Wall Street 101

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Wall Street 101

  1. 1. Wall Street 101 UMBS Investment Association September 2002
  2. 2. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “ Chinese Wall” Brokers / Advisors Analysts
  3. 3. Examples <ul><li>Mutual Funds: Fidelity, Vanguard </li></ul><ul><ul><li>Institutional Investors: CalPERs, University of Michigan </li></ul></ul><ul><li>Broker/Dealers: Merrill Lynch, Morgan Stanley </li></ul><ul><ul><li>Private Clients: ML, Salomon Smith Barney </li></ul></ul><ul><ul><li>Discount / Online: Charles Schwab, E*Trade </li></ul></ul><ul><li>Trading: Bear Stearns </li></ul><ul><li>Investment Banks: Goldman Sachs, Lehman Brothers </li></ul><ul><ul><li>Niche players: Robert Baird, Greenhill </li></ul></ul><ul><li>Conglomerates: Citigroup, JPMorgan </li></ul>
  4. 4. Investors <ul><li>Invest in securities of corporations via: </li></ul><ul><ul><li>Buy stocks/bonds through brokers </li></ul></ul><ul><ul><li>Buy mutual fund shares, essentially hiring a professional money manager </li></ul></ul><ul><ul><li>Invest directly in company via “DRiPs” </li></ul></ul><ul><li>Increasingly knowledgeable (Internet), more trading volume </li></ul><ul><li>Research increasingly available </li></ul>
  5. 5. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “ Chinese Wall” Brokers / Advisors Analysts
  6. 6. Brokers <ul><li>Execute trades for clients, earn commissions </li></ul><ul><li>Bring individual investors’ assets into fee-based accounts (“asset gatherers”) </li></ul><ul><li>Evolving job function: </li></ul><ul><ul><li>Online brokers = cheaper commissions </li></ul></ul><ul><ul><li>Internet offers research, less need for advice </li></ul></ul><ul><li>Essentially sales function </li></ul>
  7. 7. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “ Chinese Wall” Brokers / Advisors Analysts
  8. 8. Portfolio Managers <ul><li>Manage investment portfolios for: </li></ul><ul><ul><li>Institutions: pension funds, university endowments, corporations </li></ul></ul><ul><ul><li>Individuals: private clients, retail mutual funds </li></ul></ul><ul><li>In-house research or from sellside (Analysts and/or Institutional Sales reps) </li></ul><ul><li>Hedge funds: growing, increased scrutiny </li></ul><ul><li>Start as Analyst, move up to Portfolio Manager </li></ul>
  9. 9. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “ Chinese Wall” Brokers / Advisors Analysts
  10. 10. Institutional Sales <ul><li>Provide research/insight for Portfolio Managers to bring in trading commissions </li></ul><ul><ul><li>The link between sellside and buyside </li></ul></ul><ul><li>Primarily relationship management </li></ul><ul><li>Start in supporting role, then pick up smaller relationships </li></ul>
  11. 11. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “ Chinese Wall” Brokers / Advisors Analysts
  12. 12. Analysts <ul><li>Sell-side: sell research to buyside in order to: </li></ul><ul><ul><li>Earn commissions </li></ul></ul><ul><ul><li>Close investment banking deals </li></ul></ul><ul><li>Buyside: report to Portfolio Managers within own firm </li></ul><ul><li>Associates manage models, client calls, eventually cover their own space </li></ul>
  13. 13. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “ Chinese Wall” Brokers / Advisors Analysts
  14. 14. Investment Bankers <ul><li>Underwrite corporations’ equity and debt offerings, advise on mergers & acquisitions, take a % of deal as fee revenue </li></ul><ul><li>Regulated interaction with Analysts </li></ul><ul><li>Analysts: modeling, presentations </li></ul><ul><li>Associates: jack of all trades </li></ul><ul><li>VPs / MDs: deal sourcing, relationship management </li></ul>
  15. 15. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “ Chinese Wall” Brokers / Advisors Analysts
  16. 16. The Marketplace Exchanges Portfolio Managers Institutional Sales Investment Bankers Corporations Investors Traders “ Chinese Wall” Brokers / Advisors Analysts
  17. 17. Current Trends <ul><li>Re-regulation </li></ul><ul><ul><li>Conflicts of interest between investment banking and commercial banking </li></ul></ul><ul><li>Analyst scrutiny </li></ul><ul><ul><li>Conflicts between research and investment banking </li></ul></ul><ul><li>Accounting </li></ul><ul><ul><li>Quality of reported financial results </li></ul></ul>
  18. 18. Further reading <ul><li>Wall Street Journal – daily </li></ul><ul><li>Barron’s – Saturdays </li></ul><ul><li>Bloomberg </li></ul><ul><ul><li>www.bloomberg.com </li></ul></ul><ul><ul><li>Bloomberg terminals in the library (coming soon in the Tozzi Financial Research & Trading Room) </li></ul></ul><ul><li>Limitless internet resources </li></ul>

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