CAREER PRIMER

Presenters

Darren Viegas

BMO Capital Markets – Equity Research Summer Associate

Justinne Poliarco

CIBC World Markets – Investment Banking Summer Analyst

Agenda

Networking

Recruiting

Resumes

Sell-Side

Investment Banking

Equity Research

Sales & Trading

Buy-Side

Private Equity

Wealth Management

Hedge Funds

Networking – Background

◦ A diverse set of business contacts is necessary for any job in finance

◦ Networking is a term thrown around a lot in the business world, in finance it is one of the three tools that will land you a job

Job

Interpersonal skills

Networking

Technical Skills

“It’s not what you know, it’s who you know”

Networking – Establishing Connections◦ As an Analyst it will be

important to first establish a network as diverse as possible

◦ Once you have found your vocation, specialize

◦ McMaster Alumni will be more responsive because they were once in your position

3r

d

Degree Connections

McMaster Alumni

Cold - Connection

Networking Hierarchy

Resp

onsi

vene

ss

Networking – E-Mail DraftDear Mr. Smith,

My name is Darren Viegas and I am a [4th year Commerce] student at McMaster University. I am interested in pursuing a career in [Specialized: Equity Research] the Capital Markets. I have taken an interest in your firm – BMO Capital Markets – after reading a research report from Andrew Kaip.

I will be travelling to Toronto on October 29th for the day. I was wondering if you would be able to meet with me for a coffee? I would love to get your thoughts on the industry and hear any advice you may have for me.

Thank you,

Darren Viegas[] indicates optional inclusion

Networking – Initial Interaction◦ Once you have reached out, wait a few days for a response

◦ DO NOT spam the same person continuously. Wait a set amount of time [e.g. wait every two weeks].

◦ Make sure grammar and spelling is flawless◦ Meet at their convenience

◦ Meeting preparation◦ Read up on current news◦ Have a few key talking points◦ Dress in business formal attire

Networking – Coffee Meeting Dos and Don’ts

Speak Well Mention current events

Have material ready

Background research

Follow Up

Be a Robot Be a Know-it-all

Be Rude Be Boastful

Be Late

DO DON’T

Networking – Following Up◦ Always be polite and follow up with a Thank-You Email

◦ Thank you for time + advice◦ Add on Linked-in◦ Create a spreadsheet of contacts

◦ Re-establish connection periodically◦ Your goal is to stay top of mind for recruiting season◦ Discuss current events + stock pitches◦ Consistently mention and inquire about internship opportunities

Networking – Analyst DeliverablePick an finance area of your choosing

1. Search for McMaster Alumni (Linked-In Alumni function)2. E-Mail to arrange for coffee OR phone call3. Report to your PM once completed for guidance/feedback

Recruiting Target School vs. Non-target School

◦ Target School: all the major banks actively recruit at these schools◦ “Actively” means info sessions are held on campus, major banks attend

their school’s conferences and events, first round interviews are held on campus

◦ Non-target School: no major banks actively recruit on campus

For interview selection:◦ Students in target schools will compete mostly with other students

WITHIN their school◦ Students in all the non-target schools will compete against each other

◦ McMaster is typically considered a non-target school

Recruiting Recruiting Timeline

◦ Info sessions◦ Accelerated

interviews

◦ Applications open◦ Due start of Jan

◦ First week: First Rounds

◦ Second week: Final Rounds

Oct to Nov Nov to Jan Jan

Recruiting Interview Process

◦ Competing against students within non-target schools

◦ 1-3 interviews◦ 30 minutes to 1 hour

◦ Competing against all second round candidates

◦ 2-6 interviews◦ 1 to 4 hours long

First Rounds Second Rounds

CandidateReception

• Candidate receptions or candidate dinners are often used within the process

• Used to gauge whether the candidate will fit within the team

Recruiting First Year & Second Year Opportunities

◦ Most formal internship programs mainly recruit third year students◦ Opportunities are still out there (reach out to those that have done it)

Wealth Management Small Investment Firms / Banks

Resumes Finance Resumes

◦ Keep to one page◦ STAR - Situation/Task-Action-Results◦ Focus on RESULTS◦ Watch your formatting – attention to detail is important

◦ Consistency is key◦ Cover letters are required but not necessarily the most important

◦ Ensure no errors

Resources (Templates)◦ Mergers & Inquisitions◦ WallStreetOasis

Buy-Side vs. Sell-Side Main Differences

1. Buy-Side◦ Acting as the investors, actively managing money or a portfolio of assets◦ Example: Private Equity, Wealth Management, Hedge Funds

2. Sell-Side◦ Acting as a market maker, selling assets or recommending assets◦ Example: Investment Banking, Equity Research, Sales & Trading

SELL-SIDE

Sell-Side Sell Side Firms

◦ The major banks have operations in Investment Banking, Equity Research and Sales & Trading through their Wholesale or Capital Markets division

◦ There are also small firms that specialize

Investment Banking What is Investment Banking?

◦ The main role of an investment bank is arrange financing for companies though the issuance of securities by underwriting or acting as the agent

◦ An investment bank will also provide advisory services on mergers and acquisitions

◦ Product groups will focus on a specific advisory service or function within the investment bank

◦ Mergers and Acquisitions (M&A)◦ Leveraged Finance (LevFin)◦ Equity Capital Markets (ECM)◦ Debt Capital Markets (DCM)◦ Restructuring

◦ Industry Groups will provide all of the bank’s advisory services but will focus its coverage on a particular industry

◦ Metals & Mining◦ Financial Institutions◦ Technology, Media and

Telecommunications◦ Real Estate◦ Power & Utilities◦ Diversified Industries

Product Groups Industry Groups

Investment Banking What does an Investment Banking Analyst do?

◦ Detailed research and due diligence are typically performed in the process of completing a financial model or pitch book

◦ Gathering data (financial statements) or running screens (Bloomberg)

Research

◦ Analysts will compile a marketing presentation called a pitchbook to use

◦ High degree of competency in PowerPoint is necessary

PitchBooks

◦ Analysts will use financial models to assess and present the effectiveness of a transaction or strategy

◦ High degree of competency in Excel is necessary

Financial Modelling

Investment Banking What is the Investment Banking Hierarchy?

Director / Executive Director / Senior Vice-President

Vice-President

Associates

Analysts

Managing Director

Equity Research What is Equity Research?

◦ The main role of Equity Research is to provide recommendations and insight on publicly traded companies. Their audience will mainly be buy-side investment analysts

◦ Equity Research will also provide models and advice for the Investment Banking division

◦ Research groups will focus on a specific sector of the equity markets

◦ Oil & Gas◦ Pipelines◦ Consumer◦ Special Situation◦ Commodities

Research Groups

Equity Research What does an Equity Research Associate do?

◦ Associates will accompany their Analysts to meet the senior management of the companies they cover (CEO,CFO,COO)

◦ Interpersonal skills and astute curiosity are needed

Management Meetings

◦ Associates will produce and edit research comments which will be published for the market

◦ Proper grammar and good writing skills are necessities

Research Reports

◦ Associates will update a live financial model every fiscal quarter and re-adjust estimates.

◦ Familiarity of the model and proficiency in excel will be beneficial

Financial Modelling

Equity Research What is the Equity Research Hierarchy?

Research Analyst

Research Associates

AssociateAnalyst

Sales & Trading What is Sales & Trading?

◦ Sales & Trading is an encompassing term that includes the Trading Floor of a bank – the Salespeople and Traders

◦ Traders execute trades on behalf of the bank’s clients or make the market (provide liquidity)

◦ Salespeople call the bank’s clients to pitch sales ideas that will generate commission through the Traders’ activities

◦ Research groups will focus on a specific area of the markets

◦ Fixed Income◦ Equity Derivatives◦ Foreign Exchange (FX)

Sales & Trading Groups

Sales & Trading What does an Sales & Trading Analyst do?

◦ Analysts will tend to code models for their superiors (P&L, Pricing)◦ VBA, JAVA, and Python are beneficial

Coding

◦ Analysts will produce market recaps of news and other pertinent information for their superiors

◦ Grammar and conciseness are key

News Reports

◦ Analysts & Associates will call the buy-side to routinely pitch trade ideas

◦ A relationship with the client is a plus

Pitch Sales Ideas

Sales & Trading What is the Sales & Trading Hierarchy?

Group Head

Vice-President

Associates

Analysts

BUY-SIDE

Private Equity What is Private Equity?

◦ A private equity firm is an investment firm that makes a controlling or large minority interest in a company to look to maximize the value of the investment

◦ A private equity firm will take a company private and use a large amount of debt to purchase the target in order to obtain a higher return (leveraged buyout)

◦ Value = $100◦ Cash Flows = $5◦ Use 80% debt

Leveraged Buyout Example:Year 1 Year 2 Year 3 Year 4

Value of Firm $100 $100 $100 $100

Debt $80 $75 $70 $65Equity $20 $25 $30 $35

Return 75%

Private Equity What does a Private Equity Analyst do?

◦ Investors need to be informed of the current state of portfolio companies

◦ Analysts will periodically review their portfolio and report status

Portfolio Managing

◦ Analysts will conduct research to ensure that a potential target will meet its fund’s objectives

Due Diligence

◦ Analysts will use financial models to determine the right purchase price for a potential target

◦ High degree of competency in Excel is necessaryValuation

Private Equity What is the Private Equity Hierarchy?

Managing Director /Managing Partner

Vice-President /Principal

Associates

Analysts

Wealth Management What is Wealth Management?

◦ The main role of an wealth management group is to manage the funds of a high net worth client for the bank.

◦ This will include investing in mutual funds, tax & estate planning, and investing in equities

Wealth Management What does an Investment Analyst do?

◦ Investments will need to be chosen based off of a client’s risk & reward profile

◦ This will require an ongoing dialogue with the client on a routine basis

Picking Suitable

Investments

◦ Analysts will call potential clients (through referral or cold-calling) to build the advisors “book” (assets under management)

◦ A diverse network of contacts is beneficial

Building the Book

Wealth Management What is the Wealth Management Hierarchy?

Investment Advisor

Investment Analyst

AssociateAdvisor

Hedge Fund What is a Hedge Fund?

◦ A Hedge Fund is a professional money management firm that manages capital for a pool of investors (pension plans, wealthy individuals).

◦ Hedge Funds are set apart from Wealth Management arms in their use of advanced trading and investing techniques

Hedge Fund What does an Investment Analyst do?

◦ Analysts will sometimes strategize direction of the portfolio with their Portfolio Manager

◦ This will require a working knowledge of the Macro Economy

Tactical Allocation

◦ Analysts will build investment pitches for their Portfolio Managers.◦ Experience on the sell-side is usually compulsory

Prepare Pitches

Hedge Fund What is the Hedge Fund Hierarchy?

Portfolio Manager

Investment Analyst

How To Succeed On The Job

Reliability &Consistency Be Proactive

Have the Right Attitude Technical Knowledge