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Wednesday, October 7th
Educational Series Careers on Wall St.
Justin Van Vleck Co-President of Operations

• Felix Popescu
• VP of Analyst Program

• Jeff Smith
• Head of Educational Series

• Ruoting Sun
• Stock Selection Committee

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Investment Banking (Corporate Finance)

• Student Investment Association
• Wednesday, October 8th, 2008
• Presenter Felix Popescu

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Climate on Wall Street

• Colbert Report - Formidable Opponent

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Abridged List of Investment Banks
Full Service
Independent
Moelis Company
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Main Street Americas Perception of Banking

• Offer depository services such as checking,
  savings and CDs
• Financing in the form of credit cards, auto
  loans, student loans, and home mortgages
• Well-known brands like Bank One, Wells Fargo,
  Bank of America, Chase and Citibank

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Todays Agenda

• What is Investment Banking?
• Investment Banking Structure
• Investment Banking Hierarchy
• Where Do You Fit In?
• Why Investment Banking?
• Recruiting
• The Interview
• Helpful Notions

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Overview of Investment Banking

• Assists Corporate Clients to raise capital
• Sell side vs. Buy side

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Structure of Investment Banking Division

• Industry Groups
• Consumer and Retail
• Energy and Power
• Technology
• Health Care
• Real Estate
• Media and Telecom
• Financial Institutions
• Financial Sponsors

• Product Groups
• Mergers and Acquisitions
• Leveraged Finance
• Equity Capital Markets
• Debt Capital Markets
• Restructuring

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Hierarchy

• Director and Managing Director
• Vice President
• Associate
• Analyst
• Intern
• Word Processing, Research Support and Other
  Secondary-Support Divisions

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Analyst Responsibilities

• Financial analysis
• Industry and company research
• Developing client presentations
• Valuation (Financial Modeling)
• Marketing materials, management presentations and
  road show involvement

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What You Should Expect

• 12-15 hour days
• Very high stress
• Multi-tasking
• Lots of menial grunt work and micromanagement
• Meetings and conference calls throughout the day
• Sacrifice your personal life and health for this
  career
• 3 meals/day at work
• Very common to be forced to cancel vacations and
  miss holidays/birthdays when needs arise

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Typical Day

• 900 A.M. Arrive in office, Check e-mail, start
  work on valuation model
• 1100 A.M. Finish up pitchbook for upcoming
  presentation
• 100 P.M. Conference call with deal team, which
  may include people from other product and
  industry groups who work in conjunction on a
  project with you
• 300 P.M. Put together a set of
  trading/transaction comparables

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Typical Day (Continued)

• 500 P.M. Gather industry reports and put
  together a working group list for a deal team on
  transaction
• 700 P.M. Put together a few public information
  books and balance out discounted cash flow model
• 900 P.M. Make changes to pitchbook before
  sending it to Managing Director
• 1100 P.M. Go Home

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Recruiting

• Recruiting Timeline
• For Full-Time Positions
• For Summer Analyst (Intern) Positions

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Benefits of Investment Banking Analyst Program

• Significant Learning Opportunities
• Learn all elements of corporate finance
• Wide variety of industries and transaction types
• Significant impact early in your career
• Integral part of the transaction team
• Dynamic and exciting environment
• Entrepreneurial environment rewards excellence
• Culture of Teamwork and Partnership

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Getting In

• Most banks recruit analysts exclusively from ivy
  league colleges and select masters programs
• Unless youre exceptional or have a connection in
  the business, getting in from MSU will be
  extremely difficult

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Interviews

• Interviews usually consist of
• Two first-round interviews
• Either phone or in-person
• Superday interview
• Consists of 8-10 30 minute interviews
• Usually on a Saturday

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Sample Questions

• General
• Walk me through your resume
• Why did you choose Michigan State/ your major?
• What do Investment Bankers do?
• What is the most striking thing youve read today
  in the WSJ?
• You dont seem like a very driven person. How
  will you handle a job in banking?
• Say you are supposed to meet your girlfriend for
  dinner, but the MD asks you to stay late. What
  do you do?

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Sample Questions

• Technical
• What happens to the three financial statements
  when you change capital expenditures?
• In what ways can you value a company?
• Walk me through a DCF
• All else equal, should a public or private
  company garner a higher valuation?
• Other
• What stocks do you like?
• How many Northwest planes will take off in the
  next hour in the United States?
• If I shrunk you down to the size of a nickel and
  placed you in a blender, what would you do?

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Useful Courses/ Resources

• Classes
• FI 311- building block of Corporate Finance
• FI 414- case studies and modeling skills
• FI 455- Excel skills and financial modeling
• ACC 201, 300, 301, 305
• Resources
• Vault Guide for Finance Interviews
• Wall Street Journal/ Financial Times
• New York Times DealBook

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Fact vs. Fiction

• NOT like Wall Street Boiler Room
• Not spending evenings on the yacht weekends in
  the Hamptons
• Rarely traveling to meet clients
• Yes, the hours are just as bad as youve
  heardbut the compensation is just as high as
  youve heard, too
• You dont have to be a genius to be a good
  i-banker
• Connections matter

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Things To Do Now

• Solid precedent internships with known firms
• Accreditations/standardized test scores help open
  doors
• Reach out to MSU alumni
• Leverage all personal connections you may have
• Be willing to jump on a plane to interview/
  network
• East Coast undergrads have Wall Street in their
  backyard

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Summary

• Investment banking is an intense, life-absorbing
  career path thats not for everyone
• Potential rewards attract the brightest and most
  competitive individuals from the strongest
  backgrounds, so getting in is difficult
• Its definitely worth doing if you get the chance
• Decide if its for you
• Work/life balance
• Family vs. career
• Geography
• Life will go on even if you dont land a Wall
  Street job!

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Fun Resources

• Wall Street Oasis
• Dealbreaker
• BankersBall

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Sales Trading

• Presenter Ruoting Sun
• Student Investment Association
• October 9th, 2008
• Wages make you a living,
• Profits make you a fortune.

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And the story goes
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Mantra

• EMH and Sales Trading

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Agenda

• What is Sales Trading?
• Why Sales Trading?
• A day in the life of a ST Analyst
• Becoming a Sales Trading Analyst
• Personal Experience and Advice

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What does the position entail?

• ST Team originates and transacts
• Sales distribution arm for the Investment Banks
  products
• Sales force's prime responsibility is to build
  and maintain effective relationships with
  institutional investors.
• Trading handles the risk management of the
  firms positions in various financial instruments
• Make markets for buying and selling securities

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Sales

• Client coverage and relationship management
• Knowledge of client asset or liability needs, as
  well as industry trends
• Knowledge of current economic environment and
  market conditions
• Knowledge of market opportunities and firms
  product capabilities
• Promotion of the firms products and capabilities
• Pricing and execution

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Trading

• Providing liquidity to firms clients
• Portfolio management (hedging)
• Knowledge of current economic environment and
  market conditions
• Knowledge of flows being executed in the market
• Maintaining views on potential movement of
  underlying instruments
• Pricing and execution

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How is money made?

• Client driven (Flow Trading) bid/ask spread, or
  market making
• Proprietary trading
• New security issuances

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Why Sales Trading?

• Global market driven job
• BIG firm, SMALL teams
• Steep learning curve
• Fast-paced, intense atmosphere
• Instant gratification
• Performance-Based Pay
• Work/life balance

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Day in the life

• ST Analysts help engineer innovative and
  sophisticated financial products
• As an Analyst you will work closely with senior
  members on your team to attain these goals by
• Creating client presentations
• Participating in client calls/meetings
• Assisting in trade execution
• Disseminating weekly marketing material to
  internal/external clients
• As you work to support senior members on the team
  you will develop market and product expertise

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Schedule of a Junior Trader

• 630 am get into the office, confirm all
  previous days trades and cross-check with the
  details generated by back office
• 7 am confirm starting positions, be informed of
  any news regarding held positions plot strategy
• 7 am 830 am relay noteworthy trades on ECNs
  made throughout the night to sales-force morning
  meeting
• 830 am 930 economic statistics are released,
  breakfast, post indications
• 930 am markets open must be uncrossed and
  unlocked
• 930 am 4 pm open market hours take orders,
  work the orders, build relationship with
  sales-force, make good prices
• 430 pm head home

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Sales Trading Analyst Program

• Comprehensive training
• Organized by sector (equity derivatives,
  high-yield bonds, etc.)
• Example Sales
• Daily interaction with trading desks banking
  team to relay client needs

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Important qualities of a ST Analyst

• Insightful, creative, quantitative thinker
• A genuine interest in financial markets and in
  political and economic developments
• Strong communication skills
• Strong teamwork skills
• Attention to detail
• Strong academic and professional backgrounds
• The ability to perform well under pressure
• A strong stomach
• Ability to manage risk
• Ability to perform multi-task
• Ability to think on the fly
• Understand that trading is as much an art as it
  is a science
• Understand how closely integrated different
  industries are

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How to break in?

• Starting early is key VSE Competition
• Read newspaper and business publications to stay
  current with the markets
• Choose classes that will expose you to different
  business disciplines
• Choose a specific niche market/strategy you can
  be a specialist in (options, high-yield,
  vol-trading, bottom-fishing)
• Network, Network Network SIA is a good start

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Questions?
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Equity Research

• Justin Van Vleck

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Agenda

• Principles of equity research
• Equity research products
• Hierarchy
• Earnings Season
• Lifestyle
• What will it do for you?
• Formula for success

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What is Equity Research?

• Produce research ideas (reports) and distributes
  it to their clients
• Buy Side
• Money Managers at
• Hedge Funds
• Mutual Funds
• Individual Stock/Bond buyers
• Sell Side
• Internal salespeople (sales and trading desks)
• Proprietary trading desk

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Think Tank
Equity Research Department
Hedge Funds/MM
Sales Trading Desk
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Equity Research Products

• Industry research reports
• Company-specific reports
• Notes on importance events
• Industry and company related

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Industry Research Reports

• Overview summary of the industry
• Market trend/conditions
• Past and future outlooks
• Current industry leaders and lagers
• Quality of the report shows the firms and
  analysts expertise within the industry
• This product will usually be associated with an
  initiation of a group of companies

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Company-Specific RR

• Company-specific RR fall into three categories
• Initiation of coverage
• Company information, forecast model, and risk
  factors
• Update
• Explain movement in the stock, change/confirm
  earnings estimate, news from management
• Change in rating

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Company Specific Notes

• Deal with short term events
• Earnings release
• Update the forecast for model, qualitative trends
• News item
• Could deal with lawsuit, legislation, spinoff,
  stock repurchase plan, etc.
• Short-term trade recommendation
• Increasingly becoming popular due to HF client
  demand
• Will often times differ from long term rating on
  company

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Ratings

• Downgrade (Underperform)
• Lower expected earnings power, diminished growth,
  turnaround plan suspect
• Hold (Neutral)
• Do not expect much growth, potential problems,
  analyst and market is wary, perform in line with
  group
• Upgrade (Outperform)
• Better expected earnings, smart acquisition,
  beneficial long term trends starting to develop

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Hierarchy

• Basic Structure
• Associate is junior to Analyst
• Who gets their name on reports?
• Analyst runs the group
• Is the one in charge of making investment
  recommendations
• Within the Equity Research Department
• Structure looks similar to banking
• Not all analysts are MDs
• Most regarded talent sits on SSC

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Earning Season
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Lifestyle

• Travel for research analysts
• Meet w/ buy side clients, comp. management teams,
  assist with road shows
• On average, work less than CF I-Banking
• Initiations, earnings season are long hours
• Associate Salary (est.)
• 60K (more if MBA perhaps) 10-15K signing bonus
  35-75K year end bonus

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What a Career in Equity Research Will Do for You

• Strong training programs provide
• Terrific Excel, Powerpoint skills
• What the important information is
• Writing to grab investors attention
• Modeling
• Building initiation reports from scratch
• IPO Model from scratch
• Updating models
• Most importantly, youll learn how very smart
  people think about stocks and the market

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Formula for success

• Work hard learn quickly
• Comp skills (Word, Excel, PP)
• Good writing skills are mandatory
• Good communication skills
• Good listeners and ask good questions
• MBA is not mandatory to advance
• Enjoy analyzing companies and trying to outsmart
  other people

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Questions?
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Private Wealth Management
Simon Yu and Jeff Smith
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What do financial advisors do?

• Assist client in constructing investment
  portfolio strategy
• Assist Clients in obtaining financing, selling
  assets, tax efficiencies
• Recommend and place trades on behalf of client
• Estate and retirement planning
• Helping clients obtain financial goals

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Sales and Interpersonal Aspect

• Success is heavily dependent on interpersonal and
  sales skills
• Client meetings, phone calls, conferences,
  networking generate business
• Talking clients out of making bad decisions just
  as important

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Downside

• One of the most stressful jobs available
• Market takes away gains, hurts your pay and
  angers clients
• Very hard to get established, high rate of
  failure
• Highly competitive work environment,
  competitors in same office

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Upside

• Very entrepreneurial business with nearly
  unlimited upside
• Work/Life balance, especially once established
• Relationship focused
• Geographic flexibility
• High demand for wealth management services

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Day in the Life
730am Arrive at office and read up on the
markets, WSJ, etc. 830am Enter in tasks for
the day, adjust some asset allocation models,
conduct Monte Carlo analysis for a clients
portfolio 1000am Make some client calls, buy
and sell securities on clients behalf 1130am
Meet with new potential client to discuss
financial goals, risk tolerance
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Day in the Life Cont.
100pm Watch a wholesaler (Vanguard, Fidelity,
etc.) present over their complimentary
lunch 200pm Meet with potential referral
partner at their office 500pm Analyze client
portfolios after market close, touch base with a
few clients 600pm Team meeting to discuss
days activities and prepare for the next day,
administrative tasks
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Day in the Life
700pm Grab a drink with a client and head home
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How to Get In

• Network
• Speak to regional office
• Read the WSJ regularly
• Take a lot of finance/accounting
• Getting Involved (SIA, FMI, SCNO)
• Pursue an internship
• Build connections by starting in another career
  and switch to PWM

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League Tables

• UBS - 1.6 trillion
• Citigroup - 1.43 trillion
• Merrill Lynch - 1.2 trillion
• Credit Suisse - 642 billion
• JP Morgan Chase - 465 billion
• Morgan Stanley - 450 billion
• HSBC - 408 billion
• Deutsche Bank - 249 billion

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How Money is Made

• Clients give assets to wealth management expert
• Managers are paid commissions and fees for
  selling certain products, achieving gains, etc.
• More assets under management and gains results
  in more fees
• Portion of fees goes to parent firm

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Questions?