Investment Bank

1
Investment Bank

• General Description
• Investment banks assist public and private
  corporations and governments in raising funds in
  the capital markets (both equity and debt), as
  well as in providing strategic advisory services
  for mergers, acquisitions and other types of
  financial transactions. They also act as
  intermediaries in trading for clients.
• Investment banks differ from commercial banks,
  which take deposits and make commercial and
  retail loans. In recent years, however, the lines
  between the two types of structures have blurred,
  especially as commercial banks have offered more
  investment banking services. Investment banks may
  also differ from brokerages, which in general
  assist in the purchase and sale of stocks, bonds,
  and mutual funds. However some firms operate as
  both brokerages and investment banks this
  includes some of the best known financial
  services firms in the world.

Players Goldman Sachs Morgan Stanley Lehman
Brothers Credit Suisse Bear Stearns JPMorgan
Chase Banc of America Securities Citigroup UBS Deu
tsche Bank Piper Jaffray Wachovia
General Skills Analytical strong in accounting
and finance to value companies, understand the
markets Performance be able to perform at your
highest levels with minimal or no sleep thrive
in stressful environments learn from mistakes
and dont make them twice Relationship build
and maintain relationships with clients, within
the firm, with other firms
Lifestyle/Compensation 1st to 3rd year Analyst
9am to 12am, often later, usually weekends
100,000 - 250,000 1st to 3rd year Associate
9am to 11pm, often later, often weekends
200,000 - 400,000 Vice President 9am to 8pm,
sometimes later, sometimes weekends lots of
money Managing Director 9am to 7pm, sometimes
later, rarely weekends except traveling too much
money
Opportunities Can build a career as a banker, go
to various divisions within the bank, jump to
private equity, hedge fund, mutual fund, research
firm or retire early.
2
Hedge Fund

• General Description
• A hedge fund is a lightly regulated private
  investment fund sometimes characterized by
  unconventional strategies. The term hedge fund
  dates back to the first such fund founded by
  Alfred Winslow Jones in 1949. Jones' innovation
  was to sell short some stocks while buying
  others, thus some of the market risk was hedged.
  While most of today's hedge funds still trade
  stocks both long and short, many do not trade
  stocks at all. Generally investments are
  non-controlling stakes in the target company.
• For U.S.-based managers and investors, hedge
  funds are simply structured as limited
  partnerships or limited liability companies. The
  hedge fund manager is the general partner or
  manager and the investors are the limited
  partners or members respectively. The funds are
  pooled together in the partnership or company and
  the general partner or manager makes all the
  investment decisions based on the strategy it
  outlined in the offering documents.
• The fee structures of hedge funds vary, but the
  annual management fee is typically 10-25 of the
  profits of the fund plus 1-2.5 of assets under
  management.

Players NightWatch Capital D.E. Shaw Bridgewater
Associates Goldman Sachs Asset Management Farallon
Capital Management Caxton Associates Gotham
Capital Other Major Investment Banks
Strategies/Skills Various investing strategies
exist Multi-strategy (varied upon asset classes
such as equities, debt, derivatives), statistical
arbitrage, hedging, long/short, value,
contrarian, opportunistic, technical,
risk-averse, etc. Skills vary but generally
highly technical and quantitative.
Lifestyle/Compensation Generally one does not
start at a hedge fund but works in investment
banking, sales and trading, a related industry
for 2 years or business school before making the
jump. Expect 10-14 hours per day and rarely
weekends. Salary will be competitive to banking
with an extremely high upside. A top trader in
2005 made 750,000,000. Others lost their shirts.
Opportunities Usually those who work at a hedge
fund eventually start their own or jump to
another.
3
Private Equity

• General Description
• Private equity is a broad term that refers to any
  type of equity investment in an asset in which
  the equity is not freely tradable on a public
  stock market. Categories of private equity
  investment include leveraged buyout, venture
  capital, growth capital, angel investing,
  mezzanine capital and others.
• Generally, private equity funds are organized as
  limited partnerships which are controlled by the
  private equity firm that acts as the general
  partner. The fund obtains commitments from
  certain qualified investors such as pension
  funds, financial institutions and wealthy
  individuals to invest a specified amount. These
  investors become passive limited partners in the
  fund partnership and at such time as the general
  partner identifies an appropriate investment
  opportunity, it is entitled to "call" the
  required equity capital at which time each
  limited partner funds a pro rata portion of its
  commitment. All investment decisions are made by
  the General Partner which also manages the fund's
  investments (commonly referred to as the
  "portfolio"). Over the life of a fund which often
  extends up to ten years, the fund will typically
  make between 15 and 25 separate investments with
  usually no single investment exceeding 10 of the
  total commitments. Most often private equity
  investments are controlling positions in the
  target company.

Players Blackstone Group Carlyle Group KKR Thomas
H. Lee Cerberus Capital Management Oaktree
Capital Management Sorenson Capital Major
Investment Banks
General Skills Analytical strong in accounting
and finance to value companies, understand the
markets Performance be able to perform at your
highest levels with minimal or no sleep, lots of
travel thrive in stressful environments compete
against the best in the investment
world Relationship build and maintain
relationships with clients, with banks and other
supporting firms
Lifestyle/Compensation Generally one does not
begin a career in private equity. These firms
often take top analysts from Investment Banks or
top candidates from premiere business schools.
Expect banking-like hours at top large firms and
hedge fund-like hours for smaller firms. Pay is
generally a little more than banking with higher
upside potential based on yearly performance.
Opportunities Usually those who work in private
equity eventually start their own firm or jump to
another. They may move into a hedge fund or
venture capital firm.
4
Venture Capital

• General Description
• Venture capital is capital provided by somewhat
  outside investors for financing of new, growing
  businesses. Venture capital investments generally
  are high risk investments but offer the potential
  for above average returns. A venture capitalist
  (VC) is a person who makes such investments. A
  venture capital fund is a pooled investment
  vehicle (often a partnership) that primarily
  invests the financial capital of third-party
  investors in enterprises that are too risky for
  the standard capital markets or bank loans.
  Venture Capital can be looked at as an
  early-stage private equity firm.

National Players Kleiner Perkins Caufield
Byers Greylock Partners Sequoia Capital Thomas
Weisel Partners Major Investment Banks Intel
Capital Local Players VSpring Capital UV
Partners Wasatch Venture Fund
General Skills Analytical accounting and finance
is important to value companies but due to early
stage investing and financial forecasting, they
are not as integral to the valuation process
understand the markets Relationship build and
maintain relationships with clients, investors,
banks and other supporting firms a fundamental
skill because money must be invested and the
relationships used to introduce target companies
to different groups of investors Entrepreneurial
VCs are very entrepreneurial, more so than
private equity. Many principals have grown
companies themselves and/or found seed money in
the past. Often times its investing in the RD
stage, then working bringing it to commercial
use Consulting working with the company on how
things go not only from a financial perspective
but also from a management perspective
Lifestyle/Compensation Typically not as
labor-intensive as investment banking. Expect
50-70 hours per week, similar to a mutual fund
lifestyle. Almost all dont begin their careers
in venture capital but in investment banking,
consulting or as an entrepreneur (natural fit).
An Associate is compensated by a salary and
bonus. More senior partners earn a salary plus
carry, which is a share in yearly profits which
represents the high upside potential. Venture
Capital firms dont need a lot of people so
generally have a small-firm feel.
Opportunities One can move from venture capital
to another fund, hedge fund or company management.
5
Mutual Fund

• General Description
• A mutual fund is a form of collective investment
  that pools money from many investors and invests
  the money in stocks, bonds, short-term money
  market instruments, and/or other securities. In a
  mutual fund, the fund manager trades the fund's
  underlying securities, realizing capital gains or
  loss, and collects the dividend or interest
  income. The investment proceeds are then passed
  along to the individual investors. The value of a
  share of the mutual fund, known as the net asset
  value (NAV), is calculated daily based on the
  total value of the fund divided by the number of
  shares purchased by investors.
• Legally known as an "open-end company", a mutual
  fund is one of three basic types of investment
  companies available in the United States. Outside
  of the U.S. (except Canada), mutual fund is a
  generic term for various types of collective
  investment.

Players Bridgeway Legg Mason Muhlenkamp T.
Rowe Vanguard Dodge Cox Marsico Fidelity PIMCO

General Skills
Lifestyle/Compensation
Opportunities