But just like superhero movies, career advice works best when it’s a trilogy – so we’ll complete this trilogy with how to start a venture capital firm.

Starting a venture capital firm is less of a bad idea than starting a PE firm or hedge fund, but it’s still not a great idea for most people.

The biggest issue is that venture capital is best at the end of your career, not the beginning or middle.

The second biggest issue is that there are many ways to invest in startups and growth companies these days, so hardly anyone “needs” to start a VC firm to do it.

And if you think starting your own VC firm is “easy money,” please stop reading this article and seek psychiatric help immediately:

What is Venture Capital?

This article assumes you already know what venture capital is, how to get into venture capital, venture capital careers, VC interview questions, etc.

If you don’t know these points, please read this coverage first because I’m not re-explaining them.

Many of the requirements for starting a VC firm are similar to the ones for starting a PE firm, so I will focus on the differences here.

Why Do You Really Want to Start a Venture Capital Firm?

The other day, a friend forwarded me this tweet from Pieter Levels on X (Twitter):

I agree with his general point that there’s a lot of BS in the VC/startup ecosystem, with many people claiming “fake successes.”

However, he’s wrong about the specifics, from the management fees to the way carried interest works, but we’ll get to that later in this article.

I’m highlighting his tweet because it illustrates how many people think about starting a VC firm: You sit back, listen to startup pitches, pick the winners, and make millions of dollars as mermaids serve you piña coladas on a tropical island.

Nothing could be further from the truth.

Venture capital is a tough business, and it’s a high-paying, cushy job only for people who entered the industry decades ago and have advanced to the top.

OK, So Who Can Start a Venture Capital Firm?

There are exactly two types of candidates with a good background for starting a VC firm:

1. Experienced professional VCs at the Principal, MD, or Partner level with solid investment track records, good relationships with Limited Partners, and unique insights into specific industries, geographies, or deal types.
2. Successful startup founders with a solid history of angel investments who understand startups’ operational and financial sides.

Startup founders tend to be weaker with “LP relationships” but stronger with “building and supporting startups,” while it’s the reverse for professional VCs.

This is why it’s best to have at least one Partner when starting your fund – you want someone who can complement your strengths and offset your weaknesses.

If you do not fall into one of these categories, it is unlikely that you will be able to raise enough capital to start a substantial VC fund.

How to Start a Venture Capital Firm, Part 1: Raising Capital

It is still difficult to raise capital, but it’s easier than PE/HF fundraising because you need less to start a venture capital firm.

So, you don’t necessarily need to focus on institutions capable of writing very large checks, such as pensions, endowments, or funds of funds.

It’s easier to get meetings and quick responses from LPs such as high-net-worth (HNW) individuals and smaller family offices, so this is good news.

Before doing anything else, you must decide on your fund size and team size, which depend on your strategy and the number of portfolio companies you plan to invest in.

To keep things simple, let’s assume that you want a portfolio of 25 startups and you plan to invest in seed rounds for an average of $2 million per startup.

These will be software startups that need less initial capital than hardware, energy, or biotech startups.

So, you’ll need 25 * $2 million = $50 million in committed capital.

Assuming you charge a 2% management fee, that is $1 million in annual fees to cover overhead, salaries, and other expenses…. which is not that much.

After paying for rent, accounting, legal, IT, compliance, etc., that amount might cover:

• Two Partners (yourself and someone else) who both earn compensation well below market rates, such as in the low hundreds of thousands per year.
• One Associate to do the grunt work. This person will also earn well below market rates.

You might now say, “Wait a minute. If there’s not enough money to go around, why not raise a larger fund, such as a $100 or $200 million fund?”

The short answer is that raising $100 – $200 million as a first-time VC with a limited track record is very difficult.

According to Carta, even back in the frothy markets of 2021, the median first-time VC fund size was just above $10 million. Only 8% of new funds had $50 million or more:

But let’s assume that you’re OK with all of this, including the smaller fund size and the limited fee pool to cover overhead and salaries.

To raise this $50 million in capital, you’ll need the following:

• Team: It is usually a bad idea to start a VC fund with only one Partner (yourself). You usually want at least two Partners, even for a $50 million fund, and you should have a history of working together.
• Startup Investment Track Record: Speaking of track records, you must show evidence of successful startup investments, such as a few exits at decent multiples (5 – 10x+) over the years. If you don’t have this, work at an established VC firm or do your own angel investing until you do.
• Highly Specific Strategy: The market is so flooded with VCs now that it’s not enough to say you’ll invest in “vertical SaaS” or “AI-enabled services.” You need to be much more specific regarding geography, strategy, sub-vertical, and more.
• Sourcing Methods and “Access”: The returns in venture capital are very skewed toward the tiny number of companies that hit it big, which means that sourcing is critical. You need to be plugged into the startup ecosystem to find these companies, and all potential LPs will ask about your access to the best deals.
• Personal Contribution to the Fund: Limited Partners will expect you to contribute 2 – 3% of the total capital, so if you and your Partner are not comfortable writing a check for $1.0 – $1.5 million for this $50 million fund, you should reconsider your plans.

The number of LPs varies, but according to the Carta data, most first-time funds have between 51 and 100.

That translates into a lot of meetings with family offices, wealthy people, and institutions; if you assume a success rate of 10%, you’ll need hundreds of meetings to win the commitments for your first VC fund.

You might be able to reduce the required meetings by focusing on groups that can write larger checks, but it will also be harder to get commitments from them.

How to Start a Venture Capital Firm, Part 2: Paperwork and Legal Structure

Much of this is the same as the paperwork and legal structure required to start a PE firm, so I won’t repeat everything here.

Funds are Limited Partnerships or Limited Liability Firms, and the firm is structured as a Limited Liability Company (LLC); a separate LLC is also formed for the General Partners in each fund.

You’ll need all the usual documents, such as the Limited Partnership Agreement, the Offering Memorandum, the Compliance and Risk Guidelines, etc., and you’ll need to spell out the management and performance fees, the hurdle rate (if applicable), your investment targets, and your distribution policy for the LPs.

The paperwork may be simpler for small VC firms than PE firms due to the smaller deal sizes, less capital, and lack of control over portfolio companies.

So, you might be able to finish everything for reduced legal fees, though it still won’t be “cheap” – perhaps a few hundred thousand rather than $1 million+.

How to Start a Venture Capital Firm, Part 3: Hiring a Team

If you’re raising a “micro” VC fund, such as one with $1 – 5 million in capital, the team will consist of yourself.

A management fee of 2% * $5 million = $100K per year barely covers overhead, so it’s not enough to hire employees.

For something like a $50 million fund, as in this example, the team might consist of yourself, another General Partner, and maybe a junior employee.

For a much bigger fund, such as a $200 million one, it might consist of 3 Partners and 5 – 6 junior employees (and everyone will still earn below-market rates).

The most important points in team composition are access to good deal flow and Limited Partner relationships.

The “classic” split allows one Partner to focus on fundraising and LP relationships and the other on sourcing.

If you have three Partners, the third might focus on operations for portfolio companies.

LP relationships are especially important in VC because it can take 10, 12, or even 15+ years to exit certain portfolio companies, so you’ll need to raise another fund based on preliminary results from your current fund.

You must convince the LPs to take a “leap of faith” based on your first few years, including significant unrealized gains on your top investments.

The LPs (should) understand the nature of startup investing, but it can still be an uphill battle, especially with less experienced individuals or family offices.

The rest of the team doesn’t matter that much for a first-time VC fund.

You want Associates and staffers who understand your industry and the basics of VC deals, such as cap tables, SAFEs vs. convertible notes, etc., but specific technical skills are less important than in PE because early-stage deals are simple.

Because of your limited fee pool, you may have to recruit “non-traditional candidates” to fill these roles, i.e., you won’t be picking from IB Analysts in the Goldman Sachs TMT group.

Instead, you’ll have to look for career changers who might be interested in VC, such as product managers at tech companies or professionals in business development, corporate finance, or related roles.

How to Start a Venture Capital Firm, Part 4: Surviving, Investing, and Growing

You are not just “investing” within your new VC fund but also running a small business.

That means the usual headaches with HR issues, audit/finance/tax/legal issues, brand representation/PR, portfolio companies, and LP complaints.

On balance, HR and employee issues are smaller factors here because team sizes are smaller.

But portfolio company issues and LP relations will take up more time.

Portfolio companies will consume more time because early-stage startups are always several steps away from death and need help with sales, marketing, recruiting, engineering, and more.

Also, a $200 million VC fund will have more portfolio companies than a $200 million PE firm because each deal is smaller, and VCs must invest in dozens of startups to have a solid chance at a single “home run.”

LP relations are tricky because of the issues discussed above: The exit time frame is long, you need to “sell” your next fund based on preliminary results, and you may be dealing with HNW individuals who don’t understand these issues.

How to Start a Venture Capital Firm, Part 5: Realistic Compensation

Given the time, effort, and money required to raise a single VC fund, you might be wondering about the realistic compensation.

Continuing with this $50 million VC fund example, let’s say that you and your Partner contribute $1.5 million total to the fund ($750K each).

With the assumptions above, you might earn a base salary of $250K per year.

After taxes in a place like California, this might be ~$160K per year, so you’ll need almost 5 years to earn back your initial contribution before even factoring in living expenses.

Also, this 2% management fee will scale down after the first ~5 years; the total fees over 10 years of a VC fund are usually ~15% of the committed capital, or $7.5 million here.

The bottom line is that for a single new VC fund, your salary from management fees mostly just covers your contribution to the fund.

The real upside from VC investing comes from the 20% performance fees (carried interest) if your portfolio companies do well.

So, let’s say that your fund performs well and returns $120 million over 10 years for a 2.8x multiple on the $42.5 million of invested capital (deducting the $7.5 million in total management fees).

Before you earn anything, the LPs must first earn back their full $50 million (yes, they are repaid for both the management fees and the invested capital).

The remaining amount is then split 80/20 between the LPs and you, so you earn 20% * ($120 – $50) = $14 million.

This is split between you and your Partner, so you each earn $7 million over this period (again, assuming the base salary just covers your living expenses and personal contribution).

That sounds great, but remember the following:

• This was over an effective 12-year period if you account for the time spent setting up the firm and doing the initial fundraising, so it’s more like ~$583K per year for you.
• Most VC funds, especially first-time funds, do not earn a 2.8x multiple—the average multiple is closer to 2x (source). Plenty of funds do not even return 1x, so the GPs earn nothing!

So, the optimistic case for a single $50 million startup VC fund is earning a net amount in the mid-six figures on an annualized basis; the realistic case (2x multiple) is earning ~$300K per year annualized.

This is not great annual compensation for senior-level professionals, so raising additional, larger funds is the usual solution.

This works if you keep posting solid investment results and have the resources and skills to raise funds.

If not, you can always find a new job after a few years of the VC game… which leads us into the final point here:

How to Start a Venture Capital Firm, Part 6: Exit Opportunities

The good news is that if your startup VC firm does not work out, you have more options than someone whose PE firm or hedge fund did not work out.

You could easily join a startup in a finance/fundraising role, go to a tech company in a finance role, or join a larger, established VC firm.

You will probably not be able to “try again” if your firm failed due to poor performance, but if you wait long enough, there may be exceptions.

And if you want to keep investing in startups, you can do so via angel investments, syndicates, or within a larger VC firm.

Final Thoughts: Does It Ever Make Sense to Start a Venture Capital Firm?

The previous articles on starting a private equity firm and hedge fund attracted many negative comments, as readers accused me of being too pessimistic.

But I stand by my comments that starting your own firm is not a great idea for most professionals in these industries – although there are cases where it can work out well.

With startup venture capital firms, the problem is different: There are now so many ways to invest in startups that you don’t “need” to launch a VC fund to do it.

In my opinion, it does not make sense to put in the time and effort of launching a “micro” VC fund with $5 or $10 million in capital.

It’s too difficult to operate with a fee pool that low, and you’ll have more upside by joining an established firm.

Starting a VC firm makes sense in two main cases:

1. You have a long track record at an established VC firm, and now you want to branch off with your team and do something new because of disagreements about strategy or economics at your existing firm.
2. You don’t “need” the money and are doing it for other reasons, such as wanting to launch new startups or advise them after a successful track record in executive roles.

Alternatives to Starting Your Own VC Firm

If your goal is to “invest in startups,” “advise startups,” or “earn money by working with startups,” there are dozens of alternatives that make more sense than starting a VC firm:

• Start angel investing via sites like Angel List to build a track record with small amounts of capital.
• Invest in a VC fund as a Limited Partner.
• Invest in startups as part of a syndicate, either in real life or via online groups.
• Become a startup advisor or “fractional employee” and help with financing and fundraising in exchange for small equity grants.
• Join an established VC firm and work on sourcing, due diligence, and operations.
• Work at a fund of funds that invests in VC funds and makes occasional co-investments.

The point is that starting a VC fund is like a hammer, and not every problem is a nail.

If you cannot clearly articulate why you want to start a VC fund rather than pursue one of the alternatives above, you need to reconsider your plans.

And please, do not start a VC fund because you think you’ll earn $2.5 million in management fees “forever” in exchange for no work.

The post How to Start a Venture Capital Firm – and Why You Probably Shouldn’t appeared first on Mergers & Inquisitions.

Unfortunately, there’s a lot of “group think” here, driven by endless forum threads and student groups over-hyping and over-marketing the concept.

Banks are also to blame because they now market spring weeks to students as young as 16.

If you want to work in investment banking in London, these “spring weeks” (1-2-week mini-internships in your first or second year of university) are helpful but not necessarily required.

It is 100% possible to win internship offers without attending spring weeks, and they have some downsides that no one ever discusses.

But before exploring “the dark side” here, I’ll start with a quick summary:

Investment Banking Spring Weeks Defined

Investment Banking Spring Week Definition: In a “spring week,” students in their first or second year of university complete a 1-2-week internship at a bank, normally in London, which may position them to win an official summer internship the next year.

Spring weeks are mostly “a thing” in the U.K., but large banks in Asia-Pacific may also offer them.

They do not exist in the U.S., Canada, or Latin America, and in continental Europe, you normally go to London to complete the spring week.

The concept is simple: Apply to dozens of these “pre-internships,” win and complete a few, and walk away with a penultimate-year internship already set up.

Unfortunately, it’s not quite that simple – due to massive competition, a fairly involved recruiting process, and low conversion rates at many banks.

Summary of Spring Weeks: Advantages and Disadvantages

My summary would be:

• Spring weeks can be a good pathway into full IB summer internships because, depending on the bank, 20 – 40% of students might receive internship offers (and at a few firms, this is closer to an 80%+ rate).
• Applications for March/April spring weeks open far in advance (August – October), and it’s “first come, first serve,” so apply as early as possible for the best chance.
• Expectations for technical skills and work experience are lower, but the process is more random than normal internship recruiting and depends on fit, grades, and activities. Many spring weeks also have a heavy “diversity” component.
• The odds of winning an individual spring week are low because many banks receive 2,000 to 5,000 applications for 50 – 100 spots. Since it’s a numbers game, you normally apply to dozens of spring weeks.
• To convert your spring week into an internship, you will go through interviews or case studies on the last day; ~50% of interns will then be invited to an assessment center, and ~50% of those might win a summer internship for the next year (but, again, the odds vary, and more than 25% will win internship offers at some banks).
• The main downsides of spring weeks are 1) Completing one does not guarantee you an internship, so you still need to keep networking, gaining work experience, and preparing even if you have won multiple spring weeks; and 2) Some students spend so much time applying to and completing spring weeks that their grades and activities suffer.

Which Banks Offer Spring Weeks?

All the bulge bracket banks in the U.K. run them, but so do many elite boutiques (Lazard, Evercore, PJT, etc.), middle-market banks (Jefferies, Houlihan Lokey, etc.), and “in-between-a-banks” such as RBC and Wells Fargo.

Outside of IB, various asset managers, hedge funds, consulting firms, and trading firms also run some type of spring week program, but we’re focusing on banking here.

The most important point is that the acceptance and conversion rates vary wildly by firm.

For example, Citi is known for awarding internship offers to 80 – 90% of spring week participants in many years, but other banks are in a much lower range.

You need to factor this in when making decisions because even if one bank is “better” on paper, a 90% conversion rate trounces a 15% or 20% conversion rate.

How to Apply for Investment Banking Spring Weeks

You need to pay close attention to application open dates and apply ASAP, just as with real internships.

You can easily look up banks’ “spring week,” “spring insight,” or “discovery” programs (they’re all the same), but you can also use various online trackers to find the dates.

In fact, here’s an example of one such tracker with dates and information by bank.

Applications normally open between August and October, offers are usually sent in December – January, and you get the scheduling information in February.

The exact process varies by bank, but you can expect something like this:

• Online Application: This includes your academic and contact information, CV, cover letter (if required), and competency questions, which are written versions of the standard fit questions (expect 1 – 5 questions with answers of 150 – 300 words each).
• Numerical / Verbal / Logic Assessment: These tests are very similar to those given at or before assessment centers, and you can practice the same way (we recommend JobTestPrep).
• HireVue and/or Phone Interview: Expect mostly fit/behavioral questions and maybe a few simple technical/deal/market questions.

The biggest difference vs. the normal recruiting process in the U.K. is that you may not necessarily go through a full assessment center (AC) before the spring week.

Since ACs are expensive to administer, banks usually reserve them for candidates who have advanced further into the process.

Also, students applying to spring weeks are in their first and second years of university, so the group exercises often given in ACs may not be useful at this stage.

Who Wins Spring Week Offers?

The acceptance rates for most spring week programs are below 5%, so the short answer is “not that many students.”

If 3,000 students apply to Bank A, perhaps 100 – 200 will be selected for interviews, and 60 might get spring week offers.

Since students have almost no experience, the selection process comes down to:

• Do you go to a target school, or at least a decently well-known school?
• Do you have good grades, such as a 2:1 or above? What about your A-Levels, especially if you don’t yet have an academic record?
• Do you have interesting hobbies, activities, or student groups?
• Are you in one of our diversity categories (e.g., female, international, non-STEM/finance major, certain ethnicities, etc.)?
• Are you personable?

Usually, at least 50% of the students who win offers are from target or semi-target universities in the U.K. (e.g., Oxford, Cambridge, LSE, UCL, Warwick, and Imperial).

The remainder come from a mix of target and semi-target schools in continental Europe and lower-ranked schools in the U.K.

What Do You Do in a Spring Week?

You might wonder what you do at a bank if you only intern for 1 – 2 weeks, as most deals take months or years to execute.

Your tasks will include:

• Shadowing a few bankers.
• Attending workshops and training sessions.
• Practicing some of the work skills with non-client companies.
• And getting plenty of networking opportunities and attending social events.

You won’t be allowed to work on live deals for confidentiality reasons.

And if you’re in sales & trading, you won’t be allowed to trade or sell, just as you’re similarly restricted in S&T internships.

Therefore, most of your success depends on how well you network and how you perform in the final interview(s) or presentation.

How Do You Convert a Spring Week into a “Real” Internship?

This one varies by bank, but you’ll usually have to prove yourself with an end-of-week interview or case presentation.

If you do well enough, you’ll get invited to an assessment center, and if you perform well there, you’ll get a summer internship offer for the next year.

That’s a huge advantage because you won’t have to worry about applying or going through the entire recruitment process again.

The overall odds look like this:

• < 5%: Your chances of winning a spring week from a single application.
• ~50%: Your chances of doing well enough in the spring week to advance to the AC or other evaluation afterward.
• ~50%: Your chances of winning a real internship offer out of the AC.
• ~25%: Your overall chances of converting a single spring week into a summer internship, with huge variation by bank. The average range is probably more like 20 – 40%.

For tips on performing well at each stage, please see the articles on IB internships, internship preparation, S&T internships, and assessment centers.

The rates trading article has some tips for S&T assessment centers and interviews.

Bankers look for the same criteria as always: Reliability, decent industry knowledge, and evidence that you learned something during the week.

The main difference is that they can’t judge your “work product,” so networking and following up with everyone you meet are more important.

In other words, don’t just attend a social event and chat with people there.

When you meet someone, get their contact information and follow up with a quick call later if they seem receptive and helpful.

What If You Don’t Win a Summer Internship?

If you complete a spring week that does not convert, all you can do is apply for standard summer internships the next year.

Ideally, you’ll complete a finance internship before bank applications open in ~August and do the usual networking and interview prep.

If you have multiple spring weeks, your odds of winning at least one internship increase substantially.

However, if some of these spring weeks overlap, even by a few days, you can’t complete them all – so you’ll have to pick the firm(s) you’re most interested in.

If your SW does not convert, you’ll need a solid explanation before your next interviews.

You can refer to the article about what to do with no return offer from an internship, but I would recommend keeping your explanations short and sweet:

“I did well in the workshops and training but didn’t fit well with the team.”

“I liked the work but preferred a different industry or product group.”

“They were looking for people with a more extensive background in [X], so I wasn’t the best fit.”

OK, So What Are the Downsides of Investment Banking Spring Weeks?

Reading everything above, you might think:

“OK, so winning spring weeks is very difficult, and your chances of getting a full summer internship aren’t great, but so what?

It’s the same as normal IB summer internships at the large banks.”

There are a few problems, but I’ll start with the most obvious one: Some students spend excessive time on spring week preparation and applications when they could use their time and resources more effectively.

It’s like the downsides of studying for the CFA: The certification won’t hurt you, but it’s not necessarily worth the time and money required.

Also, completing a spring week mostly helps when applying to one specific bank for the same role.

For example, if you do an IB spring week at Bank of America but then decide to focus on corporate finance roles at Fortune 500 companies, this spring week will not help much vs. a 10-week summer internship.

Bankers in regions like the U.S. also have a low awareness of spring weeks, so if you decide to move or work elsewhere, the experience won’t help much.

Finally, completing a spring week does not guarantee an internship next year, so it may not reduce your workload.

In other words, if you win 2 spring weeks at different banks, you can’t just say, “OK, I’m done – time to relax and not worry about next year.”

You might not convert either one, so you need to continue preparing and networking, and you’ll need to gain some solid experience between now and internship applications.

By contrast, you could ignore spring weeks, do student activities and clubs, and network a bit to win a summer internship at a boutique PE/VC/other firm.

You would be under less pressure because there’s no expectation of return offers there, and you could still leverage the experience to apply to internships at large banks afterward.

Final Thoughts on IB Spring Weeks

The bottom line is that investment banking spring weeks were more useful a long time ago – before every finance/economics student in Europe became obsessed with them.

Due to over-saturation and obsessive-compulsive behavior, the odds have worsened, and the value proposition has fallen.

If you want to work in IB in London and you’re starting early – before you arrive on campus in a 3-year degree or in Year 1 of a 4-year course – yes, apply to spring weeks.

But also realize that:

1. A 2-week internship does not determine your entire life’s destiny.
2. There are other paths into banking (do 1-2 internships and a good activity, do off-cycle internships, pursue lateral hiring after graduation, etc.).
3. At most banks, most summer interns have not completed a spring week at the firm.

If you understand these points and avoid freaking out over your acceptance status at 50+ banks, your spring week experience might be almost as much fun as a spring break.

The post Investment Banking Spring Weeks: The Full Guide appeared first on Mergers & Inquisitions.

Partially, it’s an issue of accessibility: Everyone understands what happens to the stock price if a company beats earnings…

…but few people understand what it means if a company is set to violate a debt covenant on page 214 of its credit agreement.

But a few other reasons also explain why fixed income often gets overlooked: the unstructured recruiting process, fewer job openings, and the “cushiness” of senior-level roles.

For the right person, though, fixed income research can be even better than equity research, whether you’re at a bank, an asset management firm, a hedge fund, or a credit rating agency:

What is Fixed Income Research?

Fixed Income Research Definition: In fixed income research, finance professionals analyze companies’ debt issuances and make pricing and investment recommendations based on their outlook for each one.

The confusing part is that fixed income research exists at banks (“sell-side roles”), buy-side firms such as asset managers and hedge funds, and even credit rating agencies, and each one differs.

Also, it can be quantitative or fundamental – or both! – and different teams specialize in different instruments (investment-grade, high-yield, distressed, structured, sovereign, emerging markets, etc. – see the fixed income trading article for the full list).

We can’t possibly cover them all in one article, so this one will focus on fundamental research at banks, primarily for investment-grade and high-yield bonds.

All the top investment banks and multi-manager hedge funds have fixed income research, and so do the top asset managers and credit firms: PIMCO, Brookfield (Oaktree), Fidelity, BlackRock, Wellington, Blackstone (GSO), Octagon, Ares, and so on.

And the credit rating agencies (S&P, Fitch, Moody’s, and Morningstar DBRS in distant 4^th place) specialize in fixed income research.

Each role has common analytical elements, but the specifics and deliverables differ (e.g., a credit rating vs. an investment recommendation).

Equity Research vs. Fixed Income Research

The key difference in fixed income is that you focus on the downside case rather than growth:

• What are the chances the company will violate one of its covenants?
• Could the company default on one of its issuances?
• What if there’s a recession or a slowdown in global trade?
• If the company liquidates, which lenders will get their money back?

The fixed income market dwarfs equities in terms of market value and trading volume, but that does not necessarily translate into “more jobs.”

Liquidity is also more limited, and more trading is still done over the counter (OTC) rather than electronically.

And there is sometimes less turnover because senior staff tend to stick around longer.

Common Myths About Fixed Income Research

Some people claim that there’s more of a “macro focus” in fixed income research or that it’s more “quantitative” than equity research (i.e., closer to the work at a quant fund).

The problem is that these claims only apply to certain groups.

For example, if you focus on investment-grade bonds, you will focus more on macro factors because investment-grade companies rarely default.

Therefore, movements in interest rates drive bond prices more than other factors.

And if you’re in a “quant credit” group or something similar, sure, you could use statistics to analyze bonds rather than traditional 3-statement and cash flow modeling.

However, many fundamental roles within FI research still relate to the financial statements, debt analysis, and company-specific factors.

What Do You Do as a Fixed Income Research Analyst or Associate?

As in equity research, “Analyst” is the senior role, and “Associate” is the entry-level position.

Confusingly, there are also different “levels” within these, such as VP-level and MD-level Analysts.

Many of the work tasks are quite similar:

• You normally get assigned 1-2 industries and cover a specific set of companies; you’ll create or update a 3-statement model with support for credit features for each company.
• You split your time between new bond issuances and existing ones, similar to “initiating coverage” vs. “existing coverage” in ER.
• You cover quarterly earnings and send updated models and notes to clients and other teams.

The differences vs. equity research lie in the details:

• Financial models focus on the downside scenarios and analyze each issuance separately: the Yield to Worst, Yield to Maturity, Recovery percentages, and the default risk.
• The output is more about the credit stats and ratios (Debt / EBITDA, EBITDA / Interest, etc.), the appropriate debt vs. equity mix, and additional capital needs over the next few quarters.
• You may have to cover dozens of issuances, meaning you cannot spend that much time on a single company or bond.
• The legal side is quite important because you must read the debt agreements to understand each issuance’s covenants and other terms.
• Quarterly earnings calls and management interaction are a bit less important because it’s not always practical to participate when you cover 50 companies; also, events outside of earnings calls can sometimes be more meaningful for bond prices.

An Example Fixed Income Research Report

You can find fixed income reports on sites like Moody’s, Fitch, and S&P, but these tend to focus on the credit rating process instead.

So, I’ll share here an old report issued by Goldman Sachs on J.C. Penney.

Due to the age and the fact that J.C. Penney later declared bankruptcy, I don’t think this is particularly sensitive (but I may still remove it if it becomes an issue).

You can see that the “investment recommendation” is quite different:

The model includes different scenarios, but they’re not the typical Bear / Neutral / Bull cases used in equity research.

Instead, the scenarios are based on the company’s prospects: Liquidation vs. going concern vs. debtor-in-possession financing (see the restructuring IB article for more about these):

Throughout the report, there’s also a discussion of liquidity triggers rather than traditional catalysts – because they’re concerned about how events will affect the company’s ability to repay or refinance its debt:

Recruiting: Who Gets into Fixed Income Research?

As with equity research and hedge fund roles, there are two main options for breaking in:

1. Complete the CFA, get fixed income-related internships, and start working directly in FI research, either at a bank or a buy-side firm.
2. Do something else in finance first, such as corporate banking, capital markets, or a credit rating agency role (any job with the “Credit Analyst” title works). Sometimes, fixed income traders even get in (depending on their desk and role).

The hiring process is random and unstructured with no real “cycles” (unlike recruiting for IB and PE roles).

Some of the biggest asset managers, such as BlackRock and Fidelity, offer internships and entry-level roles in fixed income research, but they are incredibly competitive to win.

Banks do not appear to offer many internships in this area, so if your goal is a bulge bracket bank, you’ll likely have to work in other credit roles first and network your way in.

Fixed Income Interview Questions and Case Studies

To get an idea of interview questions, please review the articles on corporate banking, credit hedge funds, and distressed debt hedge funds because the topics covered are similar.

A few examples:

• Markets: What’s the 10-year U.S. Treasury yield at? What about gilts (U.K.), bunds (Germany), or Japanese government bonds (JGBs)?
• Bond Prices and Yields: What’s the difference between the Yield to Maturity, Yield to Call, and Yield to Worst, and how do you use them in real life? What might cause a bond’s price to change?
• Bond Math: How can you approximate the Yield to Maturity? What about the duration and convexity? What does duration mean intuitively?
• Rates: Is the “risk-free rate” truly risk-free? If so, how could you still lose money by investing in a 10-year government bond in a “safe” country?
• Rate Changes: If interest rates are set to rise over the next year, how would you structure your portfolio? Would investment-grade or high-yield bonds show more of an impact?
• Bond Types: How are corporate bonds different from government bonds? How would you analyze them differently?

If you get a case study, the most likely task will be to read 2-3 pages about a company and its bond issuances and make an investment recommendation on a specific issuance.

If it’s a high-yield or distressed bond, they could also ask you for a specific price target or a recommendation with credit default swaps (CDS) included, as in the report above.

Since the default probability is so low for investment-grade bonds, much of it comes down to macro factors, relative value, and portfolio “fit.”

For example, maybe a company has a 5% bond due in 10 years and a 6% bond due in 1 year.

Neither one is likely to default, but the 6% bond doesn’t necessarily “win” because:

• If you believe interest rates are set to drop substantially, you could earn a higher yield if you buy the 5% bond, wait for the rate drop, and sell it before maturity because it’s more sensitive to interest rates.
• The 1-year maturity for the 6% bond is quite short, and it may not match your overall portfolio’s duration target.

You must also consider these issuances vs. those of similar companies: Is 5% or 6% a good deal? Can you find lower/higher yields in the market?

The top mistake in these case studies is not picking a specific issuance to invest in, especially if the company has a wide range of bonds with different maturities.

Fixed Income Research Salaries and Bonuses

There isn’t much information about salaries and bonuses, but for sell-side roles, you should expect a discount to equity research compensation.

If ER Associates initially earn $150 – $200K for total compensation, FI Associates might start in the $100 – $150K range.

In equity research, some MD-level “Analysts” could potentially earn $1 million+ from their base + bonus, but the pay ceiling is lower in most fixed income roles.

Expect something more in the “mid-six-figures” range (though there are exceptions for top-performing groups and Analysts).

In buy-side fixed income research roles, Analysts can earn $300K+ depending on the firm and their seniority, and the PMs above them can earn a multiple of that (again, depending on the firm type and performance).

The Hours and Lifestyle in Fixed Income

The good news is that the hours in fixed income research are generally better than equity research because there’s less of a need to follow earnings calls closely or issue new reports constantly.

Since you cover so many more names, it’s more about forming an overall view of the market and your coverage universe.

So, expect something closer to a “normal” workweek, such as 50 – 55 hours, spiking a bit when a major event occurs.

And at buy-side firms such as asset managers, plenty of fixed income research professionals work 40 – 50 hours per week and have relatively low stress levels.

Fixed Income Research Exit Opportunities

Most people in research want to work at hedge funds, so let’s start there.

Hedge funds are more plausible if you focus on high-yield or distressed issuances because few HFs invest in investment-grade bonds, and the skill sets differ.

However, you’ll also be up against bankers who worked in groups like Leveraged Finance and Restructuring, so hedge funds are not necessarily a “sure thing.”

Traders have a big advantage when recruiting for global macro hedge funds, but you don’t have quite the same advantage when applying to credit-focused HFs.

You could also move into equity research or investment banking, especially if you focus on groups where credit is extremely important (e.g., power & utilities, FIG, or industrials).

Distressed private equity is theoretically possible if you find a firm that operates more like a hedge fund, but it’s not especially likely.

The most likely outcome is that you’ll continue working in credit-related research roles at a bank or an asset manager.

Exits like traditional private equity, corporate development, and venture capital are unlikely because you need deal experience.

Final Thoughts: Is Fixed Income Research Worth It?

Summing up everything above, here’s how you can think about fixed income research:

Pros:

• The work is arguably more interesting than equity research, at least if you cover high-yield or distressed issuances.
• It can be a nice “second step” after a role like corporate banking, capital markets, or a credit rating agency if you want to improve your profile for buy-side roles.
• It is very cushy at the top, as senior-level staff can earn into the mid-six-figures (or higher) with less stress than IB/PE-style jobs.
• You can move around to plenty of other credit-related roles.

Cons:

• There’s little turnover, which means that recruiting has a very high “luck” component.
• Exit opportunities exist, but they’re narrower than IB/PE exits because you do not work on deals.
• The work can get repetitive, especially if you focus on investment-grade issuances.

• Compensation is often a discount to equity research and “equities in general” (but there’s lots of variance for different firm/fund types, performance, etc.).

It is a shame that fixed income research gets overlooked, but it’s also understandable.

That doesn’t make it a bad area to get into – but if you do, be prepared to stay there for a long time as you grind your way up.

Hopefully, that Senior Analyst above you will retire one day.

The post Fixed Income Research: The Overlooked Younger Brother of Equity Research? appeared first on Mergers & Inquisitions.

In other words, they’re the public face and brand of their fund, and all investment decisions flow through them.

They might have separate teams for specific strategies or markets, but everything is run under a single Profit & Loss statement (P&L).

This setup creates many differences with multi-manager (MM) hedge funds, from investment styles to recruiting and careers.

Interestingly, some well-known hedge funds are also tricky to classify, as they combine elements of SM and MM funds.

Depending on your personality, skill set, and long-term goals, these single-manager funds or “hybrid funds” could be perfect or far from ideal:

What Are Single-Manager Hedge Funds?

Single-Manager Hedge Fund Definition: A single-manager (“SM”) hedge fund is run by one individual Portfolio Manager (PM) with one Profit & Loss Statement (P&L) rather than multiple teams with multiple P&Ls; it aims to earn high absolute returns, often with concentrated portfolios and very specific strategies, and it may have periods of overperformance and underperformance.

There are very few real “requirements” besides the single PM / single P&L one above and the standard Limited Partner / General Partner structure that all hedge funds use.

But one rule of thumb is that nearly all single-manager funds are smaller than the biggest multi-managers, as one person could not manage $100+ billion in assets.

Here’s a quick run-down of the other differences:

• Performance Targets: Like all hedge funds, single-manager funds aim for high absolute returns (e.g., a double-digit percentage regardless of what the S&P does), but their real internal targets may vary based on their strategies, lock-up periods, and more.
• Portfolio Structure: Unlike MM portfolios, SM portfolios do not have to be market–neutral or based on pair trades; many SM funds also tend to run much more concentrated portfolios (e.g., 10 – 15 positions rather than 100+).
• Leverage: Unlike MM funds, which all use significant leverage to boost their modest returns, SM funds span a wide spectrum. Some use no leverage, while others use decent amounts (but less than the multi-manager giants).
• Drawdown Limits: Most SM funds do not have strictly enforced drawdown limits, such as “no more than a 3% drop in a month.” They’ll tolerate monthly/quarterly losses if they’re confident of the longer-term outlook, such as the 1-year performance.
• Ease of Getting Fired: With some exceptions (see below), job stability tends to be higher at SM funds because they want to retain talented people, even if they don’t perform well in one quarter.

A Day in the Life of a Single-Manager Hedge Fund Analyst

At most single-manager hedge funds, an average day is like the one described in the Hedge Fund Analyst article:

• Market research on specific companies and assets.
• Speaking with customers, suppliers, management teams, and market participants.
• Internal meetings where you discuss new ideas and your current positions with the rest of the team.
• In-depth analysis that might take days or weeks, such as a financial model with 1,000 rows in Excel to assess a biopharma company’s valuation.
• “Putting out fires” when emergencies arise, such as unexpected company announcements.

You still pay attention to catalysts and investor sentiment, but the job is more about forming a long-term view of asset prices – not predicting what will happen on the earnings call next week.

“Quick analyses” could still come up, especially when catalysts are triggered, so there is some overlap between the multi-manager and single-manager investment styles.

This is especially common in areas like distressed debt investing that depend heavily on catalysts.

Single-Manager Hedge Fund Performance

The multi-manager hedge fund article described how MM funds grew faster than the overall industry between 2018 and 2023.

But that doesn’t necessarily mean that SM funds “performed poorly”; they simply didn’t get the same attention.

I found a useful Substack article from Joachim Klement (with a separate study) that addresses this point:

“Single hedge fund managers tend to have higher abnormal returns on average than team-managed funds.

But these higher average returns come at the price of higher tail risks and higher variance of returns.

In other words, while the average single-manager hedge fund has better performance, individual funds can be at the very top or at the very bottom, depending on the decisions of the fund manager.

Team-managed funds are in the murky middle, neither particularly good nor particularly bad.”

As a notable example, here’s Pershing Square’s performance vs. the S&P 500 from 2004 through 2017:

Yes, Pershing Square outperformed the S&P on an annualized basis over this entire period, but it also underperformed for multi-year periods!

Also, most of its outperformance came from strong results in 2004 – 2010, which is why it struggled and lost AUM and investor support in the 2011 – 2019 period.

By contrast, a top multi-manager hedge fund would post more consistent results but probably wouldn’t outperform the S&P by 5% annually over 14 years.

(One notable exception is Citadel’s Wellington fund, which has delivered 19% annualized net returns since 1990 – but that is just one fund there.)

The Top Single-Manager Hedge Funds

Single-manager funds far outnumber multi-manager funds, but they’re also much smaller.

Think: “Hundreds of millions in AUM up to a few billion” – a lot of money, but tiny by the standards of the largest hedge funds and asset managers.

If we focus on the larger single-manager funds, i.e., those with $1 billion up to $10 billion+, a representative list might look like this (please see the important notes below before leaving a comment or question):

Many of these funds were spun off from Tiger Global (hence the “Tiger Cubs” moniker).

Some have stayed relatively small, while others have expanded significantly beyond the traditional single-manager size and strategy.

As I mentioned at the top, the classification here is tricky, which explains why I’ve added the stars (“*”) to certain names.

Some of these, such as Pershing Square, Egerton, and TCI, are clearly single-manager funds because they only have a few dozen employees, and everything runs through the Famous Person in Charge.

However, others – such as Coatue, Maverick, Viking, and even Baupost – are more questionable because they’re much larger.

Some of these funds have 100+ employees; Viking has 275+ with 45+ investment professionals.

That’s much too big for a single team, so they have multiple teams with different Portfolio Managers and Analysts separated by sector and strategy.

Tiger Global is another example of this issue: It started as a hedge fund but later expanded into private equity and venture capital, with different teams for each one.

However, many people still consider all these funds “single managers” because of their investment styles.

Specifically, they have looser drawdown limits, they’re not betting on quarters, and they don’t necessarily run market-neutral portfolios.

So, if you go by the size and separate teams, the larger funds here are more like MM funds, but if you go by investment style, they’re more like SM funds.

Recruiting and Interviews at Single-Manager Hedge Funds

Most hedge fund recruiting is “off-cycle,” and that’s even truer at single-manager funds.

In other words, you’ll have to do your own legwork by networking with the right people, monitoring job postings, and pushing your case aggressively.

Some of the larger funds here, such as Viking, may have structured recruiting, but they are very specific about the types of candidates they prefer.

Specifically, they often hire people who have followed “the path” by working at a top investment bank for 2 years and then joining a private equity mega-fund for another 2 years.

Teams are small, so these funds don’t offer many entry-level seats – meaning that you need a great pedigree, luck, or both.

Also, unlike multi-manager funds such as Point72 that offer direct recruitment and training for undergrads, it’s rare for any of these SM funds to recruit university students directly.

If you have the right background – IB/PE at top firms or possibly equity research or CFA / asset management experience – the interviews and case studies are fairly standard.

Expect 3-statement modeling or valuation tests, stock pitches, and combined exercises where you do both (e.g., “Read the filings, build a model, and make a long/short pitch”).

The biggest difference is that you’re more likely to get an open-ended exercise without much time pressure at a single-manager fund, such as:

“Take a week, find a company in Sector X, build a valuation, and pitch us on a long/short/other investment in the company.”

There’s no quick/simple way to do this, but you’d probably start by screening for companies with out-of-line valuation multiples and go from there.

For specific examples, see our stock pitch guide and the templates there.

Careers and Compensation at Single-Manager Hedge Funds

Teams are very small at “true” single-manager funds – perhaps 7 – 15 investment professionals potentially managing billions of dollars.

Since teams are small and want to retain talent, turnover tends to be much lower than at the MM funds.

That’s nice for career stability, but it’s a double-edged sword because it means that promotions are more difficult; entry-level recruiting is tougher since no one wants to leave.

And if there is only one Portfolio Manager, you will only be promoted to PM if the existing one expands the firm by raising capital and creating more teams.

The good news is that if you don’t get promoted, you could move to a multi-manager fund or even back into IB or PE if you came from one of those.

In terms of compensation, most single-manager funds charge lower effective fees than MM funds because most stick to the traditional “2 and 20” (more like 1.75% and 17.5% now) structure.

Multi-managers, by contrast, have adopted a pass-through structure that makes the LPs pay for expenses, including compensation.

This results in effective management fees of 3 – 10% for many MM funds vs. the much lower 1 – 2% for SM funds.

However, the AUM per head is also much higher at SM funds, meaning they are more “efficient” than MM funds, so the lower fees don’t necessarily result in lower pay.

In practice, year-end bonuses at single-manager funds are more variable and arbitrary, which can result in surprises in both directions.

For example, if you have a “bad year,” but the PM sees potential in you, he might award you a solid bonus anyway to retain you.

But sometimes, if you had a “great year,” your bonus might be less than expected if the PM feels that other team members made bigger contributions.

The average compensation levels are similar (low-to-mid six figures at the entry-level, rising to high six and low seven figures after that), but the progression and link to the current year’s P&L are less direct.

Are Single-Manager Hedge Funds for You?

Here’s how I’d sum up everything above:

Pros:

• The earnings potential is still very high, especially as you become more senior (even if you’re not an official PM).
• There’s more job stability since most SM funds do not fire people for a 4% drawdown in one quarter.
• The work is arguably more interesting/appealing because you focus on the longer-term outlook rather than quarterly beats and misses.
• The lifestyle is more sustainable since there’s less stress and reduced hours.

Cons:

• It’s difficult to recruit for these roles due to the dearth of openings, low turnover, very specific requirements, and off-cycle processes.
• The advancement path and compensation are arbitrary; even if you perform well, you won’t necessarily be rewarded as expected.
• You won’t have much brand-name recognition if you ever leave the industry or change careers.
• Fund variability is very high, which means that the stability and stress may not be so great at places like Viking or Coatue (yes, they’re great funds, but they also have a reputation for long hours and stress).

The average banker or private equity investor would probably feel more comfortable at a single-manager fund.

But in the long term, it may not be the best career option unless you perform so well that you could leave and start your own hedge fund.

If you’re more in the “solid but not spectacular” category, it might be more useful to gain experience at an SM fund and then move to a multi-manager or another firm with a clearer advancement path.

You may earn less than a PM at a single-manager hedge fund, but you also won’t get stuck in the murky middle.

Want more?

You might be interested in:

• Fixed Income Trading: The Definitive Guide.
• Multi-Manager vs. Single-Manager Hedge Funds: Recruiting, Investing, and Climbing the Ladder

The post Single-Manager Hedge Funds: The Best Way to Get a Recurring Guest Spot on CNBC? appeared first on Mergers & Inquisitions.

It’s one area where people on both sides tend to talk past each other:

• Bankers say that wealth management roles pay less, offer less interesting work, and lack good exit opportunities.
• Wealth managers say that investment banking requires crazy hours, has mostly dull work, and is ridiculously competitive to get into; also, the “compensation ceiling” may be similar in both fields, so why kill yourself in banking?

The truth is that both claims are correct but incomplete.

To illustrate the problem, I’ve created two “career ladders” for these fields:

Now let’s dig in:

Wealth Management vs. Investment Banking: Job Functions

Wealth managers advise individuals on their investments and may provide other services, such as tax and estate planning.

These individuals are usually “high net worth” (HNW), meaning an average of $5 – $10 in assets, but it could be as low as $1 million. And wealth managers at large banks may advise people with as little as a few hundred thousand to invest.

Some of these client differences relate to the distinction between private wealth management and private banking; for more on that, you should review the the private banking article.

By contrast, investment banking is more about advising companies on transactions such as M&A deals, equity and debt deals, and restructuring.

In wealth management, you advise the same clients over long periods, but in IB, you hop from deal to deal – though some groups do operate on more of a “client service” model.

When a deal becomes “active” in IB, you dive into it and go in-depth into all aspects, from the financials to the buyer/seller outreach to the presentations and more.

You can think of it like this:

• Wealth Management: Broad and long-term/continuous client coverage.
• Investment Banking: Deep and short-term coverage (just until the deal is done!).

There is some overlap because at the large banks, wealth management clients often get early/privileged access to investment banking products, such as upcoming IPOs, equity/debt offerings, or new investment products.

The Nature of the Work: Markets, Analysis, Sales, and Interpersonal Skills

Wealth management (WM) requires broader knowledge of the financial markets since you may have to advise clients on everything from their portfolio allocations to upcoming tax changes.

(Note that the scope is more limited in “pure” WM roles; you’ll do more non-portfolio work in private banking.)

Wealth management also requires more sales and interpersonal skills even at the entry level because it is a sales job from Day 1 – and you need to start bringing in clients early to succeed.

There’s much less technical work because your analysis tends to be very high-level. Think: benchmarking portfolios rather than modeling companies.

You will very rarely get exposed to the type of financial modeling that bankers complete: 3-statement models, DCF models, M&A models, LBO models, and so on.

Investment banking eventually turns into a sales job, but only when you reach the VP level or above (roughly 7-8 years into the IB career path).

At the Analyst level, it’s more about grinding away in Excel and PowerPoint.

As you move up in the early years and become an Associate and early VP, it turns into “project management” and making sure your team delivers.

Knowledge of the financial markets is helpful, but you don’t need it like wealth managers do because you just need to understand the deals you’re currently working on.

One final note is that in wealth management, there’s a split between relationship managers and investment professionals.

This split doesn’t exist in quite the same way in IB, so you can get a very different experience in WM depending on your role.

Recruiting in Wealth Management vs. Investment Banking

You should know all about IB recruiting from reading this site, but it’s insanely competitive and starts very early.

To get an IB internship that leads to a full-time return offer, you need to get “pre-internships” in Years 1 – 2 of university, prepare for recruiting by the middle of Year 2, and do a good amount of technical prep – while earning high grades and doing something to make yourself look interesting.

If you miss undergrad recruiting or change careers, you can also get into IB via lateral hiring or from a top MBA program, but these paths take more time (and money!), and your odds are not spectacular.

By contrast, wealth management is much less competitive to get into.

If you have good sales skills, you could break in with a middling GPA (3.0 – 3.5) and without a target school or great internships.

Like any sales job, they hire lots of candidates because it’s impossible to know in advance who will succeed.

The philosophy is to hire many candidates and let them “sink or swim.”

Interviews are broader than IB interviews and require knowledge of asset allocation, economics, and and financial markets, but far less specific technical knowledge.

For example, they might ask you how to use a DCF, what bond yields are, or the trade-offs of debt vs. equity – but but they won’t ask you to build a DCF model or calculate Unlevered Free Cash Flow.

As with the job itself, the theme is breadth over depth.

Wealth Management vs. Investment Banking: Careers and Promotions

At a high level, the IB and WM career paths seem similar: it might take 10 – 15 years to reach the top (Managing Director), and you start out doing analytical work but shift to sales as you advance.

However, the “sales shift” starts much earlier in wealth management, as it’s pretty much a sales job from Day 1 (with some analytical work mixed in).

The first few years are very tough because you start from nothing – but if you build a decent book, the job gets easier since you’ll have consistent revenue from long-term clients.

By contrast, the first few years in investment banking are tough in a different way: tons of work, crazy hours, and an unpredictable schedule.

You don’t need to be good at sales to make it to the VP level; you can grind your way up if you’re good enough at executing tasks and following instructions.

To advance and move beyond the VP level, you do need sales skills, which not everyone has – this is why the more analytical candidates often leave for private equity and hedge funds in the early years.

Investment banking careers are also less stable than wealth management ones, and mid-level bankers often get laid off because they’re expensive and do not yet directly generate revenue.

I would summarize the careers like this:

• IB: Tough-but-grindable early years; the mid-level roles become less stable and require more real-world skills to advance.
• WM: The early years are painful because you need real results to advance, but it gets easier as you move up and gain “sticky” long-term clients.

Wealth Management vs. Investment Banking: Compensation and Hours

Salaries and bonuses change each year and depend on the firm and group, but in both careers, you’ll start in the low-six-figure range (e.g., $100K to $200K) and advance from there.

Expect something on the lower end of that range for WM roles at large banks and something in the mid-to-upper-end (or above) for IB roles.

At the mid-levels, VPs and Directors in IB also earn significantly more than the equivalent positions in WM (it’s maybe a ~30 – 50% discount in WM).

At the top, MDs in wealth management can theoretically earn $1 million+ year, just as many investment banking MDs do.

However, it might be more realistic to expect “high-six-figure pay” if you make it to that level and have a good base of long-term clients.

There’s less money to go around because the fees are lower, as most groups charge 0.5% – 1.0% on assets under management (AUM).

Investment banks also charge fees in that percentage range, but they’re charged on deals worth hundreds of millions or billions of dollars.

Some wealth managers eventually amass $100+ million in assets under management, but it’s a very slow process, and there’s a limit to how much in AUM any one group can manage.

As a result, the dollar volume of fees ends up being higher for a similar headcount in investment banking.

Compensation is also more individualized in wealth management, especially as you advance – if your clients generate significant fees, you should still do well even if others in your group perform poorly.

This is not the case in IB until you reach a very senior level (for more on all these points, see the article on investment banker salaries).

Finally, the hours are significantly better in wealth management because you don’t do that much work outside of normal business hours.

So, you won’t pull all-nighters to finish pitch books, and you won’t be called in over the weekend to make last-minute changes to a model.

It’s usually a 50-hour-per-week job, which is significantly better than the 60, 70, or 80+ hours required in IB.

The Top Firms in Wealth Management vs. Investment Banking

Most people would say the top investment banks are the bulge brackets and elite boutiques, at least for entry-level roles.

They do larger, more complex deals and offer better experience, compensation, brand-name recognition, and exit opportunities.

Even as you advance, there isn’t necessarily a reason to leave one of these firms and move to a smaller one outside of very specific lifestyle/personal issues.

In wealth management, some people argue that it’s best to start at the bulge bracket banks for the brand name, compensation, and network…

…but they might also say that the better long-term roles in the industry are at the pure-play firms and boutiques, especially on the “private banking” side.

These firms tend to work with higher-end clients, and the work tends to be more varied and interesting, with less cold-calling and cold-emailing to chase leads.

I could not find data to confirm this one, but I would also assume that the compensation ceiling is higher at these firms because they do not necessarily use a standard fee schedule.

Wealth Management vs. Investment Banking: Exit Opportunities

There are some huge differences here, and it’s tough to argue with the quality of investment banking exit opportunities: private equity, hedge funds, corporate development, corporate finance, venture capital, startups, equity research, and more.

It offers the broadest set of possible exits within the finance industry if you leave early (in your Analyst years).

As you advance, your exit opportunities narrow because PE firms and hedge funds don’t want to pay for expensive VPs or Directors with no direct investing experience.

The corporate finance/development options and a few others remain, but you’re unlikely to exit into a PE mega-fund – or any sizable PE firm – as a seasoned VP in investment banking (for example).

The exit opportunities in wealth management are much more limited because it is an exit opportunity.

In other words, people don’t go into WM to leverage it into another job: They go in it to build up a client book and eventually earn a high income with a good lifestyle.

If you decide it’s not for you, you might be able to move into investor relations, fundraising, or sales jobs, but deal-based roles are highly unlikely.

Even hedge fund and asset management roles are unlikely unless you’ve had a lot of experience analyzing individual companies or doing very technical analysis.

You might have a shot at sales & trading if you’ve had experience with relevant products, such as FX hedges for international clients, but even that is a stretch.

Final Thoughts on Wealth Management vs. Investment Banking

The basic issue is that investment banking “wins” for entry and mid-level roles due to the higher optionality, higher pay, and the ability to grind your way up the ladder.

Yes, IB is far more difficult to get into, and the hours and lifestyle are much worse – so these points count against it.

But if you’re an ambitious student or you’re early in your career, you shouldn’t care too much about these issues.

At the top levels, WM and IB roles are arguably similar, and wealth management might even offer advantages in terms of reduced stress and shorter hours.

But it’s tough to get there, and the burnout/quit rate is very high.

In the past, many students used WM roles at large banks to get solid brand names on their resumes and become competitive for IB internships.

But I’m not sure how well this works anymore because of hyper-accelerated recruiting, at least in the U.S.

It would be smarter to get more relevant internships – anything involving deals, modeling, or individual investments – even if they’re at boutiques or other, smaller firms.

That said, I think the sheer hatred directed toward wealth management in some online forums is quite exaggerated.

From my perspective, yes, IB is “better” for most ambitious/analytical people, but not everyone has the same personality, skill set, or goals.

If you’re very sociable but not the most analytical person, wealth management could easily be a better option for you.

Similarly, if you do not want to work more than 50 hours per week, and you’re in it for the cushy lifestyle after 10+ years, wealth management could also be better.

But remember that it is a different career ladder – and you don’t want to change your mind and fall off when you’re midway up it.

For Further Reading

• From Regional Audit to Investment Banking: How to Break in *Without* the Big 4 Pedigree
• From Valuation Advisory to Investment Banking: How to Make the Lateral Leap
• How to Cold Email for an Internship: Investment Banking Cold Email Templates and Guide
• M&A Investment Banking: The Best Group Ever?
• How to Move from Accounting to Investment Banking and Leave the Audits Behind Forever
• From Wealth Management to Investment Banking: How to Make the Leap

The post Wealth Management vs. Investment Banking: Career Deathmatch appeared first on Mergers & Inquisitions.

The IB internship recruiting timeline is now so insane that even mainstream news sources like the Wall Street Journal are writing about it (“The Race Is On to Hire Interns for 2025. Really.”).

And yes, you read the news correctly: Banks like RBC, DB, Houlihan Lokey, Rothschild, and Guggenheim opened 2025 summer internship applications in calendar year 2023.

Admittedly, not all banks did this, and many bulge bracket firms will start in the normal time frame of January – March.

In practice, this means you must be on top of IB internship recruiting from Year 1 of university if you’re in the U.S.

I’ll cover the following points in this updated article:

How to Get an Investment Banking Internship: The “Ideal” Timeline in the U.S.

By the time internship applications open in Year 2 of university – whether that’s in the middle or beginning (!) of the year – you should have the following elements in place:

• A good GPA – at least 3.5 and ideally a bit higher.
• One (1) solid finance internship and one (1) student/leadership activity or two solid finance internships.
• A decent amount of networking completed with bankers (e.g., 30 – 40 coffee chats or informational interviews).
• And ~30 hours of interview prep, which you can stretch over 2-3 months or cram into a few weeks (your story, standard behavioral questions, technical questions, etc.).

To accomplish that, I recommend the following timeline:

How to Get an Investment Banking Internship, Step 1: Your First Year in University

You don’t necessarily need to pick your major at this stage, but I would recommend finance/accounting or something that will be useful for a wide range of jobs.

Think: Engineering, math, statistics, or something with elements of all these, such as “management science” or “operations research.”

Avoid options like sociology, art history, gender studies, etc., unless you’re at one of the top ~5 universities in the country (it’s easier to get away with irrelevant majors there).

Next, front-load your schedule with easier classes in your first year, such as language classes or university-wide prerequisites.

Earn a high GPA from these easy classes and save the hard, technical ones for later years.

Join 1-2 student groups that will help you network into finance roles, such as the student investment club or the business frat. You could also consider investing or case competitions.

Most importantly, you NEED to get a finance internship in your first year or in the summer after your first year.

In the past, you could wait until Year 2 for your first internship, but this is riskier today because applications keep opening earlier and earlier.

And yes, some banks will still start later, but you want to keep your options open so you can apply to as many firms as possible.

You probably won’t be able to get a “real” IB internship, but you can find some good alternatives:

• Search fund internships.
• Internships at local venture capital or private equity firms.
• Internships at regional boutique banks.
• Corporate finance roles at nearby companies.
• Wealth management.
• Corporate banking.
• Anything in real estate, such as brokerage, appraisal, or lease management.
• Big 4 or independent valuation firm internships.

There is no set process, so you’ll have to find people on LinkedIn, send them messages or emails, and repeat until you find something.

How to Get an Investment Banking Internship, Step 2: The Summer After Your First Year

Ideally, you’ll complete your first finance internship in this period (see above).

You should also start learning the technical side (accounting, valuation, and basic M&A and LBO concepts) and begin networking with alumni.

It might even be a good idea to start networking before the end of your first year so you have more time to follow up with alumni and set up calls.

This may sound unbelievable, but with recruiting moving up and start dates becoming more random, it is better to start too early than to wait too long.

If your internship has normal hours, you could target ~10 hours per week for networking + technical prep.

A good target might be to complete 20-30 coffee chats or informational interviews by the time your second year starts.

With the technical prep, the most important point is to learn by doing.

Yes, you can read guides, take courses, and watch YouTube videos, but you should also spend a few hours building simple DCF models or 3-statement models to learn the key concepts.

You will retain far more information if you practice with companies you’re interested in than if you passively consume content.

How to Get an Investment Banking Internship, Step 3: Your Second Year in University

This is where it becomes unpredictable because it depends on when banks open their applications, which seems to change each year.

Since you can’t know that beforehand, you should continue networking with alumni and preparing for interviews as your second year begins.

Weekend trips to places like New York or London can certainly help, but you don’t necessarily “need” them if you’ve been able to speak with many alumni already.

You’ll also have to consider your internship plans for the upcoming summer (after your second year) since they will appear on your resume/CV and in interviews.

I would refer to the “pre-internship” list above and focus on the area you’re most interested in.

If you don’t already have a “brand name” on your resume, aim for an internship at a large, brand-name company; if you do have that brand name already, aim for a highly relevant internship, such as one where you work on deals and value companies.

At some point in your second year, applications will open, and the recruiting process will begin – at least if you’re at a target school.

All you can do here is pay close attention to news alerts and job postings and be ready to pounce the moment applications open.

Some people recommend resources like The Pulse, the Adventis newsletter, etc., but I can’t personally speak to how useful or accurate they are for tracking the dates.

If you do well in HireVues and investment banking interviews, you might have something lined up by the middle to end of your second year.

How to Get an Investment Banking Internship, Step 4: The Summer After Your Second Year

You complete your second finance-related internship here.

Also, not all banks finish their summer internship recruiting by this stage, so if you haven’t yet found something, you might still have a shot.

Smaller firms tend to be a bit slower, so you could find some middle-market and boutique openings, even if the bigger banks are done.

Therefore, you can keep applying and networking – but your chances decrease the longer it takes.

How to Get an Investment Banking Internship, Step 5: Your Third Year in University

Some banks will continue recruiting even into your third year, so you might still be able to interview around.

But if you do not win an internship within the first few months, chances are that you won’t be in IB at a large bank for the summer before your final year of university.

What If You Start Late or Miss Application Deadlines?

The best “Plan B” options depend on how far off you are.

If you can plausibly get finance internships in a related area, such as corporate banking or corporate finance, you could potentially aim for a full-time return offer in one of those fields, work for a year, and then go for lateral roles in IB.

Similarly, if you can win an offer at a boutique bank or another smaller firm, you could take a similar approach and work there for a year and then go for lateral roles at larger firms.

But if the best you can do is something like wealth management, it will be much harder to make this move (you want something with more financial or deal analysis – for more, see our article on wealth management vs. investment banking).

You could also think about fields like equity research that are less structured and that might allow you to get in without a previous internship.

On the other hand, if you missed the deadlines because you were on a totally different path – such as engineering, marketing, or pre-med – you will probably need to pivot more aggressively with something like a Master’s in Finance degree.

You could also work for a few years and go the MBA route, but I do not recommend that for your immediate “Plan B” because it’s slower and more expensive.

How to Get an Investment Banking Internship at the MBA Level

At the MBA level, the timing is less frantic because banks cannot recruit until students arrive on campus.

You should still expect a quick start to recruiting and on-campus events once classes begin, but that has always been the case at this level.

We have an article on the MBA investment banking recruiting process, so please refer to that for more details.

In short, you still need to prepare for interviews and do some early networking, but the entire process is very structured at the top programs.

So, your candidacy is more about presentation, consistency, and ensuring you have a good enough background to be competitive.

How the Recruiting Timeline Differs in Other Regions

In places like London and Hong Kong, the process has moved up to earlier start dates, but it’s not as ridiculous as in the U.S.

So, you can afford to take your time a bit more and get internships in Year 2 (assuming it’s a 4-year degree – if it’s a 3-year degree, you need to move more quickly).

Applications usually open ~10-12 months before summer internships begin, so it’s less accelerated than the U.S. timing.

The Big 5 banks in Canada seem to be starting recruiting season earlier as well, but they’re more in-line with the start dates of the U.S. bulge brackets (well, except for RBC).

One difference is that there are more avenues into IB internships in regions like the U.K., such as investment banking spring weeks.

How to Get an Investment Banking Internship: What to AVOID

If you attend a good university, earn good grades, get 1-2 decent internships, and network/prepare in advance, you’ll probably be able to win an IB internship.

But you could also make plenty of mistakes that reduce your chances, so here’s what you should avoid:

First, it’s risky to transfer to a better university – even if you’re moving from an unknown state school to the Ivy League.

This strategy made sense for students at non-target schools a long time ago, but the new recruiting timeline makes it difficult to execute – as you won’t have much time to network with alumni or join student groups.

Second, do NOT take difficult classes in your first year. You cannot afford a lower GPA because banks use grades to weed out candidates.

Third, do not wait too long to start networking. If you wait until the middle of your second year, it might be too late!

Finally, do not focus on activities at the expense of internships. Yes, leadership experience is nice, and clubs can be useful for networking, but you will not make it far without internships.

Additional Reading About Internships

I’ve written a lot about IB internships over the years.

Here are the most relevant articles:

• How to Write a Finance Internship Resume with No Work Experience
• How to Cold Email for an Internship: Investment Banking Cold Email Templates and Guide
• No Investment Banking Summer Internship Offers: What to Do
• The Off-Cycle Investment Banking Internship: The Best Side Door into the Industry?
• How to Prepare for Your Investment Banking Summer Internship in Less Than 8 Hours (Excel, PowerPoint, industry knowledge, and networking)
• Investment Banking Internships: The Ultimate Guide (tips for the job and receiving return offers)
• How to Decide on Investment Banking Summer Internship Offers: Who Has a 97.5% Full-Time Offer Conversion Rate?

Finally, if you want to speed up your preparation process so that you can succeed in this hyper-accelerated recruiting timeline, our friends at Wall Street Mastermind might be able to help you out.

They can coach you through the process I laid out above step-by-step and remove the trial and error you would have to go through on your own otherwise.

Their team of coaches also includes a former Global Head of Recruiting at three different large banks, so you’ll know exactly what banks are looking for in candidates.

They provide personalized, hands-on guidance through the entire networking and interview process, and they have a great track record of results for their clients.

You can book a free consultation with them to learn more.

The post How to Get an Investment Banking Internship appeared first on Mergers & Inquisitions.

But the events of 2023, including the UBS acquisition of Credit Suisse and the rise of firms like Wells Fargo, Jefferies, and RBC, have shaken up the traditional list.

As of 2024, I consider the following to be the list of bulge bracket banks (note that the “potential” category is speculative and could include other, similar firms beyond the 5 currently listed there):

Sources: The list above is based on deal volume and fee data from Dealogic, the Financial Times, and Statista over the past few years.

What is a “Bulge Bracket Bank”?

Bulge Bracket Bank Definition: The “bulge brackets” are the largest global banks that operate in all regions and offer all services – M&A, equity, debt, and others – to clients; they work on the biggest deals (usually $1 billion+) and have divisions for sales & trading, equity research, wealth management, corporate banking, and more.

The name “bulge bracket” (BB) comes from the prospectus for an IPO or debt issuance, which lists all the banks underwriting the deal.

The larger banks play more important roles, acting as bookrunners or joint bookrunners, and earn higher fees.

Therefore, their names are in bigger font sizes on the cover page, so they appear to be “bulging out” next to the smaller firms:

Note that “bulge bracket” and “BB” are online terms; I don’t think I’ve ever heard anyone use them in a spoken conversation.

Similar to terminology like “target school,” it would sound weird to use these words in an interview or networking setting.

So, if you need to refer to these firms in real life, try something like “large bank(s)” instead.

Why Have the Bulge Bracket Banks Changed? What About Deutsche Bank and UBS?

The end of Credit Suisse in 2023 means that it’s no longer on this list.

It also means that UBS, which acquired CS, is more firmly in the “bulge bracket bank” category, even though people sometimes debate its status.

The full list changes over time because banks get acquired, go out of business, and change their focus – while other banks make acquisitions and grow organically.

For example, Lehman Brothers and Bear Stearns were considered bulge bracket banks before the 2008 financial crisis – but many people today don’t even remember them.

As another example, some argue that UBS should not be a bulge bracket bank because it has focused on wealth management and areas outside the capital markets.

However, the global IB fees over the past two years do not support that argument:

UBS cares less about investment banking than the banks above it, but it is still in the top ~7 worldwide for IB revenue.

Also, following the acquisition of Credit Suisse, it’s hard to argue that UBS is not a BB bank (similar to how Barclays’ acquisition of Lehman Brothers’ operations turned Barclays into an official bulge bracket).

Deutsche Bank is a trickier case because it now generates less investment banking revenue than firms like Jefferies, Wells Fargo, and RBC.

It also tends to work on smaller deals than the top ~5 banks.

Older bankers might still think DB is a bulge bracket, but I would put it in the “borderline” category as of 2024.

I’m still listing it because it was #9 by global IB revenue in 2021 and 2022, but I would not be surprised if it fell off this list eventually.

This does not mean it’s a bad place to work.

It’s just that it’s not in the same category as GS, MS, JPM, etc., anymore (to be honest, I don’t think it has been in that same category for at least 5-10 years).

Bulge Bracket Bank “Challengers”: Do Wells Fargo, RBC, or Jefferies Qualify?

Looking at these lists, you might think:

“Wait a minute. Firms like Wells Fargo, RBC, and Jefferies all have annual IB revenue between $1 and $2 billion, so they’re not that far from Barclays and Citi. What’s the difference?”

There’s no exact revenue cut-off to qualify for this list, but these firms are less diversified in products and geography, so we do not consider them bulge brackets (yet).

For example, Wells Fargo always does well in debt capital markets but much worse in M&A advisory and equity capital markets.

You can see this if you break out the performance by product area and select “Loans”:

Wells Fargo is usually in the top 5-7 worldwide for debt but ranks much lower in the other areas.

Also, it has less of a global presence, as it’s U.S.-based and executes mostly North American deals.

Meanwhile, a firm like Jefferies is more diversified with a bigger international presence, but it also works on smaller deals than most bulge brackets.

One interesting case is a firm like Mizuho, which acquired Greenhill in 2023 (note that the deal has not yet closed as of the time of this article).

Greenhill was formerly considered an “elite boutique,” at least by some people, so this deal could turn Mizuho into more of an investment bank and give it a greater presence outside Asia, which is why I listed it in the “Potential” category above.

That said, it will still be many years before anyone starts thinking of it as a bulge bracket firm (if ever).

What About the Chinese Banks, Such as CITIC, China International, and Huatai?

While some Chinese banks earn high global revenue from their IB activities, they have virtually no presence outside China.

Also, they are often strong in ECM or DCM but far weaker in areas like M&A.

Due to the current geopolitical climate, it’s highly unlikely that these firms will expand significantly beyond China anytime soon.

But in the distant future, sure, one or more of these firms might join this list.

Bulge Bracket Banks vs Boutique, Middle Market, and Elite Boutique Banks

In addition to the bulge bracket banks, there are other categories: middle market banks, regional boutiques, and elite boutiques.

Each has a separate article on this site; there’s also a summary of the top investment banks.

I’d summarize the differences for front-office investment banking roles as follows:

• Bulge Bracket vs. Elite Boutique Banks: Both firms work on large/complex deals, and you gain access to very good exit opportunities from both. You’ll get higher compensation at an EB, more interesting work, and more responsibilities, but you’ll also get a smaller network and a lesser-known brand name if you ever want to leave the finance industry.
• Bulge Bracket vs. Middle Market Banks: You’ll work on smaller deals, have more limited exit opportunities, and get less of a network and brand name at MM banks. But the compensation doesn’t differ much for entry-level roles, and it is more feasible to win offers, particularly if you are at a non-target school, have a lower GPA, or got a late start in the recruiting process.
• Bulge Bracket vs. Regional Boutique Banks: The differences above are even more extreme here. You’ll work on very small deals at most regional boutiques, have even less access to private equity and hedge fund exits, and get even less of a network and brand name. But you might also have a chance at these very small firms even if you’re not competitive elsewhere.

Based on these comparisons, you might think the bulge bracket banks “win” across all categories.

But that’s not quite true because it ignores a few important points:

1. The elite boutiques are arguably better if you want to stay in finance long-term due to the compensation and work differences.
2. It’s harder to win offers at the BB banks, and you need more upfront preparation and an early start in university (or a top-tier MBA).
3. In some regions, the bulge brackets are not the best because domestic banks are stronger. For example, the “Big 5 (6?)” Canadian banks dominate investment banking in Canada, and the top banks differ in emerging markets such as Brazil.

So, my advice here is simple: Get a realistic sense of where you’re competitive and focus on winning the best offer you can.

If that’s at a bulge bracket bank, great.

If not, go for smaller banks, do your best, and think about moving around once you have more experience.

Final Thoughts: Bulge Bracket Bank or Bust?

A long time ago, many university and MBA students assumed that bulge bracket banks were the “be-all and end-all” for careers.

While they still have advantages, it’s a murkier distinction nowadays.

The elite boutique banks (Evercore, Lazard, Centerview, etc.) are now strong competitors, and you could easily make the case for accepting an offer there.

Also, many private equity firms and hedge funds now recruit undergrads directly via Analyst programs, and if you can win an offer at a large/reputable firm, it’s quite a good option.

Finally, technology firms now offer lucrative jobs to engineers, product managers, and salespeople, so many students go the tech route instead.

The bottom line is that while the bulge bracket banks are still appealing, they are no longer the clear winner in the “Post-Graduation Career Olympics.”

This is especially the case with the changes over the past few years and the disruptions to the traditional list.

Here’s how I’d sum up everything above:

Advantages of Working in Investment Banking at the Bulge Bracket Banks:

• Brand Name & Alumni Network: Everyone knows your firm, which is helpful for finance and non-finance roles.
• Broad Exit Opportunities: You have good options for both finance and non-finance companies because of the brand, network, and access to recruiters.
• Larger, More Complex Deals: You’ll work with multi-billion-dollar corporations instead of family-owned businesses, so the analysis is often more in-depth.
• Compensation: You’ll earn more than you would at smaller firms but less than at the elite boutiques.

Disadvantages of Working in Investment Banking at the Bulge Bracket Banks:

• Extremely Competitive: To win offers, you must start early, ideally attend a top university or MBA program, and have excellent work experience and networking.
• Long Hours and Unpredictable Lifestyle: You won’t have much of a life for the first few years (even with “protected weekends” and other measures).
• Larger Teams: While the deals may be more complex, larger deal teams also mean that Associates and VPs may do more of the interesting work.
• Compensation: Higher percentages of compensation start to become deferred and paid in stock as you get promoted, and the absolute numbers may be less than elite boutique pay as well.
• Regional Variations: Finally, depending on your region, domestic banks might have better deal flow than the BB banks.

If you’re not sure of your long-term plans and you’re competitive for roles at the largest banks, sure, go for it.

But if you are more certain and you can win offers at the elite boutiques or buy-side firms, one of those could be a better alternative.

And if you don’t know where you have a realistic chance, go back to Square One and review our coverage of how to get into investment banking.

Final Note: Everything in this article refers to investment banking jobs. If you are interested in corporate banking, wealth management, IT, or other areas, the top firms and groups differ.

The larger banks still offer advantages over smaller ones, but the rankings change depending on your area of interest. We may cover these points in future updates (for more, see our coverage of wealth management vs. investment banking).

The post Bulge Bracket Banks: 2024 Edition appeared first on Mergers & Inquisitions.

The questions usually go like this:

• Are capital markets teams (ECM, DCM, and LevFin) “real” investment banking?
• Do you work or get paid less in capital markets? Do you learn anything? What about the exit opportunities?
• Should you accept a capital markets offer at a larger bank over an M&A or industry group offer at a smaller bank?
• If you’ve won a capital markets offer, should you delay accepting it so you can target “better” groups?

I’ll answer all these here, but let’s start with a quick comparison:

Capital Markets vs. Investment Banking: Deals

The basic difference is that in “investment banking” groups, such as technology, TMT, healthcare, or consumer retail, you work on various deal types: sell-side and buy-side M&A, leveraged buyouts, IPOs, follow-on offerings, and bond issuances.

You also pitch prospective clients on deals and spend time learning your industry.

But in capital markets, you work on just one category of deals, such as equity-related transactions (IPOs, follow-ons, convertible bonds, etc.) or debt offerings (investment-grade or high-yield bonds).

Some of your work may support other deal types (M&A, LBO, restructuring, etc.), so you may look up stats on recent issuances and share them with the lead team – but you are not heavily involved in the process.

The advantages of capital markets are that you will learn your specific product(s) very well, you’ll spend less time on pitches, and you’ll have more predictable and lighter hours than bankers in other groups.

Note that while Leveraged Finance is technically in “capital markets,” it is closer to groups like M&A because most of the work relates to funding for acquisitions and leveraged buyouts.

This deal type distinction matters because your deal experience determines your skills, hours, compensation as you advance, and exit opportunities.

And all of these differ in capital markets vs. investment banking.

Is Capital Markets “Real” Investment Banking?

Returning to the first question at the top, yes, capital markets teams are “real” investment banking, but they’re more like a subset of investment banking.

If you consider just the ECM and DCM teams, they remove the worst and best parts of traditional IB roles.

You work shorter, more regular hours but get paid less at the senior levels, get worse exit opportunities, and learn fewer technical skills.

Many firms put capital markets groups within “Investment Banking,” but some include it within Sales & Trading or “Global Markets.”

And then other banks, such as Goldman Sachs, do not separate their product and industry groups, so there are no separate capital markets teams.

Because of these classification differences and the nature of the job (more “monitor the markets and respond quickly” tasks and fewer long-term projects), capital markets roles are closer to sales & trading, but most people still consider them IB jobs.

Capital Markets vs. Investment Banking: Skill Sets

The main difference here is that ECM and DCM are far less modeling-intensive, so you’ll spend more time in PowerPoint drafting market update slides and sharing information with different groups.

You work in “flow” mode, where you process requests as they come in but do not get pulled away to work on deals that take months to complete.

In a good industry group, you might build a 3-statement model for a client based on a detailed review of its business, and you would use the output in the CIM and management presentation to market the company.

By contrast, you’ll do far more PowerPoint work in ECM / DCM, and the “modeling” work could more accurately be called “data gathering.”

You’ll find information on previous issuances and shareholders / investors, and you might occasionally work on a simple model for an IPO or bond issuance.

You’ll also draft sales team memos and registration statements and conduct due diligence if you’re leading the offering.

But you won’t get the same in-depth exposure to revenue, expense, and cash flow modeling, or any experience with M&A or LBO models.

Capital Markets vs. Investment Banking: Lifestyle

You will work more regular and shorter hours in ECM and DCM than in other investment banking groups.

On average, you might work from 7 AM to 7 PM, so you start earlier but also finish much earlier.

There will be occasional spikes, but you’re far less likely to get forced into all-nighters or weekend emergencies.

We’ve covered normal investment banking hours dozens of times, but they’re long and unpredictable – and even when deal activity is low, they remain long because you do more pitching.

You should expect to spend 70 – 80 hours in the office per week, with improvements as you move up the ladder and longer hours when deals heat up.

But the worst part is the unpredictability, which makes it hard to plan your life (even with “protected weekends” and other measures banks have introduced).

Capital Markets vs. Investment Banking: Recruiting and Interviews

Very little about the recruiting process is different, partially because each bank does it differently.

Some ask you to specify a team upfront, while others assign you to a team only once you’ve won an offer.

You can expect the same early recruiting timeline in the U.S., the same need for 1-2 solid internships before you apply to the large banks, and the same need to network and prepare for common fit and technical questions.

The questions are ~90% the same regardless of the group; they won’t suddenly ask you obscure questions about convertible bond analysis just because you’re interested in ECM.

So, prepare for the usual categories, but shift some of your time away from merger and LBO models and learn about IPOs and convertibles for ECM or bond math for DCM.

Again, LevFin is the exception; expect just as many M&A and LBO interview questions there.

Capital Markets vs. Investment Banking: Salaries and Bonuses

Analyst and Associate salaries and bonuses are standardized at mid-sized and large banks, so you won’t see a difference between capital markets and investment banking.

However, that starts to change as you move up the ladder because the fees charged by ECM and DCM are split between more banks and groups.

To illustrate, let’s say that a $1 billion public company sells itself in a sell-side M&A process.

The bank advising it might charge fees of 0.5% – 1.0% for something in this range; let’s assume 0.75%, which equates to $7.5 million in fees.

This $7.5 million might be split with another bank or the industry group, but the team that did the bulk of the work usually gets most of the fee.

If this same $1 billion company went public in an IPO, it might sell 10 – 20% of its shares to investors.

Banks might charge a 5 – 7% fee for an IPO in this $100 – $200 million range, so the fees would be around $7 – $10 million, which seems like the M&A fee above.

But in an IPO, these fees are split between multiple banks and may even be split with other groups at the same bank.

Just look at the Instacart S-1: It lists GS, JPM, BofA, Barclays, Citi, and then ~14 smaller banks.

As a result, the fees per bank are lower, translating into lower compensation for senior bankers.

I’ve never seen great data on Managing Director compensation by group, but my guess is that it’s probably 20 – 25% lower in capital markets teams.

You can still earn $1 million+ per year, but getting there is more difficult, and the ceiling is lower.

Capital Markets vs. Investment Banking: Exit Opportunities

Reading everything above, you might be thinking, “Wait a minute, capital markets jobs sound pretty good. You work less, have more of a life, and get paid about the same for many years. Why not accept a capital markets role?”

For most people, the answer is “inferior exit opportunities.”

Specifically, private equity is not feasible from most ECM or DCM teams, hedge funds are also challenging, venture capital is a stretch, and you won’t have the right skills for corporate development.

That leaves you with a few options: Corporate finance at normal companies, investor relations, fundraising at financial sponsors, and maybe credit analyst roles.

(Again, LevFin is the exception and provides realistic exits into private equity, direct lending, mezzanine, etc.).

These exit opportunities are fine, but they all pay less than private equity and hedge funds and are seen as less desirable for the hyper-motivated crowd.

So, in practice, most Analysts who want traditional exit opportunities will transfer out of capital markets into other investment banking teams.

How to Move from Capital Markets to Other Investment Banking Groups

On that note, it is possible to move from capital markets to investment banking industry groups or even teams like M&A.

To do it, you should focus on aggressive internal networking and make a move once you have at least 2-3 solid deals to point to; it’s often wise to move after ~1 year on the job to make sure you have enough experience and your year-end bonus.

If you need to network discreetly, you can use an outreach email like this one to contact bankers in other teams:

SUBJECT: Introduction – [Group Name] [Position Name] at [Firm Name]

“[Name],

I hope this email finds you well. I just wanted to reach out and briefly introduce myself – I am [Your Name], and I’m currently working in [Group Name] at [Firm Name].

I saw that you’re currently working in [Other Group Name], and I am very interested in learning more about your team and the work you do there.

Would you happen to have 5 minutes to grab coffee on [Propose Dates and Times]?

Thanks in advance, and I really appreciate your time.

Regards,

[Your Name]”

In interviews, avoid negativity about your job and say nothing about deals being “boring,” the work being “repetitive,” or you not gaining modeling skills.

Instead, focus on the more interesting bits of your work and any results you can point to:

• ECM Work: Recommendations for co-managers and deal economics; an investor targeting analysis where you found other institutions that might want to buy an offering; a due diligence discovery that changed perceptions of the company; an analysis of the stake size that would be most appropriate to sell in a secondary offering.
• ECM Results: Client issued shares at a lower-than-expected discount to its current share price; investors exited at a favorable time; IPO drew more interest than expected or priced at a higher-than-expected level; the company attracted new, promising institutional investors.
• DCM Work: A debt capacity analysis where you determined the most appropriate interest rates and covenants based on the debt comps; an analysis where you found the conditions that might lead to violated covenants; a trade-off analysis where you measured the impact of paying a penalty fee to refinance debt at a lower interest rate.
• DCM Results: The company raised funding more quickly than expected or on better terms; it saved $XX in interest expense by refinancing at a favorable rate; it improved its leverage and coverage ratios via refinancing; it raised enough debt to meet an upcoming cash crunch.

You’ll also have to spend time learning/reviewing the technical questions, as the day-to-day work in ECM and DCM is far removed from subjects like Equity Value vs. Enterprise Value or a DCF model.

Should You Accept a Capital Markets Internship or Job Offer?

And now, we return to questions #3 and #4 at the top of this article:

3) How would you compare capital markets and traditional IB offers?

4) Are capital markets offers “worth” accepting? Should you hold out for something better?

If you want a long-term finance career (stay in banking or switch to private equity, corporate development, hedge funds, etc.), I recommend accepting a capital markets offer over pretty much any non-IB offer.

Yes, ECM/DCM beats options such as the Big 4 firms, small PE/VC firms, corporate banking, corporate finance, valuation firms, etc.

On the other hand, I do not recommend capital markets over something like a private equity mega-fund offer, even if the capital markets offer is at a bulge bracket.

If you have a capital markets offer at a bulge bracket and an M&A or industry group offer at a smaller bank, the best decision depends on “how small” the other bank is.

If it’s a 5-person regional boutique, take the BB capital markets offer.

But if it’s one of the top few middle-market banks (e.g., Jefferies, Lincoln, etc.), I recommend the M&A or industry group offer.

In either case, you’ll have to make a lateral move for the best exit opportunities, but if you work in an industry or M&A team, you’ll gain a more useful skill set over the next year.

I do not recommend delaying acceptance of a capital markets offer in search of something “better” unless you are very close to getting a superior offer (e.g., 1-2 weeks away).

Especially in tough market environments, like the one we’re currently in, your attitude must be “Take what you can get and move around later.”

And if you have a capital markets offer you’re not sure about, ask away in the comments.

Want to learn more?

Take a look at:

• The Definitive Guide to Corporate Banking
• Investment Banking Internships: The Ultimate Guide
• Private Equity Exit Opportunities: How to Check Out of Hotel California
• Venture Capital Careers: The Complete Guide
• The Hedge Fund Career Path: The Complete Guide
• Corporate Development Careers: The Definitive Guide
• Or take a look at this tutorial that shows you how to color code in Excel

The post Capital Markets vs. Investment Banking: Deals, Careers, Recruiting, Exits, and Offer Decisions appeared first on Mergers & Inquisitions.

Unfortunately, my initial instincts are often correct: If I have a bad feeling about something, it usually has issues.

And that is exactly what happened when I watched Dumb Money, the movie about the GameStop short squeeze in 2021, the other day.

There are some entertaining moments and good performances, so I wouldn’t call the movie “bad.”

But the story is thin, there’s no real character development, and even if you ignore these issues, the filmmakers do a poor job of explaining the GameStop story.

I understood it because I knew the companies and people involved, but the movie might confuse the uninitiated.

I’ll cover all those points here, but I want to start with some context first:

A Long Time Ago in a Stock Market Far, Far Away

To understand the premise of Dumb Money, you need to return to late 2020 and early 2021, which now seem like a lifetime ago:

• There was a global pandemic. I wrote many articles about it. It sucked.
• Everyone was locked up inside, and many turned to day trading for entertainment and money (in between binge-watching shows on streaming services).
• The Fed and other central banks cut interest rates to 0% and printed massive amounts of money to support the “fiscal stimulus” that was allegedly required to counteract the pandemic; this created a bubble in the financial markets.
• SPACs, cryptocurrency, and other junk went “to the moon” as people piled into risk assets. Remember when Chamath was on CNBC all the time?
• Oh, and lots of M&A, IPO, and SPAC deals were happening, so banks made plenty of “COVID hires,” often ignoring qualifications and recruiting norms.

I wrote about the GameStop short squeeze back when it happened in February 2021, and it turned into the most popular article of the year.

I later removed it because of annoying trolls, but I’ve restored it if you want to go back and read my initial comments.

In short, the media portrayed this event as a populist uprising against Wall Street, as retail investors on Reddit joined forces to bid up GameStop’s stock price while hedge fund Melvin Capital was heavily short the stock.

This led to a “short squeeze,” where Melvin had to cover its shorts by buying shares, further pushing up the price.

This huge increase in GameStop’s stock price led to many normal people becoming wealthy on paper – but popular brokerage firm Robinhood then blocked buys of GME shares, and the stock price fell back down to earth (it’s now down ~80% from the top of the squeeze).

In the original article, I explained the problems with this narrative: Retail investors acted as a catalyst, but if you look at the order data, institutional investors and huge trend-following funds were responsible for most of the price increase.

And yes, Melvin Capital and Robinhood emerged as losers following these events, but other big firms, such as Citadel and Silver Lake, became winners because they made different decisions.

Dumb Money: Characters and Story

As you can probably infer from the summary above, this is a thin premise for a movie because there isn’t much to the story.

In a traditional story structure, the protagonist has strengths and weaknesses and must overcome challenges to achieve their goals; this protagonist makes movies, the antagonist responds, and the protagonist succeeds or fails by the end.

The original Wall Street from 1987 is a good example of this structure, with the relationship of friends-turned-enemies Bud Fox and Gordon Gekko forming the movie’s core.

Dumb Money has none of this.

Things just… happen, and the protagonist – “Roaring Kitty” on the Wall Street Bets sub-Reddit, who started hyping GameStop in 2020 – is poorly defined.

Sure, he wants to make a lot of money and “stick it to the man,” but these goals could describe 99% of the human population.

By the end, he’s the same person, but he’s $34 million richer because of his GameStop stock.

Despite that, we’re supposed to feel sorry for him because he got grilled in front of Congress for his role in the short squeeze.

The antagonists – Steve Cohen (Point72), Ken Griffin (Citadel), Gabe Plotkin (Melvin Capital), and Vlad Tenev (Robinhood) – are even worse because they barely do anything.

Their scenes reminded me of fantasy novels where the evil wizards sit around discussing their schemes in the prologue… but then never enter the story directly.

We never understand why these billionaires cared about GameStop or Redditors so much, given everything else in their lives and portfolios.

Ultimately, Dumb Money falls into the same trap as many other “money movies”: it focuses too much on the money and not enough on the personal motivations.

This can work if the characters are entertaining or crazy things keep happening, but this film didn’t have nearly enough of that to keep me invested in the story.

Dumb Money: The “Finance” Parts of the Story

The filmmakers wanted to convey a “Wall Street bad; populist/rebel retail investors good” message, and that’s fine.

The issue is that they went a mile wide and an inch deep and didn’t properly explain the key relationships, companies, and personalities.

I will give them credit for covering concepts such as “payment for order flow” and the deposit requirements set by the Depository Trust & Clearing Corporation (DTCC), which forced Robinhood to limit GameStop buying activity.

They could have skipped all this, but they added more nuance by including these points.

But if you asked the average non-finance person to explain the relationships between Robinhood, Citadel, GameStop, and Reddit after just watching this movie, I doubt they would be able to do it.

The film needed an “explainer scene” that connected all the dots and explained how Citadel emerged as the big winner due to Robinhood’s order flow and why so many retail investors started day trading due to zero-commission trades, lockdowns, and the market bubble.

The Big Short did an excellent job explaining the 2008 financial crisis with a few key scenes, and Dumb Money could have done something similar – maybe during the Congressional hearings toward the end.

Dumb Money and Dumb Conclusions

Besides the lack of connecting dots, the other big issue is that the film reaches some unfounded conclusions in its final moments.

Via on-screen text, it states or implies the following:

1. Robinhood’s IPO flopped because of the bad press around GameStop and the trading limits the company imposed on customers.
2. The GameStop short squeeze “changed the industry” forever because hedge funds could no longer ignore retail investors. Now, they scour the internet for ideas as well.
3. Robinhood and Citadel colluded to limit GameStop trading activity.
4. Melvin Capital shut down because of its losses on GameStop and other meme stocks.

I agree with point #4, but this was entirely Melvin Capital’s fault; any short squeeze would have melted down the fund, even if retail investors hadn’t catalyzed it.

On point #3, some leaked text messages later emerged that pointed to collusion, but a judge threw out the lawsuit due to the lack of credible evidence.

I completely disagree with points #1 and #2: Robinhood’s IPO flopped because it was a bad company poorly suited to a post-pandemic world, and the GameStop story did not fundamentally change the finance industry.

Hedge funds have always scoured the internet for ideas, and quant funds have always used internet data to train their models. Maybe these funds pay more attention to retail traders now, but I don’t think it’s a night-and-day difference.

In short, many of the film’s conclusions are off the mark and represent a romanticized view of the real story.

Dumb Money: The Final Verdict

Despite all my criticism, I still wouldn’t call Dumb Money “bad.”

To me, it’s in “mid” territory: There are some funny scenes and good performances from a great cast, but they’re marred by underdeveloped characters and a paper-thin story.

If you’re interested in trading or the markets, you might want to check it out when it arrives on the streaming services, but I’m not sure I’d recommend a trip to the theater to see it.

If you want an educational finance movie that explains complex ideas well, watch The Big Short.

If you want an entertaining finance movie with drugs, crazy people, and models, watch The Wolf of Wall Street.

And if you want everything above, plus excellent writing and characters, watch Succession.

There may be other good finance stories waiting to be discovered, but they’ll need a much stronger premise than Dumb Money – one that lends itself to real character development and the twists and turns of a traditional story.

The post “Dumb Money” Review: A Worthy Addition to the Classic Finance Movie Roster? appeared first on Mergers & Inquisitions.

After putting in all that time and effort, you feel like you’re back at square one.

Unfortunately, it’s also quite common: in some years, over 50% of interns fail to get a return offer.

And in periods where deal activity is terrible (e.g., 2008 – 2009 or 2022 – 2023), the percentage may be even higher.

While it may feel like the end of the world, you are not actually back at square one.

But if you want a good outcome, you need a solid plan and honesty about why you didn’t get a return offer. I recommend the following steps, detailed below:

1. Step 1: Figure Out Why You Didn’t Get a Return Offer
2. Step 2: Pick Your Best Next Move
3. Step 3: Network and Prepare for Interviews
4. Step 4: Reevaluate Your Options If Nothing Worked

What is a “Return Offer”?

All the large investment banks – bulge brackets, elite boutiques, and middle-market firms – use internships as a recruiting tool for Analysts and Associates.

Effectively, the internship is an 8-10-week interview where you must prove yourself on the job by helping full-time employees with their tasks.

If you perform well and the bank has enough spots, you’ll get a “return offer,” which means you can start working full-time at the bank the following year after graduation.

These internships matter because the large banks make most of their full-time job offers to interns who perform well.

To succeed in your internship, please see our guide to investment banking internships.

This guide will focus on what to do if you did not perform well or if something outside your control resulted in no return offer.

Much of this guide also applies to related opportunities, such as investment banking spring weeks in the U.K., though there are some subtle differences (see the full article for more).

Step 1: Figure Out Why You Didn’t Get a Return Offer

You need to start by asking why you didn’t get a return offer.

Sometimes, it was because of something outside your control, such as the firm not hiring anyone, the group shutting down, or a bad market.

But in many cases, it was because you made specific mistakes, didn’t perform well, or didn’t “fit” with investment banking.

If you’re in this category, there’s no shame in admitting it.

It’s mostly the banks’ fault for accelerating recruiting so much that they hire many students who are not good fits for the job.

There are ~5 main reasons why you might not have received a return offer:

1. Poor Soft Skills – For example, maybe you made off-color comments, didn’t dress appropriately, or didn’t communicate effectively with full-time bankers. Or maybe you came across as weird or anti-social.
2. Poor Hard Skills – Maybe you could not use Excel or PowerPoint effectively, made math mistakes, or failed to check your work before turning it in.
3. Bad Market and Very Few or No Return Offers – Maybe deal activity was so bad that the bank didn’t need to award many return offers. Finance firms are notorious for under-hiring and over-hiring, so this happens a lot.
4. “No Return Offer” Policy – Some boutique banks hire interns but never plan to bring them back full-time. If you’re in this category, at least it’s easy to explain in interviews!
5. “Special Circumstances” – For example, maybe you had to start the internship late due to scheduling issues, or you had to work remotely for part of it, and these factors made it difficult to get to know the team.

You must understand which category best matches your situation because it determines your next move.

If it was something “beyond your control” (categories #3 – 5), it makes sense to give it another go and recruit for full-time IB roles or off-cycle internships.

But if it was “your fault” (categories #1 – 2), you may want to consider non-IB roles or give yourself time to improve by staying in school longer.

Step 2: Pick Your Best Next Move

Once you’ve determined why you didn’t get a return offer, you need to plan your next move.

In most cases, you have 6 main options, depending on your region and level:

1. Delay Graduation – This one no longer works well due to the accelerated internship recruiting timeline in the U.S. But if you can somehow delay your university graduation by ~3 semesters, you could use the extra time to apply for summer internships once again, ~18 months in advance.
2. Do a Master’s in Finance Degree – This one is best if you need to fix multiple issues in your profile, such as a low GPA and poor technical skills; it’s similar to delaying graduation but more realistic for the recruiting timeline.
3. Do an Off-Cycle or Post-Graduation Internship – This one is more viable in Europe because off-cycle internships are more common there. You don’t need to pay extra to stay in school, but many of these internships never turn into full-time offers, so it is a bit of a gamble.
4. Recruit Directly for Full–Time IB Roles – Banks hire most of their full-time Analysts from their summer intern classes, but you can always find a few firms and groups that under-hired or had terrible interns.
5. Aim for Non-Banking Roles in Finance – Maybe you discovered that investment banking is not for you because you don’t like the hours, the work, or dealing with sociopaths all day. But you could use the experience to aim for other finance roles, especially ones like equity research or corporate banking with less structured recruiting.
6. Aim for Non-Finance Roles – Or maybe you learned that you hate finance and never want to work in the industry. Great! You saved yourself years, and now you can find another job that’s a better fit (tech, consulting, marketing, startups, etc.).

At the MBA level, options #1 – 4 are not available, so you usually need to look for other full-time jobs outside of banking.

(Addendum #1: There’s a small chance you can find a full-time Associate role at a smaller bank, but I would be very cautious about these roles.)

(Addendum #2: Occasionally, an MBA student will fail to get a return offer and still find something else in banking, so it’s not impossible – but it is a lot more difficult than at the undergraduate level, so “not widely available” may be a better description.)

So, which of these options is best for you?

If you failed to get an offer because of your performance, you should consider options #2, 5, or 6 (Master’s degree, non-IB roles, or non-finance roles).

You need to be honest and ask yourself a simple question: “Do you want to work in banking but simply need to improve, or is it not for you?”

If it’s the former, consider another degree and how to use the extra time to improve your profile and get more experience.

If it’s the latter, read our guides to equity research recruiting, asset management internships, corporate banking, or product management (for example).

If you failed to get an offer mostly because of external factors but are still very committed to IB, you should consider options #3 and 4 (another internship or full-time recruiting).

Even if you’re in Europe or another region with off-cycle internships, I recommend networking to look for full-time roles first.

Yes, it’s difficult, and your chances aren’t great in a terrible market, but spots sometimes appear – and if you can win a full-time offer anywhere, that’s much better than interning again.

Step 3: Network and Prepare for Interviews

If you’ve decided that investment banking is not for you, please search this site for recruiting guides to other industries.

In short, you need to be a lot more proactive if you aim for something like equity research or asset management; there is less competition, but there are also many fewer spots.

If you are still aiming for full-time investment banking roles, this interview about how a reader won an IB offer at the last minute has some useful tips.

The short version: Aim for roles outside of major financial centers, target smaller banks (middle markets, in-between-a-banks, etc.), and do a ton of networking.

You can reach out to your existing contacts, find new ones, and send a message like the one below via email or LinkedIn:

“SUBJECT: Investment Banking Intern at [Bank Name] – Positions at [Name of Person’s Firm]

Hi [First Name],

I’m a student at [University Name] with a [XX] GPA and investment banking internship experience at [Bank Name] and [Describe Previous Internship Experience]. I’ve attached my resume here. I’m seeking full-time investment banking roles and just wanted to know if your group is hiring.

Thanks,

[Your Name]”

There is no magical secret to getting a response. Find people, email them, and follow up after 5-7 days until you get an answer.

If you eventually make it through to interviews, the #1 question will be:

“Why did you not receive a return offer at [Bank Name]?”

I recommend telling the truth, but not the whole truth, and spinning the reason slightly more positively.

If you say something like, “Deal activity was bad, so the group didn’t give out many offers,” the interviewer’s follow-up response will be:

“OK, but they did give out some return offers, correct? Why did some interns receive return offers while you did not?”

You can keep going back and forth like this forever unless you admit a weakness or mistake.

So, similar to the “Why is your GPA low?” question, it’s best to say that you made mistakes initially and improved over time, but it wasn’t quite enough to put you among the top few interns.

For example, you could say that you made some mistakes in email communications or office protocol at the start of the internship.

You received feedback that you had to improve, which you did, and your final review said you were much better.

However, they only brought back 1-2 interns due to the market, and because of these mistakes in the beginning, you didn’t quite make the list.

Besides this, investment banking interview questions will be the same: Expect to walk through your resume, answer technical questions, and discuss your deals.

Similar topics will come up even if you target off-cycle or summer internships.

So, if you’re already well-prepared for standard interviews, you mostly need to plan your explanation for why you didn’t get a return offer and discussions of your deals and internship work.

Step 4: Reevaluate Your Options If Nothing Worked

If you go through everything above and fail to win a full-time offer or another IB internship, return to Step 2 and reevaluate your options.

In most cases, the best choice is to aim for non-IB roles because you don’t want to spend much time without a full-time job.

So, consider related roles such as corporate banking, Big 4 firms, business valuation firms, corporate finance at normal companies, etc.

The #1 point is that you need to line up something post-graduation, even if it’s not your ideal role, it’s in a bad location, or it has below-market pay.

If you’re still 100% committed to IB and unwilling to compromise, your best option is to do a Master’s in Finance degree – but the timing may be tricky if you’ve already spent months recruiting for other roles.

No Return Offer: The End of the World?

It may seem like the end of the world if you complete an investment banking internship and fail to get a return offer, but it’s a common outcome.

The key is to be honest about why it happened so you can plan what to do next.

If you hated the internship and decided that IB is not for you, great – move on and start applying for other roles.

If you like “the idea” of investment banking but couldn’t perform well or tolerate the long hours, fine – think about something like corporate banking with better work/life balance.

And if you are 100% committed but failed to get an offer because of factors outside your control, start pounding the pavement and looking for full-time roles or internships.

In the short term, “no return offer” hurts, but in the long term, it can lead to more fitting careers if you handle it properly.

Want more?

You might be interested in:

• Distressed Private Equity: The Best Place to Invest When the World is Collapsing?
• The Definitive Guide to Equity Research Internships
• How to Decide on Investment Banking Summer Internship Offers: Who Has a 97.5% Full-Time Offer Conversion Rate?

The post No Return Offer from an Investment Banking Internship: What to Do appeared first on Mergers & Inquisitions.