offers the opportunity to earn mage salaries, and attracts some of the world’s keenest financial minds.

So how does the investment banking scene work? Well, it’s all about the making the most of the financial markets; buying and selling the assets on offer or that you own at the right time to get the best return on investment (ROI, i.e. the money you get back from what you initially put in).

Businesses and individuals the world over participate in the financial markets. In fact, anyone can trade on the financial markets – the trick is to be clever and make transactions at the right time and at the right place in order to see the best returns on investments. Literally millions of transactions take place every day! Investment banks also have armies of researchers and analysts to monitor asset performance of the markets closely and sniff out potential new investment opportunities.

As you can probably imagine, it’s a rather complex industry. In essence it’s ‘Buy, buy! Sell, sell!’, but in practice experts in this field have to possess strong knowledge of the markets in which they are working trades, the specifications of their client, an ability to analyse a lot of complex (often numerical) information AND identify and assess risks before they make any sort of move. Decisions to buy or sell an asset must be well informed, and guided by a thorough research strategy.

The most well-known job types in this industry are probably the traders and stockbrokers. But it’s not just the people on the trading floor and front office staff who take the glory for making this industry work; there’s a huge network of back office staff who process transactions after they have been made and make sure everything runs through smoothly, not to mention the indispensable professionals in areas such as HR, technology and marketing who hold the bank together on an operational level!

Investment bankers aren’t afraid to be bold and make quick decisions under pressure on when to pounce and buy or sell, or when it’s best to retain an asset, but a well-developed risk strategy is central to success. The majority of roles in this industry hold a good deal of responsibility from an early stage. Graduates are expected to get stuck in! The saying goes that money never sleeps, and there are certainly some long hours and shifts involved in this area! But the long hours and responsibility are rewarded with some seriously good salaries…graduates who enter investment banking earn the highest average salaries (around £45,000!) of all the industries – even more than trainee solicitors!

Why is investment banking important?

Quite simply, trading keeps everything working across the world. It’s an indispensable part of the world economy. Not just companies, but countries depend on trade for the commodities and capital they need to succeed. Countries are not able to produce all of the resources and materials they need and desire themselves, for example rice or oil, and there needs to be some way that allows them to obtain these things. Supply and demand is what drives the world economy; investment banks facilitate this and help companies to make the most of their assets on the financial markets.  

Areas of investment banking…

Investment Research & AnalysisWhere are the best assets to invest in and why? Investment research and analysis roles are all about delving into the markets to source businesses, products and industries to invest in which will provide a cracking return on investment for clients and the bank itself.

Trading & SalesThe traders and salespeople are probably some of the most iconic lot on the investment banking scene. But it’s a far cry from the incessant wailing and shouting down the phone these days! Modern trading and sales is all about risk management, utilising technology and effective client management…and a solid nerve for decision making!

Capital MarketsRoles in the capital markets concern the trade of financial securities (namely stocks and bonds); either as someone conducting research, making the decisions, or working to support the transaction process both during and after an agreement is made in some way.

CommoditiesThis is all about the trading of services and goods to fulfil the buyer’s want or need. The term ‘commodity’ usually refers to basic resources products such as oil, wheat, tea, coffee, rice, salt, sugar, copper and gold. It also encapsulates natural energy resources such as gas and coal, and in more recent times has grown to

ForexOr, if you’d rather, the Foreign Exchange Market or FX, is the market for trading different currencies. The turnover on the 24-hour a day Forex market is literally trillions of pound – each day. Yikes! There are front office, middle office and back office roles in this market that ensure these trades are made and settled in the correct manner. 

DerivativesTrading in the IOUs of the investment world…

Mergers & AcquisitionsIn order to stretch across practically any industry in the corporate world.

StockbrokingStockbrokers facilitate trading in investment banking; they work on behalf of their clients to suss out potential investments for them and then buys or sells for them.

Investment Managementfinal word on when to buy or sell the assets held in a fund; a collection of bonds and shares that belongs to an individual client or group of shareholders.

OperationsAway from the front office action, operations covers all of the departments that keep the bank running, from HR to marketing and technology.

Transaction ServicesThe guys who work in transaction services perform essential support work on the deals the bank makes.  

TechnologyFrom software development for front office trading and analysis of markets to cyber security and infrastructure roles, modern investment banking relies on exceptional technology experts to keep them trading and ahead of the game.

Real EstateLand is big business too, and some professionals in investment banking specialise in providing advice and services to help clients raise clients raise capital for the trade and development of land, factories and other buildings. They help them to buy and sell their property too!

Clearing After a transaction has been agreed on the financial markets, clearing forms part of the post-trade process and includes everything up until the deal had been settled (i.e. assets transferred, payments made and all contractual terms of the trade fulfilled). There are a heck of a lot of deals going through these procedures on a daily basis across the world; and naturally an army of professionals getting the job done!

Relationship ManagementIn such a highly competitive industry which has come through some exceptionally difficult times in the last few years, building and maintaining a strong relationship with clients has never been more important for investment banks. Relationship management professionals liaise with clients, listen to them and network to ensure they are kept with the services they pay for. Relationship management can also cover relationships with other banks and financial institutions.

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Capital Markets

Financial markets where long-term investments are made.

Clearing

Post-trade processes and making sure payments are made.

Commodities

Trading in tangible things.

Derivatives

A financial market for financial instruments ‘derived’ from underlying assets.

Forex

The financial market where currencies are bought and sold.

Investment Management

Advising clients on their investments and making moves on their behalf.

Investment Research & Analysis

Conducting research and analysing the market to help investors make decisions.

Mergers & Acquisitions

Companies buying other companies, selling companies, or dividing up companies.  

Operations

A global investment bank will handle millions of transactions a day. The operations team keeps it all moving.

Real Estate

Helping clients to buy, sell and develop land.

Relationship Management

The face of investment banking.

Stockbroking

The inbetweeners of investment.

Technology

Technology specialists keeping the financial world a-turning.

Trading & Sales

The front office revenue engines of an investment bank.

Transaction Services

Investigating the finances and inner workings of a transaction before a big deal goes ahead.

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