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| Like Bob Cody AA Says What He Means and Means What He Says |
Recently there’s been a lot written about the plight of investment bank analysts.
Long distance psychological diagnoses have been performed on both analysts and those who manage them. Paging Senator/Dr. Bill Frist!
Various economic theories have been trotted out and fingered as the culprits.
Deep societal analysis has shown. The weakness of youth. The enlightenment of youth. The end of the American Dream.
What I haven’t seen is a look at what are the fundamental drivers that affect how investment banking operates.
Not all industries are the same. There is no one organizational or management style that fits all. And even within industries there are differences.
Corporate organization and management style have a direct impact on how an organization behaves or doesn’t.
One more introductory comment.
When there’s talk about “investment banking”, the names Goldman Sachs or Morgan Stanley usually come to mind.
Just to be clear: these and similar firms do more than investment banking.
What are some of the other activities?
Global client and proprietary trading. Asset management. Investment vehicles/funds. Securities research. And (shudder) now even retail banking. These all have different characteristics than investment banking and operate differently.
Broadly speaking what then is investment banking?
Capital (debt and equity and hybrids thereof) raising and placement. Mergers and Acquisitions. Structured Finance. Derivatives. And more.
In the posts to follow, I’ll look at two key characteristics of investment banking and the role/purpose of analysts with a firm. And use some of the observations to explain IB behaviour or misbehaviour.
All this meant to be descriptive not normative.
Or, if you’d like, explanatory not exculpatory.
The three topics that I think are relevant to how IB’s operate are:
- Compensation Structure
- Product Characteristics
- The Role and Purpose of Analysts
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