Merchant banking (2 Viewers)

[gm]

hehe you keep picking up my spelling mistakes... i always rush when i type these messages......

How much do you manage in your IM business?

I kinda do the same, but only with family money... My father's a property developer, he handles all our property investments/speculation...

I basically jointly manage the family's stock investments, and i trade derivatives and CFDs quite freely... I occasionally look at Risk Arbitrage situations.

I'm more interested in speculation in markets other than stock than in investment... Relates to personality type i guess...

I'm hoping to head to London and work for probably Goldman Sachs, hopefully trading in FICC (fixed income, currencies, commodities). I like the idea of emerging market fixed income...

After that, i'd like to go in the hedge fund direction...

GM

 

[alman]

i decline to say how much i manage...but its a considerable amount (lets say you could buy some houses with it)....i dont like property because i dont really understand it (its outside my circle of competence completely - unless a property fund is selling below NTA which is certainly worth a look)...im not into derivatives of any sort mainly because its just too complicated..im more of a company person - stock investments are the way to go for me...

for emerging markets, i have to say that south america might be a big thing in the next ten years..but thats only on face value...i dont have anything there...

im interested in making a local berkshire, if i can find a public company to take over in the future...

 

[Minai]

Originally posted by Merethrond
Secondly, is membership of the Australian Society of Certified Practising Accountants or the Institute of Chartered Accountants in Australia helpful in the banking sector at all? Thanks.

It's helpful for any area of business, as CA/CPA doesnt train you to become an "accountant", it trains you to become an all-round business manager

 

[SoCal]

Originally posted by gm
Hey,

sorry i missed your questions...

Quant finance involves alot of maths, maybe a financial model... business finance is more related to accounting....

I see, thanks.

Originally posted by gm
For the memberships of the associations...

They don't mean much... in IB if you perform well, you're good.

Just get really good marks in what you do, try and network, show initiative, maybe even do some post grad SIA....

So you don't think that a Senior Associate membership of the Australasian Institute of Banking and Finance would mean much. Well that will at least save me some time. By the way, what does IB stand for? Sorry for my ignorance.

Originally posted by Minai
It's helpful for any area of business, as CA/CPA doesnt train you to become an "accountant", it trains you to become an all-round business manager

Oh, thanks for that Minai. I might do the subjects to qualify for membership of CPA and entry to the Professional Year of CA, instead of doing the subjects of Senior Associate membership of the Australasian Institute of Banking and Finance.

 

[gm]

Hey sorry about the delay, i've been busy...

Becoming a CA would be good if you wanted to change careers later on (IB may be too stressful), i think the banking and finance thing wouldn't be all that great.

Associate membership of the SIA might be good, which you can get after you do their grad diploma.

If i had to pick two majors for IB i'd choose finance and accounting, other useful ones are economics, econometrics (i think). maybe statistics...

Good grades are the most important thing.

Have a look on macquarie banks website, the career section...

You seem quite determined, which is very good... Just keep up your GPA in uni... Apply for banks, if you get rejected, work in a different part of the bank or do some postgrad work (SIA).

There are also like 10-15 different large investment banks to apply for, which also includes the Corp finance side of normal banks (NAB, St George etc)


Another thing to think about, will you be happy doing 100 hour weeks doing DCF valuations of companies in excel?

There are other options like trading stocks/bonds/futures etc.


IB = INVESTMENT BANKING

GM

 

[alman]

Will I be happy with doing DCF valuations? Most definitely...but the more important thing is using them properly

besides, i use DCF all the time for my valuations, as part of my analysis

i'll quote from Berkshire's 2004 AGM:

"When the [long-term] growth rate is higher than the discount rate, then [mathematically] the value is infinity. This is the St. Petersburg Paradox, written about by Durant 30 years ago.

Some managements think this [that the value of their company is infinite]. It gets very dangerous to assume high growth rates to infinity thats where people get into a lot of trouble. The idea of projecting extremely high growth rates for a long period of time has cost investors an awful lot of money. Go look at top companies 50 years ago: how many have grown at 10% for a long time? And [those that have grown] 15% is very rarified.

Charlie and I are rarely willing to project high growth rates. Maybe were wrong sometimes and that costs us, but we like to be conservative."

but yes, there are a lot of choices available....even private equity funds (but this is more reliant on connections within the industry..)

 

[gm]

Private Equity is probably the hardest area of finance to get into.

For people that don't know what this is. A PE fund is an investment vehicle, where generally only rich people can invest in. The vehicle looks for undervalued companies, buys a large stake in the company and then attempts to add value, whether through firing management/financing new technology etc.

All this is done with a view to selling for a profit 3-5 years down the track. Returns can be in the hundreds and even thousands of percent.

Generally the PE companies in Australia to work for are ones owned by the top of the rich list, Kerry Packer etc etc.

To get into this, people probably study Comm/Law, work in mergers and acquistions for two years, maybe studying some post grad. AND then majorly network with the managers of PE funds...

PE can make you rich

GM

 

[alman]

Also note the idea of "networking". That's the most important part of the business world.

Whilst PE can make you rich, this cannot happen unless you have your own money in the fund.

The recent round of IPO's are a good example of PE funds selling their acquisitions.

 

[gm]

Hehe we sound like finance professors in some of these posts...

In the book "Masters of the Market", there's atleast one interview that i remember, that is with a guy in PE.

There's also an interview with Ron Brierley, the only surviving Corporate Raider of the 80s...

GM

 

[alman]

I havent gotten around to reading that book. I've been busy reading other books-not necessarily about the market but more thinking, philosophy types.

But finance professors? that may be taking it a bit too far.

Ron Brierley-I hear good and bad things about him. I think he's a more relaxed person these days. But he does know a hard bargain when he sees it, especially with his right-hand man (ive forgotten his name but it'll come back; he has really messy/afro style hair!)

 

[dude431]

GM, I am impressed with your knowledge of the industry and appreciate your insight into all of this.

I recently attended a seminar held by the SIA, asking exactly the same question as Merethrond, is a combined law degree essential to work in the large financial institutions in the area of finance?

Now, from what I've read, you basically say its not essential, but it would greatly help. Now the guy I spoke with, who has a recruitment role, said that law is good to have but by no means essential, and most financial institutions rather a candidate have honors and a D. plus average on their BCom degree, along with an SIA qualification.

So would you say that this guy is somewhat incorrect in that he says a law degree isn't too important? That is, to get into investment banking/etc.

Similarly a young woman working in Macquarie Bank's Corporate Finance group only had a BCom (Honours) and an SIA. She also down-played law, saying that if you've scored high enough in your BCom degree, most financial institutions will train you to understand the laws anyway.

I'm really unsure as to whether I should add a /LLB component (or at least try to, lol). See, if you do a BCom/LLB at say USYD or UNSW, wouldn't it be extremely difficult to get first class honours in the BCom component?

 

[alman]

Its been a very, very long time since I've actually posted a message (have been reading though)..I do combined law at USYD and i will find it quite helpful in certain areas (such as taxation, stock exchange, etc.). I intend to work for myself in fund management I'd say that SIA is useful within Australia. Overseas, im not sure how others would perceive - i guess that to work overseas would mean being transferred by a merchant bank (or that sort of thing)..

Its kind of funny too - i was reading the AFR (as you usually do) and read that many banks are now hiring Arts graduates. Would that imply commerce is obsolete? Im not saying that but it's just a thought....

In reality, the choice is up to you. To get into investment banking requires an unimagineable amount of work...I think the whole atmosphere is tense, which is why the average lifespan is relatively small.

But yes, read more about it - it cant hurt your opinion. You may even not like it after a while. For some sort of idea, read Liar's Poker by Michael Lewis. Its a good book at the world of merchant/investment banking and how it can go awfully wrong.

 

[dude431]

Well, I'm not aiming specifically for merchant banking, as I haven't yet decided on where I want to go (I'm not even in uni yet, lol).

Its kind of funny too - i was reading the AFR (as you usually do) and read that many banks are now hiring Arts graduates. Would that imply commerce is obsolete? Im not saying that but it's just a thought....

Funny you mention that, I read it too. It was something along the lines of BCom graduates being too 'by the book' and arts graduates being more creative, thus bringing fresh ideas/etc. into the workplace. Or something like that, it was last months issue of AFR Boss. That won't convince me to do arts though...

 

[alman]

Oh you'll be surprised...Arts can be quite useful (philosophy can provide a quirky but good view on things)..There are successful funds managers who did Arts at uni, especially in America - where they manage money to the tune of tens of billions of dollars (example: the manager of Legg Mason Value Fund in America and i forget his name!). Really, i think arts would be a more general and (dare i say) common sense type of course. It was in the BOSS magazine but i have read it somewhere else too...trying to put my finger on it..

 

[gm]

Sorry guys, i've been busy for a couple of weeks.

dude431, I take it you were at the SIA career seminar? I was there as well.

The Macquarie Bank chick, she'd studied her honours commerce degree part time while doing an accounting cadetship. So she ended up with accounting experience (she also studied the grad dip from the SIA).

Law is of course not the only way, i'm only saying it really gives you a better chance, most of the grads tend to be law/comm students.

I'm not chasing a law degree though, i'm doing a bachelor, and attempting the SIA masters while at uni.

I gained admission to the grad dip through doing the dipoma while in school...

It all comes down to what you'll do well at.

For example, someone who has awesome marks in an arts degree (because they enjoy studying that) and maybe a Diploma of Financial Markets, as long as they can talk and can show intelligence, should actually have a good change at alot of jobs in an investment bank.

GM

 

[gm]

Just quickly,

The book Liars Poker is about Saloman Brothers' bond department in the mid-80s. Not really IB...

I think it's the book "Monkey Business" which is on IB.

GM

 

[dude431]

It all comes down to what you'll do well at.

Very true. Thanks for your reply.

 

[t & co.]

What about the applied finance/commerce double degree at macq. uni?

Would that be more relevant?

Also, i've been hearing that employment opportunities are better if you go to usyd or unsw. What's macq's reputation like in the financeial sector?

 

[alman]

I would tend to think that USYD and UNSW tend to have that "old boys" network feel to it..then again, theres probably some arguments to contrary this (just find them on the numerous threads abound on BOS!)....It's really up to you and what you think.

Liar's Poker gave me a good feel of what IB is all about - is it just me or does Macquarie Bank have the same overtones as Salomon.

Do what you enjoy and you'll excel at it.

 

[SoCal]

I still haven't made up my mind on what majors I want to do! I have narrowed my decisions down to "Business Finance", "Money, Banking, Trade and Finance" and "International Business". I am sure I want to do Business Finance as one of my majors but I am not sure about the other one. I am thinking that maybe "Money, Banking, Trade and Finance" will be too theoretical and Economics related (considering it is a Economics major), so I am leaning more toward International Business.