Wall Street 101

1
Wall Street 101

• UMBS Investment Association
• September 2002

2
The Marketplace
Corporations
Investment Bankers
Exchanges
Chinese Wall
Analysts
Brokers / Advisors
Investors
Traders
Portfolio Managers
Institutional Sales
3
Examples

• Mutual Funds Fidelity, Vanguard
• Institutional Investors CalPERs, University of
  Michigan
• Broker/Dealers Merrill Lynch, Morgan Stanley
• Private Clients ML, Salomon Smith Barney
• Discount / Online Charles Schwab, ETrade
• Trading Bear Stearns
• Investment Banks Goldman Sachs, Lehman Brothers
• Niche players Robert Baird, Greenhill
• Conglomerates Citigroup, JPMorgan

4
Investors

• Invest in securities of corporations via
• Buy stocks/bonds through brokers
• Buy mutual fund shares, essentially hiring a
  professional money manager
• Invest directly in company via DRiPs
• Increasingly knowledgeable (Internet), more
  trading volume
• Research increasingly available

5
The Marketplace
Corporations
Investment Bankers
Exchanges
Chinese Wall
Analysts
Brokers / Advisors
Investors
Traders
Portfolio Managers
Institutional Sales
6
Brokers

• Execute trades for clients, earn commissions
• Bring individual investors assets into fee-based
  accounts (asset gatherers)
• Evolving job function
• Online brokers cheaper commissions
• Internet offers research, less need for advice
• Essentially sales function

7
The Marketplace
Corporations
Investment Bankers
Exchanges
Chinese Wall
Analysts
Brokers / Advisors
Investors
Traders
Portfolio Managers
Institutional Sales
8
Portfolio Managers

• Manage investment portfolios for
• Institutions pension funds, university
  endowments, corporations
• Individuals private clients, retail mutual funds
• In-house research or from sellside (Analysts
  and/or Institutional Sales reps)
• Hedge funds growing, increased scrutiny
• Start as Analyst, move up to Portfolio Manager

9
The Marketplace
Corporations
Investment Bankers
Exchanges
Chinese Wall
Analysts
Brokers / Advisors
Investors
Traders
Portfolio Managers
Institutional Sales
10
Institutional Sales

• Provide research/insight for Portfolio Managers
  to bring in trading commissions
• The link between sellside and buyside
• Primarily relationship management
• Start in supporting role, then pick up smaller
  relationships

11
The Marketplace
Corporations
Investment Bankers
Exchanges
Chinese Wall
Analysts
Brokers / Advisors
Investors
Traders
Portfolio Managers
Institutional Sales
12
Analysts

• Sell-side sell research to buyside in order to
• Earn commissions
• Close investment banking deals
• Buyside report to Portfolio Managers within own
  firm
• Associates manage models, client calls,
  eventually cover their own space

13
The Marketplace
Corporations
Investment Bankers
Exchanges
Chinese Wall
Analysts
Brokers / Advisors
Investors
Traders
Portfolio Managers
Institutional Sales
14
Investment Bankers

• Underwrite corporations equity and debt
  offerings, advise on mergers acquisitions, take
  a of deal as fee revenue
• Regulated interaction with Analysts
• Analysts modeling, presentations
• Associates jack of all trades
• VPs / MDs deal sourcing, relationship management

15
The Marketplace
Corporations
Investment Bankers
Exchanges
Chinese Wall
Analysts
Brokers / Advisors
Investors
Traders
Portfolio Managers
Institutional Sales
16
The Marketplace
Corporations
Investment Bankers
Exchanges
Chinese Wall
Analysts
Brokers / Advisors
Investors
Traders
Portfolio Managers
Institutional Sales
17
Current Trends

• Re-regulation
• Conflicts of interest between investment banking
  and commercial banking
• Analyst scrutiny
• Conflicts between research and investment banking
• Accounting
• Quality of reported financial results

18
Further reading

• Wall Street Journal daily
• Barrons Saturdays
• Bloomberg
• www.bloomberg.com
• Bloomberg terminals in the library (coming soon
  in the Tozzi Financial Research Trading Room)
• Limitless internet resources