What an Investment Banker in Capital Markets Does
When most people think of investment banking, it’s typically mergers and acquisitions (M&A) which comes to mind. Professionals in that area help get companies the funds they need to follow through with a merger or acquisition, and make the company that’s looking to be acquired appear valuable and appealing to others. Investment bankers in capital markets (CMs) carry out similar tasks, such as valuations and research, but rather than help ease a buy, they help companies raise capital to grow their businesses. The financial instruments used include equity securities (stocks) and debt securities (bonds). As a result, professionals in capital markets typically work in one area; either equity capital markets (ECMs) or debt capital markets (DCMs), although many large banks have merged the two divisions in recent years.
Their duties involve origination and structuring, as well as marketing the investment opportunity to individuals, retail investors, and/or institutional investors who manage things like pension funds, hedge funds, and insurance funds. Investment bankers carry out many duties to support this. At the lower levels, much of the work involves research, analytics, modeling, and the creation of pitch books, the latter being marketing materials produced by investment banks to pitch services to their prospective clients. Directors and above typically focus more on nurturing relationships with investors, giving presentations, and convincing investors to get in on an opportunity.
The most common type of ECM deal is the initial public offering (IPO), which is what occurs when a company first decides to offer public stocks. These deals can be worth millions, if not billions. In some cases, a single investment bank is the sole “book-runner,” meaning it’s the only one issuing the initial round of stocks. Other times, investment banks work together as a “syndicate” to issue the new stock. In addition to IPOs, CM teams also handle follow-on offerings, secondary offerings, convertible bonds, private placements, and other types of complex transactions.
Who would enjoy a career in Capital Markets (Debt and Equity)?
Investment banking is a high-powered career, ideal for those with a keen eye for detail, a fanatical obsession with numbers, excellent interpersonal skills, and an immense amount of stamina. CM team members typically work less hours per week than their M&A counterparts, so those looking for a less intensive but still financial-focused career would enjoy working within this side of the bank.
Who mightn't like the career?
The career may not be the right career choice for those who aren’t prepared to work extensive hours, including nights and weekends, or perform copious amounts of financial analysis.
Most people begin their careers as an analyst after completing a four-year degree in a field such as accounting, finance, or mathematics. Banking is a very competitive field to get into with limited roles on offer, so many successful applicants have double degrees, honors, masters or postgraduate qualifications.
Licenses are often required to progress in the field as well. It’s somewhat common to begin career as a general analyst at an investment bank, and then be moved into capital markets. The decision is based largely on the organization’s needs, but they also look at the skills and backgrounds of all their analysts to decide who the best fit is. For further reading, see “All About Equity Capital Markets: How You Get In, What You Do, and What You Do Next” and “Debt Capital Markets 101: How You Break In, What You Do, and What You Do Next.”
The small number of spots available can make it challenging for anyone to break into the field, so coming to an interview fully prepared is crucial. Candidates must be primed to sell themselves by telling their story, explaining why they have the necessary experience, showcasing why they’re a good fit for a particular firm, and more. Strong candidates might come prepared by looking through the bank’s recent capital raising transactions and offer their own insight as to the raising and any other opportunities they see in the market.
Moving into Capital Markets (Debt and Equity) from another career
There are very few careers outside of finance which will provide a smooth transition into a capital markets career. For more information, see “Before changing industries, consider your time, money and motivation,” which discusses the transition from engineer to investment banker, and “10 ways to break into banking in your 30s.”
Role: An analyst will typically hold the title for about three years and will spend his time supporting the more tenured investment bankers. Job duties often include administrative work, tracking and gathering data, researching, and assisting with the creation of “pitch books,” or books of information given to prospective investors. Because of this, analysts must be very skilled in programs like PowerPoint and Excel.
Role: Those who perform well as an analyst are generally offered positions as an associate by the bank they begin with. Associates support the people in higher positions and put together pitch books, though they spend more time on the financial models, versus gathering information and researching.
They are also generally responsible for ensuring the work that analysts complete is accurate. Larger banks will often promote their associates to VPs after a set amount of time, perhaps three years, though those who work for smaller banks may have to wait for a VP position to become available.
Role: Most VPs are promoted internally based on a bank’s schedule or need. VPs oversee everything that associates do and are usually responsible for guiding the process of pitch book creation. They also communicate directly with clients on a daily basis and keep them informed about the progress of their funding.
Director & Managing Director
Role: Most directors are internally promoted after working for about three years as a VP. The goal of a director or managing director is to bring in new clients and keep the established ones happy, so they spend much of their days meeting with people as opposed to in the weeds of Excel or Powerpoint as their more junior colleagues do. It’s common for a managing director to spend a week or more out of the office traveling.
Opportunities for travel vary based on the role and bank. Entry-level employees will likely not travel at all, while directors and above may travel extensively all over the world.
Base salaries across various investment banking groups tends to be fairly standard, although there are some reports which indicate those in debt capital markets may earn 10-20% less than their counterparts at junior levels, with the gap increasing at senior levels due to reduced bonuses from thin margins. However, the same group also tends to work fewer hours.
Analyst: According to Glassdoor, the average base salary in the United States is USD$76,969, though an incoming analyst can probably anticipate something in the USD$50k-60k range, depending on the strength of his resume and size of the bank. PayScale puts the rate at £34,000 in the UK, AU$76,000 in Australia, and CAD$59,000 in Canada.
Associate: USD$111,562, £50,726, AU$87,262, and CAD$68,784.
Vice President: USD$145,791, £82,196, AU$113,440, CAD$82,541.
Directors and Managing Directors: USD$170,143, £156,458, AU$130,450, CAD$100,383.
Bonuses are awarded at the close of successful deals and vary based on the size of the deal and bank. They can increase an analyst’s salary by a one-third margin, and carry some directors over the one-million mark.
Why an Investment Banker in Capital Markets moves on
It’s easy to get boxed into a capital markets career, so many move to other areas of banking to pick up other skills and make themselves more marketable. Others get burned out by the number of hours and time away from family or have difficulty climbing the career ladder.
It’s fairly common for someone in investment banking to collect their bonuses and roll them into their own startup company or investments. Some CM professionals who can navigate the jump move into mergers and acquisitions, private equity, hedge funds/ asset management, corporate finance, or corporate development, although this is typically more challenging to do from CM than the M&A team.
For further reading, see “How to Move from Capital Markets to M&A at an Investment Bank” “Ex-MD in equity capital markets: 'It's a bit like insurance fraud',” and “Horror as hot millennial investment bankers quit for regular jobs elsewhere.”