November 2024: Top Posts of the SimTrade Blog about Professional Experiences

November 2024: Top Posts of the SimTrade Blog about Professional Experiences

I have selected very interesting posts about a very interesting topic: professional experiences from alumni of the SimTrade course.

Most Read Posts

Please find below the most read posts from the SimTrade blog about professional experiences:

Learn about the professional experience of a management controller at CarFuel. A practical insight into the role and its challenges in the field of financial management!

▶ Medine ACAR Mon expérience professionnelle en tant que contrôleuse de gestion chez Carfuel

Explore the professional experience of a credit analyst at Targobank. Gain a better understanding of the role and its responsibilities in the banking sector!

▶ Matthieu MENAGER My professional experience as a credit analyst at Targobank

Discover the professional experience of a quantitative analyst intern at FinDoc Financial Services.

▶ Praduman AGRAWAL My Professional Experience as a Quantitative Analyst Intern at Findoc Financial Services

Learn about the professional experience of a Global Development and Learning Intern at Danone. Get insights into the key responsibilities and skills needed for this role in a global company!

Jayna MELWANI My Professional Experience as a Quantitative Analyst Intern at Findoc Financial Services

Explore the professional experience of an Associate Auditor at PwC’s Digital Data Hub. Discover the role’s key tasks and the skills required in a leading auditing firm!

▶ Federico MARTINETTO My professional experience as a PwC Associate Auditor in the Digital Data Hub

Professional experiences are invaluable for understanding the practical applications of finance theory and gaining insights into the industry. By learning from others, you can anticipate challenges, discover new job opportunities, refine your career strategy. The November 2024 top posts on the SimTrade blog are designed to inspire and guide you on your professional journey. Do not hesitate to contact the contributors to ask them questions about their internship and get their contacts in the firms they work for.

SimTrade choice

Have a look on the post below!

Learn about the internship experience of a Structured Finance Analyst at Société Générale. Discover the tasks and skills involved in this dynamic role in corporate finance!

▶ Mickael RUFFIN My Internship Experience as a Structured Finance Analyst at Société Générale

Job description – Financial analysts

Job description – Financial analysts

Nithisha CHALLA

In this article, Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024) explains the job of financial analysts and their contributions to the investment community.

Introduction

Financial analysts serve as the backbone of the finance industry, providing critical insights and analysis to support investment decisions. Did you know that the Bureau of Labor Statistics in the US projected a 6% growth in employment of financial analysts from 2020 to 2030, faster than the average for all occupations? According to a survey by the CFA Institute (November 2021), most financial analysts believe that their role is becoming increasingly important in today’s complex financial landscape.

This article explores the multifaceted role of financial analysts, with a particular focus on their responsibilities and contributions within both the buy-side and sell-side sectors of the financial industry. Buy-side analysts work for entities that have money to invest, such as mutual funds, hedge funds, pension funds, and high-net-worth individuals. Sell-side analysts work for brokerage firms, investment banks, and other entities that sell investment services. These analysts conduct research and analysis on companies and industries to publish investment recommendations for the firm’s clients and the general investing public.

What Does a Financial Analyst Do?

Financial analysts analyze a firm’s past financial data to spot trends and assess risks, which helps them predict outcomes for business decisions, identify sale or purchase opportunities, and make investment recommendations. To that end, a financial analyst may need to work with different types of data such as company financial statements, the performance of investments such as stocks and bonds, industry research, macroeconomic data, and more, depending upon the specific role they play within the organization.

Buy-Side Financial Analysts: Crafting Investment Strategies

Buy-side analysts work for entities that have money to invest, such as mutual funds, hedge funds, pension funds, and high-net-worth individuals. The job of a financial analyst is important as these financial institutions manage a lot of money. For example, the global assets under management (AUM) of hedge funds amounted to approximately $3.6 trillion in 2020 (Gitnux, December 16, 2023). These analysts perform research and analysis to make direct investment decisions on behalf of their firm’s money. Their primary objective is to identify and capitalize on lucrative investment opportunities that align with their client’s objectives and risk profiles.

Role and responsibilities

Buy-side financial analysts are instrumental in evaluating and recommending alternative investment opportunities to their clients. More and more, they take into consideration the environmental, social, and governance (ESG) factors that are important in their investment decision-making process.

Examples of companies employing Buy-Side Financial Analysts

An investment manager at BlackRock specializes in infrastructure investments and identifies Brookfield Infrastructure Partners L.P. (NYSE: BIP) as a promising opportunity for long-term growth and income generation. BlackRock’s investment in Brookfield Infrastructure Partners helps diversify its clients’ portfolios and provides stable returns over time.

Sell-Side Financial Analysts: Providing Market Insights and Advisory Services

Did you know that the global investment banking revenue reached $124.5 billion in 2020, driven by strong performance in equity underwriting and mergers and acquisitions (M&A) advisory? Sell-side financial analysts work for brokerage firms, investment banks, and financial advisory companies. Their role revolves around providing research and advisory services to institutional and retail investors, as well as corporate clients.

Role and responsibilities

A survey by the Brunswick group found that institutional investors believe that the quality of sell-side research reports has improved over the past five years. Sell-side financial analysts play a crucial role in providing timely and insightful research reports to help clients make informed investment decisions.

Examples of companies employing Sell-Side Financial Analysts:

  • A sell-side analyst at Goldman Sachs publishes a research report on Amazon.com Inc. (NASDAQ: AMZN), recommending a “buy” rating based on its dominant position in e-commerce and cloud computing, as well as its consistent revenue growth. This recommendation attracts significant investor interest and contributes to a surge in Amazon’s stock price.
  • An equity research analyst at J.P. Morgan advises Alphabet Inc. (NASDAQ: GOOGL) on strategic options for expanding its autonomous driving technology division, conducting industry analysis and financial modeling to support the recommendations. Alphabet Inc. leverages J.P. Morgan’s expertise to develop a comprehensive growth strategy for its autonomous driving business.
  • A sell-side analyst at Vanguard conducts extensive research on emerging technology companies and recommends investing in Tesla Inc. (NASDAQ: TSLA), recognizing its leadership in electric vehicles and sustainable energy solutions. This recommendation leads to a significant increase in Tesla’s stock price, generating substantial returns for Vanguard’s clients.

Financial analysts play a pivotal role in shaping investment strategies, providing market insights, and facilitating financial transactions. Whether operating on the buy-side or sell-side, these professionals leverage their analytical expertise and industry knowledge to navigate the complexities of the financial markets. By offering investment recommendations, conducting research, and providing advisory services, financial analysts contribute significantly to the pursuit of financial prosperity and wealth creation.

Skills and Qualifications

Now given the job and the daily environment they have to deal with there are certain skills a financial analyst would need to have. Soft skills such as Analytical Thinking, Communication Skills, Attention to Detail, and Time Management hard skills such as Technology Skills, Quantitative Skills, Financial Analysis, and Industry Knowledge are demanded.

When it comes to the career path of an analyst, requires them to stay updated on industry developments, regulations, and best practices. From various analyses and surveys, we could say that many financial analysts hold a bachelor’s degree in finance, accounting, economics, or a related field. Pursuing a master’s degree in finance, business administration (MBA), or a specialized finance program can provide additional knowledge and credentials.

Obtaining certifications such as the Chartered Financial Analyst (CFA) designation is common in the financial industry. The CFA program covers a broad range of topics including investment analysis, portfolio management, and ethics, and is highly regarded in the field. Apart from the theoretical knowledge gaining practical experience through internships or entry-level positions at financial institutions, investment firms, or corporate finance departments is essential for building foundational skills and industry knowledge.

  • The Chartered Financial Analyst (CFA) designation is highly valued in the buy-side industry. Buy-side financial analysts need to possess strong data analysis skills to extract actionable insights from large datasets and alternative data sources. They play a crucial role in developing and implementing these customized investment strategies.
  • Sell-side financial analysts need to possess strong academic credentials and technical skills to excel in their roles. They believe that soft skills such as communication and relationship-building are essential for success in their roles. Sell-side financial analysts need to effectively communicate their research findings and build rapport with clients to gain their trust and confidence.

Remuneration

According to a report by Bloomberg, the average compensation for equity research analysts at investment banks in the United States ranged from $200,000 to $600,000 in 2020, depending on their level of experience and performance. Sell-side financial analysts are well-compensated for their expertise in analyzing and recommending investment opportunities to clients.

Why should I be interested in this post?

In essence, this article provides a perspective on the job of financial analysts. For a student who would like to work in finance, it is important to know about the job of a financial analyst as it relates to both the corporate world and financial markets.

Related posts on the SimTrade blog

   ▶ Aamey MEHTA Market efficiency: the case study of Yes bank in India

   ▶ Louis DETALLE The importance of data in finance

   ▶ Louis DETALLE Bloomberg

Useful resources

Forbes Financial Analyst Job Description

Gitnux Must-Know Hedge Fund Statistics

CFA Survey of CFA Institute members on latest ESG matters

Brunswickgroup About the Brunswick Digital Investor Survey

Market consensus What is market consensus?

Faster Capital Navigating Markets: The Power of Market Analysis and Consensus Estimates

About the author

The article was written in April 2024 by Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024).

A quick review of the Sovereign Advisory job…

A quick review of the Sovereign Advisory job…

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains what a Sovereign Advisor works on, on a daily basis.

What does the Sovereign Advisory job consist in?

Sovereign advisory is a specialized field of finance that involves providing advice and guidance to governments and sovereign entities on a range of financial matters. This includes things like helping governments to develop and implement economic policies, advising on the issuance of sovereign bonds, and assisting with the management of public debt.

The job of a sovereign advisor is to help governments to make informed financial decisions that are in the best interests of the country and its citizens. This can involve providing expert analysis and guidance on a wide range of issues, including economic growth, public spending, and the management of public debt.

What are the missions of the accountant?

The missions of the Sovereign Advisor consist mainly of three tasks.

About a country’s economic policies

One of the key responsibilities of a sovereign advisor is to help governments to develop and implement economic policies that are effective and sustainable. This can involve providing guidance on the design and implementation of fiscal and monetary policies, as well as helping to identify potential risks and opportunities in the global economy.

About issuing sovereign bonds

Another important aspect of the job is to assist governments with the issuance of sovereign bonds. This can involve providing advice on the structure and terms of the bonds, as well as helping to market the bonds to investors and manage the sale process.

Helping a country master its commercial policy and global regulations

In addition to these core responsibilities, sovereign advisors may also be called upon to provide advice on a range of other financial matters. This can include things like helping governments to manage their public debt, providing guidance on the management of foreign exchange reserves, and assisting with the development of financial sector regulations.

Who are the main Sovereign Advisors?

The main actors of sovereign advisory are typically large financial institutions, such as investment banks and consulting firms. These firms typically have teams of experts with deep knowledge of global economic trends and the ability to provide expert guidance and advice to governments on a range of financial matters. In addition to these large financial institutions, there may also be smaller specialized firms that focus exclusively on providing sovereign advisory services. These firms may have a particular area of expertise, such as public debt management or economic policy development, and may be sought out by governments for their specific knowledge and expertise in these areas.

Examples of banks that provide sovereign advisory services include:
1. Goldman Sachs
2. JPMorgan Chase
3. Citigroup
4. Morgan Stanley
5. Deutsche Bank

How to become a Sovereign Advisor?

A career in sovereign advisory typically requires a strong background in economics, finance, or a related field. Many sovereign advisors hold advanced degrees, such as a Master’s in Business Administration (MBA) or a PhD in Economics. In addition to academic training, many sovereign advisors also have practical experience in the field, such as working in government or in other financial institutions.

In order to work in sovereign advisory, it is important to have a deep understanding of global economic trends and the ability to analyze and interpret complex financial data. This may require studying economics, finance, and related subjects at the undergraduate and graduate levels, as well as gaining practical experience through internships or other job opportunities. Additionally, many sovereign advisors also participate in professional development programs and continuing education courses in order to stay up to date with the latest developments in the field.

Resources

Rothschild & Co Sovereign Advisory

Youtube Interview of a Sovereign Advisor

Lazard Sovereign Advisory

Related posts on the SimTrade blog

   ▶ Rodolphe CHOLLAT-NAMY Government bonds

About the author

The article was written in December 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).

A quick review of an Analyst in Transaction Services’ job…

A quick review of an Analyst in Transaction Services’ job…

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains what does an analyst in Transaction Services work on.

What does Transaction Services consist in?

The Transaction Services consultant assists clients and advises them on their financial transactions. He or she works on disposals, mergers and acquisitions, and restructuring. Clients of a Transaction Services department are generally investment funds, investment banks or very large companies that conduct financial transactions and require the expertise of a Transaction Services team.

What does a Transaction Services analyst work on?

There are two types of missions: buy-side and sell-side due diligence. The approach is different depending on whether you are on the buy side or the sell side. We will review what these missions consist in.

A due diligence is conducted by a specialized audit firm, its objective is to evaluate the risks inherent in the target company when the latter is being sold for instance. All the checks are made possible to understand the company’s strategy, to analyze its strengths and weaknesses, and also to have an overview of its accounting, financial, tax, social and environmental situation.

This analysis is therefore based on the analysis of the historical performance, cash flow and assumptions made in the business plans of the target company.

Calculations of metrics and normative ratios (e.g., EBITDA) or an in-depth analysis of the company’s working capital requirements, sector and business model are also carried out.

In short, the mission of Transaction Services is to carry out all the analyses to ensure that the client and the parties involved do not make any mistakes on the valuation of the company.

What are the biggest Transaction Services firms?

Deloitte, Ernst and Young (EY), PricewaterhouseCoopers (PwC) and KPMG are the four audit and consulting firms that make up the Big Four. They are the most influential consultancies in the world, employing nearly 1,200,000 people worldwide.

What are the main jobs possible after a Transaction Services position?

Some former Transaction Services staff move into areas such as investment banking, private equity (PE), controlling or mergers and acquisitions (M&A). Others use their time in Transaction Services to target departments where they can re-use the skills they have acquired.

To go into M&A or PE, Transaction Services will lack modelling, and this should be kept in mind. Thus, consultants are often found in managerial positions, M&A managers or even in the financial department. Eventually, the excellent command of numbers, operations and the ecosystem allow some to become partners.

Related posts on the SimTrade blog

   ▶ Louis DETALLE My experience as a Transaction Services intern at EY

   ▶ Basma ISSADIK My experience as an M&A/TS intern at Deloitte

Resources

Youtube How to nail TS interviews?

KPMG Careers website

EY Careers website

About the author

The article was written in December 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).

My experience as an Audit intern at PwC

My experience as an Audit intern at PwC

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) interviews a former Audit intern at PwC.

First of all, let’s recall what Audit consists in?

The financial auditor expresses an opinion on the financial statements of a company. Their objective is to carry out the work necessary to enable the auditor to give an informed opinion on the true and fair nature of the published accounts.

The financial auditor is therefore the guarantor of the reliability of the company’s financial information and has a great responsibility, in particular to the company’s third-party stakeholders who invest in the company on the basis of the information published by the company.

Where had you applied for and what makes PwC different from other big 4?

It was my first internship in corporate finance, for that matter, I wanted to get into something but I did not really know what was possible. Since, an internship in Audit is a great way to launch one’s career; because you can do whatever you want after; I figured that it would be easier for me to apply there. I quickly got interviews at KPMG and PwC.

The reason why I chose PwC is because I was accepted there first! They offered me the position first and I was very keen to get over my internship hunting!

What does an intern in Audit work on?

An intern in audit at PwC will work on different tasks depending on the specific organization and the needs of the audit team. Some common tasks that an audit intern may be responsible for include:

• Assisting with the preparation of audit plans and procedures
• Conducting research and gathering information to support the audit process
• Analyzing financial statements and other data to identify potential risks and issues
• Participating in meetings with clients to discuss audit findings and recommendations
• Preparing reports and presentations to communicate audit results to clients and internal stakeholders
• Assisting with the development and implementation of internal controls and other risk management processes

Overall, the work of an audit intern typically involves providing support to the audit team in order to ensure that the audit is conducted in a thorough and professional manner. This may involve conducting research, analyzing data, and participating in meetings with clients and other stakeholders.

What do you plan to do next?

Most former Audit intern go for transaction services, investment banking, private equity or M&A internships.

As a consequence, I am not sure, but I think I will try to get into M&A and see if I like it.

Overall, would you recommend this experience to younger students? Why?

I would personally recommend this experience to anyone who is interested in corporate finance. Because it is one of the rare fields of corporate finance that you can have a with no experience before.

For that matter, it is an excellent internship, and anyone would be very lucky to do this internship because it would mean great opportunity to do things after. However, if you are lucky, you will be able to find a more interesting internship in banking perhaps or even in a financial department of a large corporate firm.

Resources

PwC Careers website

Youtube How to succeed in Audit interviews?

Related posts on the SimTrade blog

   ▶ Haiyuan XU My professional experience as financial research assistant in a green finance institute

   ▶ Tanmay DAGA My experience as a sell-side equity research analyst

About the author

The article was written in December 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).

A quick review of the Audit job…

A quick review of the Audit job…

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains what an Audit analyst works on, on a daily basis.

What does the Audit job consist in?

The financial auditor expresses an opinion on the financial statements of a company. Its objective is to carry out the work necessary to give an informed opinion on the true and fair nature of the published accounts.

The financial auditor is therefore the guarantor of the reliability of the company’s financial information and has a great responsibility, in particular to the company’s third party stakeholders who invest in the company on the basis of the information published by the company.

What are the biggest audit firms?

Deloitte, Ernst and Young (EY), PricewaterhouseCoopers (PwC) and KPMG are the four audit and consulting firms that make up the Big Four. They represent the most influential consulting firms in the world. They are the most influential consultancies in the world, employing nearly 1,200,000 people worldwide.

However, some other players are very influential, such as Mazars in France, which is ranked neck and neck with the Anglo-Saxon Big Four. On the other hand, smaller companies do not necessarily need to call on such large firms as their audits are not as labour intensive.

What does an Auditor work on?

In the case of an accounting and financial audit, it is an examination of the company’s financial statements in order to assess the company’s accounts and verify their fairness, compliance and regularity. As the auditor is expected to give an opinion on the fairness of the accounts, the auditor and his team will study the different accounting cycles of the company: income and customers, costs and suppliers, but also equity, cash flow, stocks and fixed assets, etc.

The objective of this review of the major financial masses is to understand the client’s challenges related to its business, its environment, its organisation, and to understand its internal processes in order to see how all this is reflected in the accounts. A meticulous verification of the accounts and invoice amounts is carried out (often subcontracted).

The common objective of all engagements is to provide confidence to both external investors and the client, who may need to make adjustments after the annual audit. The client may have to make adjustments after the annual audit because their internal control systems are more or less effective, and they may present inaccurate accounts unintentionally but more inadvertently.

Other audits may therefore cover the environment, the production system, ethics, safety and many others. The role of a quality audit, for example, is to check whether the client company’s stated quality objectives are being met. The auditors must ensure that the quality management systems comply with the applicable contractual and regulatory requirements.

The use of AI in order to quicken the audit job.

Artificial intelligence (AI) can potentially impact the audit profession in a number of ways. Here are a few examples:

Auditing large amounts of data: AI technologies, such as machine learning algorithms, can help auditors analyze and interpret large amounts of data more efficiently and accurately. For example, an AI system could be used to identify patterns and anomalies in financial data that might indicate fraudulent activity or other problems.

Improving efficiency: AI can automate certain tasks, such as data entry and analysis, allowing auditors to focus on higher-value activities, such as interpreting results and communicating findings. This can help improve the efficiency and effectiveness of the audit process.

Enhancing risk assessment: AI can help auditors better understand and assess the risks associated with a particular business or industry. For example, an AI system could analyze data on economic conditions, market trends, and other factors to help identify potential risks and provide recommendations for how to mitigate them.

Providing real-time monitoring: AI can be used to monitor a company’s financial data in real-time, alerting auditors to any unusual activity or trends that may warrant further investigation. This can help auditors identify potential issues earlier in the process, which can lead to more timely and effective interventions.

Overall, the use of AI in the audit profession has the potential to improve the accuracy and efficiency of the audit process, while also helping auditors to identify and address risks more effectively.

Related posts on the SimTrade blog

   ▶ Pierre-Alain THIAM My experience as a junior audit consultant at KPMG

   ▶ Louis DETALLE Wirecard: At the heart of the biggest German financial scandal of the 21st century

Resources

Youtube The Audit Methodology

KPMG Careers website

EY Careers website

About the author

The article was written in December 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).

A quick review of the Equity Research analyst's job…

A quick review of the Equity Research analyst’s job…

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains what an Equity Researcher works on, on a daily basis.

What does Equity Research consist in?

The objective of equity research is to make buy or sell recommendations on stocks to advise investors on their asset allocation. In doing so, the Equity Research team will closely monitor certain stocks to see if the stock is outperforming or underperforming. In doing so, they will closely monitor the share price and sell their monitoring as a service to determine whether to buy or sell a share.

This equity research service is therefore sold to investors in the financial markets to provide them with a comprehensive financial analysis, as well as advice on whether to buy or sell particular securities. The analysis report presented by an equity analyst is used by investment banks and private equity firms to evaluate the company for an initial public offering (IPO), a leveraged buy-out (LBO), alliances and others. Therefore, all these investors constitute clients of Equity Research teams.

Most banks have Equity Research teams such as Societe Generale Bank, UBS, BNP Paribas, Barclays, Goldman Sachs and Citi for instance. In short, equity research analysts are mainly employed by investment banks (BNP, Citi, Barclays, etc.), investment funds (KKR, Blackstone, Bpifrance) or asset managers (BlackRock, Vanguard, Amundi).

An equity research analyst is specialised in a specific sector such as automotive, aerospace, healthcare, telecoms and biotech. The advantage of doing that is that the banks will have extremely complementary profiles that will be able to deal with the analysis of many companies of the same sector. They will have the benefit of hindsight trough building their knowledge of comparable companies. The analyst will often even develop a special expertise on a particular company, which he or she will follow closely.

What does an analyst in Equity Research work on?

As explained above, an equity research analyst will follow the release of sector or company specific information to write a note for subsequent use by the clients as part of their investment strategy. Therefore, the work of the equity research analyst will be primarily information research, reading quarterly financial reports, and press releases which may provide information on the company’s performance to date compared to expectations. The analyst will also look for information on upcoming mergers and acquisitions (M&A) or divestment transactions, the announcement of new partnerships or possible disposal plans.

As for the sectoral notes, the analyst will delve into the reading of documents from the major international institutions for all the data relating to global and entire sectors.
Once this research work is completed, equity research analysts proceed to forecast results through financial modelling: they use historical data to understand how the results were obtained and they confront these historical performances with the constraints of the future environment in order to anticipate how the company will perform. This modelling will enable them to forecast short-, medium- and long-term stock performance and the behavior to adopt in order to make the most of it.

This work will therefore be carried out in the form of a synthesis and by drafting studies for investors and reacting to specific news items.

Finally, a last type of task will consist of answering clients’ questions by telephone during morning meetings in order to give them recommendations for the day.

Why do Equity Research jobs appeal so much to business school students?

First of all, it should be noted that this profession combines corporate finance skills with financial market experience, which is rare! Indeed, the Equity Research analyst will carry out various financial analyses which will be used to issue trading recommendations on the financial markets. A financial profession in such a situation is rare, which is a first strong argument.

In addition, it is the dynamic working environment that investment banking constitutes that attracts young graduates. Equity Research is marked by a culture of high standards and maximum commitment, with highly responsive teams and extremely competent colleagues. Working in a high-powered team though quite small teams enables an analyst to quickly gain knowledge on a sector or a client.

The position of Equity Research in front of clients also makes the job really interesting because the Equity Research Analyst is at the core of the clients’ investment strategies. Because as we have seen together, such a job requires the ability to manage theoretical models and market trends in order to give clients a good insight of what is to expect for the day. For that matter, an Equity Research career can be very challenging and gives plenty of responsibilities, and this is what young graduates seek for.

Related posts on the SimTrade blog

All posts about jobs in finance

   ▶ Louis DETALLE A quick review of the ECM (Equity Capital Market) analyst’s job…

   ▶ Haiyuan XU My professional experience as financial research assistant in a green finance institute

   ▶ Tanmay DAGA My experience as a sell-side equity research analyst

   ▶ Marie POFF Film analysis: The Wolf of Wall Street

Resources

Equity Research Interview Questions with answers

Youtube An analyst in Equity Research’s Youtube Interview

Youtube How to do the Equity Research of a company?

About the author

The article was written in November 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).

A quick interview with an Asset Manager at Vontobel…

A quick interview with an Asset Manager at Vontobel…

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) interviews an asset manager at Vontobel to better understand their daily work.

Hello, what is your background?

I went to business school and chose to do an internship in finance at Blackrock. When I left ESCP Business School, Blackrock offered me a job and that’s how I launched my career in Finance. I got into Vontobel later, as I had experienced many aspects of Asset Management.

Could you explain what Vontobel Asset Management does?

Vontobel is an asset management company, which means that it invests the funds of clients such as banks and insurance companies that do not necessarily have the required expertise.

Our investment strategy must therefore ensure the growth of our clients’ funds while combining several factors such as risk, investment horizon and the profitability objective sought by the client.

What is your role as Managing Director here at Vontobel?

I am responsible for the global development of bond sales, so I have to make sure that our representatives around the world present these bond products well by making sure they have access to all the necessary marketing materials such as tenders. I also have to understand the market behaviour and the expectations of our clients in order to define the best possible strategy.

How were you recruited for this position and what qualities do you think are required?

I was recruited in particular for my experience and knowledge of the various financial markets. Vontobel was looking for someone who had the ability to understand the client segments and the ability to manage teams, for example, I manage 50 people on a daily basis. Generally speaking, the higher you go, the less technical skills are required. A managing director (MD) will of course have to be able to master the financial issues of the day, but he or she will make the difference by his or her ability to lead a team to ever-improving results.

What do you like about this job?

What I like is the diversity of the subjects I deal with in my job. This job requires me to use my technical knowledge of investment products, stock markets and macroeconomic principles in the context of a client relationship.

I have to analyse both the financial markets and my clients’ needs. Understanding their psychology and the structure in which they evolve allows me to define offers in line with their needs. For instance, it is required of me to understand what the best investment opportunities are given the macroeconomic circumstances and the interest rates environment.

Do you have any advice for students who want to go into investment banking or asset management?

Before choosing which area of finance you want to work in, I think it’s important to identify the characteristics of each of these sectors. Investment banking is similar to corporate finance, so it is a very demanding job (including weekends) because you work on M&A and company IPOs. So an analyst in M&A will be required to work from 9:30 am until midnignt and later sometimes…Asset management is a market finance job, with the definition of investment strategies linked to the opening of the market. This is why this sector requires more reasonable hourly volumes, we are talking about 8 am to 8:30 pm. The level of remuneration will be less than the ever-increasing wages of M&A, an Asset Manager can start around 50 K€ per year but it will increase every year.

Resources

Vontobel

Youtube How to approach a job interview for Asset Management

Related posts on the SimTrade blog

All posts about jobs in finance

▶ Louis DETALLE A quick presentation of the Asset Management field…

▶ Akshit GUPTA Asset management firms

▶ Jayati WALIA My experience as a credit analyst at Amundi Asset Management

▶ Youssef LOURAOUI ETFs in a changing asset management industry

About the author

The article was written in November 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).

A quick review of the DCM (Debt Capital Market) analyst's job…

A quick review of the DCM (Debt Capital Market) analyst’s job…

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains what an analyst in Debt Capital Market (DCM) works on, on a daily basis.

What does DCM consist in?

The Debt Capital Market or DCM teams are used to cover the debt financing needs of organizations via financial markets. For this reason, they assist companies in the issuance of bonds and loans. This job is perfectly centered between corporate finance and financial markets! The clients of a DCM team are very broad and regroup corporate, financial institutions and governments.

The DCM analyst’s job is therefore a financing-related job like the Equity Capital Market (ECM). However, it differs by the nature of the financing offered: debt or equity.

Why would a company resort to DCM rather than ECM?

The main advantage of issuing debt rather than equity is that a company will not have to sell any share of its capital. The company’s shareholders will maintain their shares in the company, in order to keep control of it. The counterpart to this is the repayment obligation inherent in the financial debt, which does not exist when the company issues shares. Indeed, legally, there is no obligation for a company to pay dividends to its shareholders, whereas the repayment of interest and principal on the debt is contractually binding.

The DCM is therefore an effective solution to attract a large number of clients such as companies, but also actors unable to intervene in the equity markets: the governments. Indeed, governments, supranational institutions or sovereign wealth funds cannot sell part of their capital; they find in the bond market a source of liquidity. Traditionally, countries offering solid guarantees of interest payments and bond repayment – the United States, Germany and France – are the biggest players on the bond markets.

What does an analyst in DCM work on?

The DCM team of a bank works mainly on three dimensions: commercial relationship, structuring, and syndication. There are usually dedicated analysts devoted to each task.

Commercial relationship

Through the commercial relationship, the DCM team will try to understand the client’s needs and find a customized solution. The objective is therefore to define the amount of debt to be issued, based on the client’s financing needs, outstanding debt and solvency. This origination work therefore requires an overall view of the client’s profile and capital structure to ensure that its rating will not be affected by the new bond issue (about credit rating you can read this post.

Structuring

This dimension is more technical. This is the case when an investment bank has to offer more sophisticated products such as convertible bonds, bonds with warrants or bonds redeemable in shares. Structuring is mainly concerned with hybrid debt issues. These products offer different levels of risk for investors who will participate to the issuance.

Syndication

Syndication relates to oversized loans that requires allocation among different banks.

Why do DCM jobs appeal so much to business school students?

First of all, it is the dynamic working environment that investment banking constitutes that attracts young graduates. Like ECM, DCM is marked by a culture of high standards and maximum commitment, with highly responsive teams and extremely competent colleagues. Working in a high-powerded team is very stimulating, and often makes it possible to approach the workload with less apprehension and to rapidly increase one’s competence.

The position of DCM divisions within investment banks also makes the job really interesting because the DCM can interact with other departments like M&A. Because as we have seen together, a DCM job requires the ability to manage theoretical models, market trends and legal specificities. For that matter, a DCM career can be very challenging, and this is what young graduates seek for.

Resources

Youtube Interview with a DCM originator at Natixis

Related posts on the SimTrade blog

All posts about jobs in finance

▶ Louis DETALLE A quick review of the ECM (Equity Capital Market) analyst’s job…

▶ Jayati WALIA Credit risk

▶ Bijal GANDHI Credit rating

▶ Mohamed Dhia KHAIROUNI Analyse du documentaire « Inside Job »

About the author

The article was written in November 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).

A quick review of the ECM (Equity Capital Market) analyst's job…

A quick review of the ECM (Equity Capital Market) analyst’s job…

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains what an analyst in ECM works on, on a daily basis.

What does ECM consist in?

The Equity Capital Markets or ECM teams are used to cover the equity financing needs of companies via financial markets. For this reason, they assist companies in initial public offerings (IPOs) and then seasoned equity offerings (SEOs), convertible bond issuances, capital increases or squeeze. The ECM analyst’s job is therefore a financing-related job like the Debt Capital Market (DCM), which differs, however, by the nature of the financing offered: debt or equity.

What does an analyst work on?

The analyst may first work on the origination of the deal. This involves, for example, proposing a financing solution to the client in parallel with a merger or acquisition (M&A) transaction. This will require a major pitch to convince the client that the proposed financing solution is the most suitable for its needs. On the other hand, the analyst will also have to work upstream on the technical aspects of the ECM transaction, i.e., the pricing of the transaction to reassure the client that the transaction will be successful. This is both a technical and commercial job, with strong relations with clients and other teams in the bank.

In parallel to this technical and commercial work and directly linked to the ECM transaction, the analyst must also work with the legal teams on the structuring of the transaction. This is often overlooked, but a share issue is a financial as well as a legal operation. That is why ECM teams also work on the tax and legal aspects of a share issuance or IPO for example.

Finally, the ECM analyst must regularly inform himself on the behavior of the financial markets in order to choose the most opportune moment for an IPO or a share issuance for example. The current context of massive inflation and instability linked to the war in Ukraine, for example, invites investors in the financial markets to be very cautious and therefore to invest less than usual. This is the reason why IPOs are so rare at the moment, as players wishing to go public fear the response of the primary markets. This work of monitoring the financial markets will be done by looking at the records on Bloomberg for instance, in order to obtain insights on the major market trends.

Why does ECM jobs appeal so much to students?

First of all, it is the dynamic working atmosphere that investment banking constitute that also attracts young graduates. ECM is marked by a culture of high standards and maximum commitment, with highly responsive teams and extremely competent colleagues. Working in a quality team is very stimulating, and often makes it possible to approach the workload with less apprehension and to rapidly increase one’s competence.

The position of ECM divisions within the Investment Banks also makes the job really interesting. Because as we have seen together, an ECM job suggests an ability to manage both theoretical models, market trends and legal specificities. For that matter, an ECM career can be very challenging, and this is what young graduates seek for.

What are the main exits for ECM?

What is special about ECM is that it is a profession between corporate finance and market finance, which means that it is possible to move into one of these two branches after working in ECM. Some go into Venture Capital or late stage start-ups to build on their knowledge of IPOs. Others go into Sales & Trading, although this seems to be more rare.

Resources

Coursera Lecture on ECM & how they work

Indeed 55 Capital Market Interview Questions (With Sample Answers)

Related posts on the SimTrade blog

All posts about jobs in finance

   ▶ Louis DETALLE A quick presentation of the Private Equity field…

   ▶ Louis DETALLE A quick presentation of the M&A field…

   ▶ Frédéric ADAM Senior banker (coverage)

About the author

The article was written in November 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).

A quick presentation of the Restructuring job…

A quick presentation of the Restructuring job…

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains the job of an analyst in Restructuring.

What does Restructuring consist in?

Restructuring is a term that encompasses all professionals working to assist companies in difficulty. In this market, various categories of actors are involved: debtors (often the company in difficulty), creditors (which may be banks), shareholders (of the company in difficulty) and managers.

Restructuring is an activity that comes to the aid of companies facing economic and financial difficulties in the course of their lives that could threaten their survival in the short or medium term. The particularity of this sector is that it requires both a real financial technicality and a legal technicality, which are invaluable during complex collective procedures.

This activity is particularly fashionable in the current context, marked by the post-covid period, and it should be noted that the restructuring profession generally does well in periods of crisis or post-crisis since the number of companies in difficulty increases.

What does an analyst in Restructuring work on?

There are several situations in which a company in difficulty may call on the services of a restructuring consultancy.

However, if a general methodology is to be given, the missions of a restructuring analyst are generally as follow:

Analysis of the company’s history and the choices that led it to find itself in this situation (collective procedure in France for example). The first step is therefore to determine how the company got into such difficulties. The objective is simply to understand the choices and events that led to this situation.

A strategic due diligence is then required: In order to understand the prospects for improving the company and its activity, the business plan submitted by the company must be carefully examined in order to gauge the company’s future ability to repay its creditors.

To do this, a comparative analysis of the business plans of the last 10 years compared to the results actually achieved may be judicious in order to gauge the realistic nature of the company’s management. A forecast analysis of the evolution of the company’s market is also essential to assess whether the company will evolve in a favorable context or not. A strategic analysis must complete this due diligence work to see if the business strategy implemented is consistent with the developments anticipated by the restructuring firm.

Definition of the sustainable debt level and production of a debt repayment plan: Next comes a turnaround plan to suggest ways to improve the company’s management and profitability. This may involve reducing the cost structure, requesting longer payment terms to relieve pressure on operating cash flow.

Finally, the company will have to define its sustainable debt level. The company will propose a new sustainable debt according to the estimates made by the Restructuring firm. This will allow the company to continue its activity under new conditions that will enable it to repay the old debts that have not been honored as well as the new debt intended for the continuation of the activity.

In doing so, the restructuring firm will enable the creditors to assess the company’s future capacity to honor its debts in the event of a continuation of its activity under the terms proposed in the turnaround plan.

What is interesting & demanding in Restructuring?

First of all, a restructuring analyst can work on extremely complex cases, both because of the number and nature of the players involved and because of the situations of the companies in difficulty.

Indeed, if all economic crises are different, it is also because all the events that cause them have a different impact on companies. This is why each restructuring assignment is different from another, and this is an aspect that many professionals in this sector stress.

However, this diversity of subjects obviously suggests complexity since each subject is not like any other. On the other hand, the topics encountered are related to both legal and financial considerations, which requires skills in Law as well as in Financial Modelling. Profiles with these two facets are therefore highly appreciated.

Related posts on the SimTrade blog

▶ Louis DETALLE A quick presentation of the Private Equity field…

▶ Louis DETALLE A quick presentation of the M&A field…

▶ Frédéric ADAM Senior banker (coverage)

Useful resources

KPMG’s definition of Restructuring

An article about how Restructuring creates value for companies…

About the author

The article was written in October 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).

Fiche Métier : Térsorier

Fiche Métier : Térsorier

Emma LAFARGUE

Dans cet article, Emma LAFARGUE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2024) décrit le métier de trésorier.

Que fait un trésorier ?

Le trésorier est la personne en charge des différents flux monétaire de l’entreprise. C’est lui qui gère la répartition et la distribution des liquidités (paiement des prestataires, rémunération des salariés) et qui veille à la stabilité financière. Il doit s’assurer que l’entreprise dispose d’un fonds de roulement suffisant pour son fonctionnement quotidien, c’est lui qui place l’argent et décide du financement et des investissements (en lien avec la direction stratégique)

Concrètement, ses missions au quotidien sont de :

  • Contrôler les dépenses et recettes de l’entreprise
  • Tenir le registre des différents mouvements financiers
  • Gérer les liquidités, c’est-à-dire veiller au remboursement des emprunts et à la rentabilité des investissements
  • Etudier les risques liés aux perspectives de placement

Avec qui travaille un trésorier ?

Le trésorier est en lien constant avec la direction de l’entreprise afin de décider de la stratégie de financement, de se mettre d’accord sur les investissements et les placements à effectuer.
Le trésorier est également le principal interlocuteur des banques et des investisseurs.

Enfin, il travaille en interaction avec les comptables, en charge de l’aspect technique des transactions financières : ils enregistrent les opérations et formulent des déclarations. Le trésorier quand-à-lui, est chargé des fonds directement.

Combien gagne un trésorier ?

Un trésorier gagne entre 3 700€ et 6 000€ brut par mois. Cependant, le salaire d’un trésorier junior varie entre 36 000€ et 48 000€ par an (source : cadremplois.fr 2021)).

Quel positionnement dans la carrière ?

Il est possible d’être trésorier junior. Cependant, les entreprises privilégient les personnes avec de l’expérience, c’est-à-dire ayant déjà exercé des fonctions de contrôleur de gestion ou comptable trésorerie.
Le trésorier peut aspirer à une belle évolution de carrière. Après 5 années, il peut bénéficier d’opportunités et évoluer en tant que directeur financier, responsable du service administratif, chef trésorier ou responsable trésorerie groupe.

Quelle formation ?

Pour être trésorier, un bac +5 est nécessaire en finance, commerce, gestion ou comptabilité.
Les formations peuvent donc être une école de commerce avec spécialisation en finance ou trésorerie ou un diplôme supérieur de comptabilité et de gestion (DSCG). Ces deux formations sont proposées par l’ESSEC : le DSCG peut être passé en parallèle et la spécialisation en finance se fait par le Corporate Finance Track disponible à Cergy et Singapour.

Lien avec le cours et concepts clés :

Pour être trésorier, il faut avoir une très bonne connaissance des différentes normes IFRS (International Financial Reporting Standards), du droit des affaires ainsi que toutes les notions de comptabilité et finance (Compte de résultat, Bilan, Tableau de financement, flux de trésorerie, fonds de roulement etc.)

Autres articles sur le blog SimTrade

   ▶ All posts about Professional experiences

   ▶ Anna BARBERO Career in finance

   ▶ Alexandre VERLET Classic brain teasers from real-life interviews

Resources utiles

Association Française des Trésoriers d’Entreprise

Cadremplois.fr Trésorier

A popos de l’auteure

Cet article a été écrit en Mai 2022 Emma LAFARGUE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2024).

Métier de Directeur financier

Description du métier de Directeur financier

Chloé POUZOL

In this article, Chloé POUZOL (ESSEC Business School, Grande Ecole Program – Master in Management, 2022-2024) présente le métier de Directeur financier.

Que fait un directeur financier ?

L’objectif principal d’un directeur financier est de développer stratégiquement et financièrement l’entreprise pour laquelle il travaille. Ses missions sont variées et nombreuses. Il est tout d’abord responsable de garantir l’équilibre financier de l’entreprise et d’optimiser ses performances. Pour cela, il encadre les équipes financières et comptables, établit les budgets, assure le suivi de la trésorerie et des écarts avec le budget, gère le besoin en fonds de roulement (BFR) et s’occupe de la gestion des dettes en anticipant les besoins de financement de l’entreprise.

Ensuite, le directeur financier est chargé de conseiller la Direction Générale sur les investissements à réaliser. Il décide des placements à effectuer, des plans de financement et suit leur mise en œuvre.

Le directeur financier doit aussi représenter l’entreprise lors des rencontres, des négociations avec les partenaires financiers et des réunions de la Direction générale au sein même de l’entreprise. Il est responsable de l’organisation des réunions et assemblées générales (notamment de clôture des comptes et pour les reportings) .

Enfin, le directeur financier doit mettre en place des procédures de gestion et d’optimisation et faire des veilles réglementaires relatives au secteur d’activité de l’entreprise. Il supervise le recouvrement et le juridique.

Avec qui travaille un directeur financier ?

Le directeur financier doit avoir une appétence pour le travail en équipe. En effet, il est en relation avec tous les services de l’entreprise pour établir les budgets de trésorerie et surtout avec les équipes comptables, administratives et financières. Il dirige lui-même une équipe composée d’analystes financiers, de responsables de la trésorerie, de spécialistes du financement et d’experts des crédits internationaux. Le directeur financier est également en charge des relations extérieures avec les bailleurs de fonds (les actionnaires et les créanciers comme les banques) et les organismes privés ou publics (Etat, régulateurs, associations professionnelles, etc.) concernés par l’activité de l’entreprise.

Combien gagne un directeur financier ?

Le salaire d’un directeur financier dépend de son expérience professionnelle, de sa formation initiale, du secteur d’activité et de la taille de l’entreprise dans laquelle il travaille. Cependant, le salaire mensuel moyen s’élève généralement entre 5 000 € et 6 600 € brut ; mais il peut aller jusqu’à 25 000 € brut pour un directeur financier très expérimenté. En tant que directeur, il est également possible de toucher des bonus.

Quel positionnement dans la carrière ?

Travailler en tant que directeur financier permet une mobilité professionnelle importante. En effet, il vous est possible d’une part de continuer votre carrière dans la même entreprise en travaillant à la Direction Générale en tant que DG ou PDG par exemple, ou d’autre part, en changeant d’entreprise pour occuper à nouveau un poste de Directeur Financier ou au sein de la Direction Générale.

Quelle formation ?

Être muni d’un Bac+5 et sorti d’une école de commerce comme l’ESSEC correspondent à la formation académique nécessaire pour occuper ce poste.

Cependant, le poste de Directeur financier n’est pas accessible dès la diplomation. Il est, en effet, nécessaire d’acquérir plusieurs années d’expériences dans le domaine de la comtpabilité, de la finance, du contrôle de gestion ou de l’audit.

Compétences requises ?

Il est évident que chaque directeur financier est différent et qu’en fonction de l’entreprise dans laquelle il travaille et des équipes qu’il gère certaines compétences seront plus nécessaires que d’autres. Il est tout de même possible d’affirmer que parmi les hard skills nécessaire, une bonne connaissance des aspects fiscaux, comptables, juridiques et financiers est essentielle à acquérir. Les compétences techniques s’acquièrent principalement avec l’expérience. De même, le directeur financier doit faire preuve de leadership et avoir le sens de l’écoute afin de bien manager ses équipes. Enfin, une forte résistance au stress ainsi que la capacité de convaincre un public sont des compétences humaines et comportementales (soft skills) très valorisées pour ce poste.

Artilcles à lire sur le blog SimTrade

   ▶ All posts about Professional experiences

   ▶ Anne BARBERO Career in finance

   ▶ Alexandre VERLET Classic brain teasers from real-life interviews

Ressources utiles

Cegos Fiche métier directeur financier

A propos de l’auteure

Cet article a été écrit en mai 2022 par Chloé POUZOL (ESSEC Business School, Grande Ecole Program – Master in Management, 2022-2024).

Online Brokers

Online Brokers

Shruti CHAND

In this article, Shruti CHAND (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2022) elaborates on the concept of online brokers.

This read will help you get started with understanding online brokers and how it is practiced in today’s world.

Introduction

A stockbroker is an entity that facilitates trading, that is to say executing trades on your behalf and storing your cash and stocks with them. Traditionally, brokers have been big banks and financial institutions that deal with billions of dollars in trading volumes. With advancing technology around the world, financial markets is adapting to the change, allowing retail investors to invest in the financial markets in new ways.

An online broker essentially is an entity that carries the activity of a broker without having a brick and motor existence, allowing its customers to execute and manage their trades by themselves on a trading platform available on the internet.

An online broker allows investors to trade in stocks, derivatives, commodities, cryptocurrencies, exchange-traded funds (ETFs), etc. in multiple currencies and markets. Additionally, they provide additional services such as:

  •  Market news
  •  Extensive investment information
  •  Expert advice
  •  Technical and fundamental analysis

online brokers provide their services in return of transactions and management fees, which are on the lower side for brokerage firms because of the low cost, they incur because of their non-physical existence. The expenses related to labor, property, management systems are reduced as all the process is carried out digitally. This allows the customers/investors to have quick transactions and a smooth experience. Some online brokers are in fact divisions of larger traditional brokers, e.g. Saxo Bank.

How can you use an online broker?

There are various online brokers available in every country which will allow you to use their platforms via their mobile phone application or internet website. Just as traditional brokers, they will make sure a robust system to study KYC (Know Your Customer) is conducted for every investor.

Additionally, regulators across the world are recognizing the potential of online brokers and making the system more secure day by day. The first step towards using an online brokerage is to choose the right one for you. In the US alone, with the growing number of online brokers, logins from mobile devices are up significantly between 35-50% over last year alone. There are various popular online brokers that one can start using, to begin with their investing journey.

Here, we have noted down attractive online brokers that investors use in
France:

1. Revolut- Has been transforming the online banking space and is one of the most convenient online brokers in terms of usage for beginners. It is FREE and easy to set up an account with them.

2. DEGIRO- Is in fact again one of the lowest fees trading platform. It is regulated by reputed authorities which makes it trustworthy and secured.

3. eToro- Very simple to open an account with them. It provides a simple to understand user interface and allows trading of almost all kinds of stocks, ETFs etc.

Steps to start availing services of an online broker:

1. Set up an account with an online broker
2. Get approved by the broker through a series of KYC and AML checks
3. Deposit the minimum amount of money to start trading.
4. Get additional support through reports, stock tracking, and investment advices.
5. Start investing.

It is sometimes argued that online brokers can be unsafe as their existence is not physical and the investors’ money can be lost if they go bust. The transition from traditional brokers to online brokers will take time but it is growing tremendously. Even the traditional brokers are opting for online facilities to match up with the trend.

Related posts on the SimTrade blog

   ▶ Wenxuan HU My experience as an intern of the Wealth Management Department in Hwabao Securities

   ▶ Akshit GUPTA Initial and maintenance margins in stocks

   ▶ Louis DETALLE A quick overview of the Bloomberg terminal…

Relevance to the SimTrade certificate

This post deals with online brokers which is used by various you as an investors in different instruments can use various mediums to invest in the markets:

About theory

  • By taking the Simtrade course, you will know more about how investors can use various strategies to invest in order to trade in the market.

Take SimTrade courses

About practice

  • By launching the series of Market maker simulations, you can extend your learning about financial markets and trading approaches.

Take SimTrade courses

About the author

Article written in August 2021 by Shruti CHAND (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2022).

Option Trader – Job Description

Option Trader – Job description

Akshit GUPTA

This article written by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) presents the job description of an Option Trader.

Introduction

Options are a type of derivative contracts which give the buyer the right, but not the obligation, to buy (for a call option) or sell (for a put option) an underlying asset at a predetermined price and at a given date.

Option traders are generally hired by investment banks, investment firms, brokerage firms and commercial banks (for the trading of currencies on the foreign exchange).

Work of an option trader

An option trader is responsible to maximize trading revenue and use different hedging strategies to minimize the portfolio risk and prevent capital loss. He/she trades in two types of option contracts namely, call and put options by taking long or short positions (most of the time selling options to clients).

Trading in options is a highly complex work as the option pricing and risk exposure depend on a number of factors which includes the changes in prices of the underlying, volatility, interest rates, time value, etc. To manage his/her option book, an option trader also uses option Greeks, which are financial tools that measure the price sensitivity of option contracts.

These tools help the option traders to understand the market in a better sense and determine which options to trade and when. Option traders also use different quantitative models (such as the Black-Scholes-Merton model in continuous time and the binomial model in discrete time) to price different option contracts and manage their positions.

With whom does an option trader work?

Option traders work in coordination with several teams. These teams are responsible for providing the option traders with underlying data and market inputs. Some of the most common teams that an option trader works with are:

Sales

A sales analyst works with the retail or institutional clients of the firm to implement profit generating strategies on the client’s investments. An option trader also works with the sales team of the firm to execute trades based on the clients’ needs.

Portfolio managers

An option trader also works with the portfolio managers of the firm to manage portfolios of the firm’s clients by implementing hedging strategies based on option contracts.

Quants

An option trader also works with the quantitative analysts of the firm to utilise different quantitative models to price option contracts and implement hedging strategies.

Economists and Sector specialists

An option trader trading in indices, equities or currencies, works in tandem with the Economists or sector specialists to predict the macroeconomic trends and gather information about specific sectors and economies

Equity researchers

An option trader trading in equities work with the equity researchers of the firm to obtain financial and non-financial data about different equity underlying.

How much does an option trader earn?

The remuneration of an option trader depends on the type of role and organization he/she is working in. As of the writing of this article (2021), an entry level option trader working in a financial institution can earn an average salary of €65,000/year. The option traders also earn high bonuses and commissions which are based on a percentage of the total profits they have generated over the period.

What training to become an option trader?

In France, an individual who wants to work as an option trader is highly recommended to have a Grand Ecole diploma with a specialization in market finance. He/she should possess strong knowledge of financial markets, mathematics, and economics. He/she must understand financial and economic trends and have strong research skills and interpersonal skills.

The knowledge of coding languages like Python and VBA is also a very desirable skill to become an option trader. To work as an option trader, it is advised to start your career as an intern or an apprentice at a French financial institution while pursuing your diploma.

The Financial risk management (FRM) or Chartered Financial Analyst (CFA) certification provides a candidate with an edge over the other applicants while hunting for a job as an option trader.

Relevance to the SimTrade course

The concepts about option trading can be learnt in the SimTrade Certificate:

About theory

    • By taking the Trade orders course, you will know more about the different type of orders that you can use to buy and sell assets in financial markets.
  • By taking the Market information course, you will understand how information is incorporated into market prices and the associated concept of market efficiency.

Take SimTrade courses

About practice

    • By launching the Sending an Order simulation, you will practice how financial markets really work and how to act in the market by sending orders.
  • By launching the Efficient market simulation, you will practice how information is incorporated into market prices through the trading of market participants and grasp the concept of market efficiency.

Take SimTrade courses

Useful resources

Hull J.C. (2018) Options, Futures, and Other Derivatives, Tenth Edition, Chapter 10 – Trading strategies involving options, 276-294.

Hull J.C. (2018) Options, Futures, and Other Derivatives, Tenth Edition, Chapter 8 – Mechanics of options markets, 235-240.

Related posts

▶ Akshit GUPTA Market maker – Job description

▶ Akshit GUPTA Trader – Job description

▶ Akshit GUPTA Risk manager – Job description

About the author

Article written in June 2021 by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

Credit analyst

Credit analyst

Rodolphe Chollat-Namy

In this article, Rodolphe CHOLLAT-NAMY (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2023) introduces you to the job of credit analyst.

Within an investment bank, several jobs are directly linked to bonds. Among them is that of credit analyst. What does a credit analyst do? What are the qualities required to be a credit analyst?

The missions of a credit analyst

Within a bank, the role of the credit analyst is to study in depth the financial situation of companies (risk assessment, analysis of strengths and weaknesses, analysis of financial accounts, etc.) in order to determine their solvency.

More concretely, analysts have three main tasks:

Firstly, as mentioned above, analysts conduct in-depth analyses of the financial statements and credit applications of the companies under their responsibility. They keep abreast of their current situation and closely monitor any developments that may affect their debt capacity.

Secondly, analysts provide recommendations related to the analysis and evaluation of the credit risk. If they think that the company is solid, they can for example propose to buy bonds of this company, which would thus constitute a safe investment. On the other hand, if they believe that the risk of default is increasing, they will propose to sell.

Finally, a significant part of analysts’ job is to present their results. This may take the form of a daily summary publication, or a more in-depth quarterly or annual publication. In addition, analysts may have to meet with the bank’s clients, mainly investors, to present their recommendations.

In addition, there may be ancillary tasks. For example, analysts may seek to develop new mathematical and statistical models to improve their understanding of bond risks.

What is the day-to-day life of a credit analyst like?

Analysts’ day starts early, before the financial markets open, so that he has time to brief investors on the latest bond news in the sectors they follow.

After that, their day depends very much on the calendar of the companies he or she follow. During the quarterly publications of these companies, they will spend time reading them and collecting the information contained in them. Similarly, they will attend the various conferences organized by these companies to explain the published results. The rest of the time, they will analyze this information, update their projection models and update their recommendations.

As the end of the semester or the year approaches, credit analysts’ days can become longer because they have to produce a semiannual or annual publication in which their recall the economic context and their recommendations. Following the publication of this, they will often make a tour of their clients to present it. This is known as a roadshow.

The qualities required to be a good credit analyst

Several qualities are necessary to be a good credit analyst.

First of all, credit analysts have strong corporate finance skills. In particular, they have a good understanding of corporate debt and liquidity ratios. The main ratios are: the debt-to-equity ratio which informs on the financial structure of the company, the interest coverage ratio which measures the capacity of a company to pay its interests and the debt-to-EBITDA ratio which measures the capacity of the company to repay its debt with the money generated by its activity.

Secondly, it is imperative to be very rigorous. Indeed, the quality of the analyses depends on the data collected. Analysts cannot afford to make mistakes in the figures they report. To this end, they have recourse to several sources of information: companies’ annual reports, press releases, financial statements, as well as market analyses produced by other players. It is important to note that all this information is public. Indeed, for legal reasons, to avoid insider trading, analysts have limited access to the information.

In addition, analysts must have strong synthesis skills. It is their analysis that investors will buy. It must therefore be as relevant as possible in order to present the best possible guidance. Moreover, the format of these analyses must also be carefully designed. They must be easily understandable by its readers. Analysts must therefore have presentation skills in order to sell them. It is important to take care of the content and the form.

Finally, analysts improve over time. They usually cover a particular sector. For example, he or she will be a specialist in the automotive sector. The better their knowledge of the sector, the more relevant their analysis. To do this, they must be familiar with the general environment of the sector they are following in order to identify future trends. Secondly, they must build up a database of the companies they follow.  The more accurate and long-standing the database, the better they will be able to put the new information they collect into perspective.

Related posts on the SimTrade blog

All posts about jobs in finance

   ▶ Jayati WALIA My experience as a credit analyst at Amundi Asset Management

   ▶ Aamey MEHTA My experience as a credit analyst at Wells Fargo

   ▶ Louis DETALLE My professional experience as a Credit Analyst at Societe Generale

   ▶ Jayati WALIA Credit risk

Useful resources

Rating agencies

S&P

Moody’s

Fitch Rating

About the author

Article written in June 2021 by Rodolphe CHOLLAT-NAMY (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2023).

Career in finance

Career in finance

Anna Barbero

In this article, Anna BARBERO (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2020-2021) discusses various aspects of a financial career.

I had the opportunity to talk with Alexis Fontana (ESSEC Alumni and Board member of ESSEC Alumni-Club Finance) who has worked in many fields related to corporate finance (audit, private equity, and mergers and acquisitions, etc.) Alexis currently works at EY as a “Strategy and Transactions” manager.

Interview with Alexis Fontana

Question: First, your curriculum and your engagement at Club ESSEC Finance show a real passion for corporate finance. When did you decide you would take this orientation? And why?

Corporate Finance is indeed a field in which I really enjoy being involved and here are the reasons why:

  • The analytical aspect of Corporate Finance, as a transaction due diligence professional on a day-to-day basis
  • The investment side, I was once a private equity professional and continue to work with small and large Private Equity (PE) funds
  • The theoretical approach, I have just finished my certified accountant thesis. The subject deals with the impacts of the working capital requirements on the value of industrial small medium enterprises (SMEs) in the context of a sell-side process.

When I joined ESSEC in 2012, I initially wanted to work for the Autorité des Marchés Financiers (the French financial regulator). The multiple professional experiences required to fulfil the ESSEC curriculum helped me in the design of my professional career I am still building today.
I think that one of the key encounters that made me discover my passion for corporate finance was Albert Aidan, a Senior Partner at Deloitte, who was once my professor of accounting at ESSEC Business School but also, back then, the treasurer of ESSEC Alumni.

Question: The financial sphere is often criticized for being profit oriented. What would you respond to those critics?

The financial sphere is mandated or has in its very statutory purpose the aim of making sustainable profit. One of the key aspects I learned over the recent years is that no company can be durable without being profitable.

During my curriculum at ESSEC Business School, I have been privileged to work in a pan-European French Private Equity fund, attending each week the investment committee with some of the sharpest investment minds I have had the opportunity to meet so far.

What I understood, is that these professionals work to safeguard the interests of the Limited Partners (LP) of the fund (institutions, family offices, individuals which decide to invest money in an investment fund managed by a General Partner (GP) and its team of investment professionals). To that extent the actions taken are aimed to achieve resilient returns through investments in high potential companies which are, by the way, embarked in value creation journeys which bring (i) new jobs, (ii) economic activity to region, (iii) growth and ambition on a national or international scale.

More recently in the context of the COVID-19 crisis, the financial sphere has been faced with a call for greater purpose that is still being translated in concrete actions: (i) extra-financial reporting measuring impact and Environmental, Social, and Governance (ESG) related metrics, (ii) tighter reporting and communication standards, (iii) stronger compliance. I really do believe that today is a good time to start a career in corporate finance. So many fields and uncharted territories are being addressed by the industry which is in high need of bright minds and pioneers!

Question: You have worked in several finance fields: audit, private equity and more recently even M&A. Which one did you like most? Do you feel that an experience in one field can help in another? For a young professional, which one do you advise to start with?

I am really passionate about my current responsibilities as a transaction due diligence professional, it offers me the opportunity to always be working on the most strategic corporate events (acquisition, divestiture, capital reorganization, refinancing and even restructuring). It gives me also the opportunity to work on daily basis with Chief Executive Officers (CEOs), Chief Financial Officers (CFOs), Private Equity (PE) professionals, Merger and Acquisitions (M&A) bankers, lawyers (corporate, law, tax) on top of a broad ecosystem of experts.

My past experiences gave me the tools to advise my clients on very technical aspects of a deal with the aim of always giving them the more acute advice in a timely manner. What I really like is the negotiation phase of the deals – the final word is to convince the other party to get the deal done. Each deal is unique, and I would even say that cross-border deals are the most fascinating as you add the cultural aspects on top of the already complex deal challenges you must solve.

Should you consider a career in Corporate Finance, I recommend performing an introductory experience in Audit as it gives you all the keys to understand how financial information is sourced, processed and then communicated.

My advice to young professionals is to learn and gather soft skills, but to also bring a broader focus on a domain of expertise. Hard skills are keys in the current business environment we are navigating through and it will become more and more sought after. It can be law, accounting (please do write me directly if this field interest you) and other fields of interest but do be curious and keep learning things even after finalizing your curriculum at ESSEC Business School, you always to remain at the top of the game.

Key concepts

Audit

According to the Dictionary of Cambridge, financial audit is “the process of checking a company’s or organization’s financial statements to make certain they are correct and complete, and then providing this information in an official report”. Financial audits are conducted internally and externally by consulting firms. The major audit experts are called the “Big Four”: Deloitte, EY, KPMG & PwC.

Private Equity

“Private equity is an alternative investment class and consists of capital that is not listed on a public exchange” (Investopedia). There are two types of investors in private equity:

  • Limited Partners (LP) that generally hold 99% of shares and have limited liability;
  • General Partners (LP) who hold 1% of shares and have full liability.

Private equity allows companies & startups to gain liquidity without necessarily contracting expensive loans or listing on public markets. Yet, it is more difficult to find & negotiate private equity funds than making a match in the public market order book.

Merger and Acquisitions

According to the CFI (Corporate Finance Institute), “Mergers and acquisitions (M&A) refer to transactions between two companies combining in some form”:

  • Mergers are the combinations of two companies of comparable size. The largest in history was the merger of American Online & Time Warner Inc. The $360 billion deal was closed in 2000 (Investopedia).
  • Acquisitions occur when a bigger company acquires a smaller one. Vodafone acquired Mannesman AG for $180.95 billion. However promising, the deal was a failure (Investopedia).

Working in M&A can mean several things: leading the strategy to proceed M&A, advising on the target company, proceeding the financial transaction, examining the legal side, etc. M&A is treated internally in corporations and externally by consulting firms, banks, etc. Morgan Stanley and Goldman Sachs are two famous M&A firm.

Related posts on the SimTrade blog

   ▶ All posts about Professional experiences

Useful resources

Corporate Finance Institution, Mergers & Acquisitions.

Shobit Seth reviewed by Eric Estevez, 2021. The 5 biggest Mergers in History, Investopedia.

Shobit Seth reviewed by David Kindness, 2021. The 5 biggest Acquisitions in History, Investopedia.

About the author

Article written by Anna BARBERO (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2020-2021) .

Quantitative Trader – Job Description

Quantitative Analyst – Job description

Akshit GUPTA

This article written by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) presents the job description of a Quantitative Analyst.

Introduction

Quantitative analysts or “quants” are professionals that work on designing, implementing, and analyzing algorithms based on mathematical or statistical models to help firms in taking financial decisions. With the advent of technology-based trading, the demand for quantitative analysts has seen a rise in the recent years. The analysts are generally employed at investment banks, hedge funds, asset management firms, brokerage firms, private equity firms, and data and information providers. They develop algorithms using programming knowledge of several languages like C++, Java, Matlab, Python, and R. Quantitative analysts possess strong knowledge of subjects like finance, mathematics, and statistics.

Quants create and apply financial models for derivative pricing, market prediction, portfolio analysis, and risk management. For example, quants develop pricing models for derivatives using numerical techniques for asset valuation (including Monte Carlo Methods and partial differential equation solvers) like the Black-Scholes-Merton model and more sophisticated models. Such models are used by traders and structurers in the trading rooms of investment banks. They design and develop decision-supporting analysis, tools and models that support profitable trading decisions. In risk management departments, quantitative models are used to assess the risks associated with the bank’s portfolios. Some popularly used techniques include Value-at-risk, stress testing and direct analysis of risky trades. Along with all this, quants are also responsible for regular back testing of the tools and models they develop, in order to maintain quality assurance and add improvements if any.

Types of Quantitative Analyst

The professionals working as quantitative analyst can be divided into two categories namely, front-office quantitative analysts and back/middle office quantitative analysts.

Front-office analysts

The front-office quants are employed at firms that are involved in sales and trading of financial securities which includes investment banks, asset management firms and hedge funds. The role of the analyst is to devise profitable strategies to trade in different financial securities by leveraging the use of algorithms to implement these investment strategies. They are also responsible for managing the risk of the firm’s investments by using quantitative models. With the advent of algorithm-based trading, the job of a quantitative analyst and a trader has mostly consolidated. The analysts in the front-office generally work on trading floors and deal with clients on a regular basis. The job of the front-office analysts is quite stressful as compared to the other quantitative analysts but on the upside, it provides them with better compensations.

Quantitative analysts in credit rating agencies and asset management firms develop quantitative models to predict the macroeconomic trends across different geographies.

Back-office and middle-office analysts

The analysts working in the back/middle office are generally employed by investment banks and asset management firms.

The analysts working in the back/middle office are primarily responsible to develop algorithms to validate the quantitative models developed by quants working in the front-office and to estimate the model risk.

After the financial crisis of 2008, the demand for risk managers has increased across all financial institutions. The quant analysts in the back/middle office also work as risk managers to manage the firm’s risk exposure.

Whom does a Quantitative Analyst work with?

A quantitative analyst depending on the type of office he/she is employed in, works in tandem with many internal and external stakeholders including:

  • Institutional clients of the firm – A quantitative analyst working in the front office deals with the institutional clients (or even wealthy retail customers) of the firm to implement profit generating strategies on the client’s investments.
  • Sales and Trading – A front office quantitative analyst also works with the sales and trading team of the firm to execute trades based on the quantitative models.
  • Portfolio managers – A front office quantitative analyst also works with the portfolio managers of the firm to manage portfolios based on the quantitative models.
  • Economists and Sector specialists – A back/middle office analyst developing models to predict the macroeconomic trends work with economists and sector specialists to gather information about specific sectors and economies
  • Legal Compliance – A quantitative analyst also works with the legal compliance team of the firm to maintain a proper check over different rules and regulations and prevent legal challenges
  • Equity researchers – The quantitative analyst developing models to predict the stock market developments also works with the equity researchers to obtain insights about financial and non-financial data about different companies

How much does a Quantitative Analyst earn?

The remuneration of a quantitative analyst depends on the type of role and organization he/she is working in. As of the writing of this article (2021), an entry level quantitative analyst working in a financial institution earns a median salary of €60,000 per year (source: Payscale). The analyst also avails bonuses and other monetary/non-monetary benefits depending on the firm he/she works at.

What training do you need to become a Quantitative Analyst?

An individual working as a quantitative analyst is expected to have a strong base in computer science, mathematics, and market finance. He/she should be able to understand and develop mathematical and statistical models using programming languages and possess knowledge of market finance. He or she must understand financial and economic trends and have strong research skills and interpersonal skills.

In France, a Grand Ecole diploma with a specialization in financial engineering, mathematics or market finance is highly recommended to get an entry level job as a quantitative analyst in a reputed bank or firm.

The Financial risk management (FRM) or Chartered Financial Analyst (CFA) certification provides a candidate with an edge over the other applicants while hunting for a job as a quantitative analyst.

In terms of technical skills, a quantitative analyst should be efficient in the use of programming languages like C++, Java, Matlab, Python, and R.

Relevance to the SimTrade course

The concepts about quantitative analysis can be learnt in the SimTrade Certificate:

About theory

  • By taking the Trade orders course, you will know more about the different type of orders that you can use to buy and sell assets in financial markets.
  • By taking the Market information course, you will understand how information is incorporated into market prices and the associated concept of market efficiency.

Take SimTrade courses

About practice

  • By launching the Sending an Order simulation, you will practice how financial markets really work and how to act in the market by sending orders.
  • By launching the Efficient market simulation, you will practice how information is incorporated into market prices through the trading of market participants and grasp the concept of market efficiency.

Take SimTrade courses

Useful Resources

Payscale

Related posts on the SimTrade blog

▶ Akshit GUPTA Risk manager – Job description

▶ Akshit GUPTA Trader – Job description

▶ Akshit GUPTA High-frequency trading

About the author

Article written by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

Women in Finance

Women in Finance

Alexandre VERLET

In this article, Alexandre VERLET (ESSEC Business School, Grande Ecole Program – Master in Management, 2017-2021) explores the potential causes and solutions of women’s underrepresentation in the financial sector.

It is no secret to anyone that women are largely underrepresented in the world of finance. It might not sound really surprising to anyone, since a woman in France still had to obtain her husband’s permission to open a bank account and exercise a profession less than 60 years ago- and yet France is doing relatively well in terms of gender parity in finance compared to other countries. What is astonishing, however, is to observe how slowly the financial sector has been opening up to women compared to the progress of gender equality in society. While many sectors are running late, especially when it comes to gender quality in highly ranked positions, finance is losing the race to parity by far.

The difficulty to consider the financial industry as a whole

It would not make sense to simply set as a target a 50% parity in the financial sector, because it would not prevent strong inequalities to remain. For instance, a survey conducted by the French Association of Financial Management found that women accounted for a third of the workforce overall, which is a rather low number but does not adequately reflect the issue that the financial industry has with women. Indeed, most women in those number work in internal control, compliance and communication, positions which are essential to the functioning of the financial industry but are not at the core of the finance activity, where jobs are usually more highly regarded and salaries much higher. When looking at firms that encompass mostly “core” finance jobs, the figures are incredibly low: hedge funds, venture capital and private equity funds, respectively 11%, 9% and 6% occupy senior positions.

What are the specific reasons for women’s underrepresentation in finance?

There are several reasons that could explain why finance is so robust to parity. A key aspect of the issue that can be easily quantified is the lack of women with quantitative backgrounds, an essential qualification for financial jobs, which makes parity mathematically impossible as there are just not enough women applying to finance positions. The trend is definitely not going in the sense of parity since the number of women majoring in finance is decreasing in the US, and surveys show that less than half of women in finance are satisfied with their careers. Nevertheless, the latter should not obscure the fact that it is not all about getting: a study from McKinsey found that while parity was close to being respected in the business degrees of the most prestigious American universities and at entry level in the major banks, only 19% of women occupied positions of power: something must definitely be happening in-between. Both self-censorship and stereotypes are probably part of the equation, as well as some form of “path dependency” where women might be reluctant to set foot in positions overwhelmingly masculine. The same could be said of many sectors, but the fact that finance is a restricted club in many ways probably emphasized the aforementioned reasons.

What can be done to promote women in finance?

According to PWC, gender equality in finance senior positions will not happen before 2085. Surely, some things have to be done to speed it up. There is a growing research consensus pointing to the fact that diverse board of directors take better decisions than less diverse ones. Christine Lagarde, ECB president even said that if “Lehman Brothers had been Lehman Sisters, the world might well look a lot different today”. She recently insisted on the importance of quotas to counter self-censorship from women, saying that all along her career as a leader, she saw hundreds of young men come to ask for pay raise but hardly ever any women. Quotas are not always an efficient measure when it comes to diversity, but one might argue that a club as sclerotic as top finance positions need strong and immediate change. Regarding self-censorship or the lack of self-confidence, many organizations like 100 women in finance or WIBF try to promote successful women in finance, and Girls Who Invest even offers a summer program to intensively train women for finance interviews at different levels.

On the long run, promoting girls in quantitative degrees is essential, but it is a much bigger issue than just that of women in finance, as research suggest that the gender inequality in maths results is the product of a social phenomenon that roots back to secondary school.

To conclude, I strongly encourage women interested in finance and reading those lines to attend the numerous events “Women at [insert investment bank]”, which are tailored to tackle the problems mentioned in this article.

Useful resources

Academic research

Adams R.B and V. Ragunathan (2017) Lehman Sisters Working paper.

Longin F. and E. Santacreu-Vasut (2019) Is Gender in the Pocket of Investors? Identifying Gender Bias Towards CEOs with a Lab Experiment ESSEC Working paper.

Websites

Longin F. and E. Santacreu-Vasut Gender & Finance

Related posts on the SimTrade blog

   ▶ Aastha DAS Women in Finance (Northeastern University)

About the author

This article was written in May 2021 by Alexandre VERLET (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

Who will become London’s heir as Europe’s main financial center in the wake of Brexit?

Who will become London’s heir as Europe’s main financial center in the wake of Brexit?

Alexandre VERLET

In this article, Alexandre VERLET (ESSEC Business School, Grande Ecole Program – Master in Management, 2017-2021) explores the Brexit’s consequences on the City’s monopoly over European finance, and which capital could possibly claim the throne.

A historic perspective on the City’s dominance

To determine whether Brexit will cause London’s fall as Europe’s main financial center, we shall examine if the causes of London’s rise might be undermined by its isolation from the single market. In 1973, Charles Kindleberger, an economic historian considered that London would not make it as Europe’s finance capital, saying that “Sterling is too weak, and British savings too little.” Obviously, he was wrong, since London concentrates a third of all European Union capital markets activity and 90% of euro-denominated derivatives clearing. This shows how London’s unquestioned position as the hypercentre of European finance is actually pretty recent, and that it is definitely not immutable, especially since assets move fast. The key element of London’s transformation is the Big Bang, the sudden and massive deregulation of financial markets that resulted from an agreement between Thatcher and the London Stock Exchange. But before that, the City and its iconic banks such as HSBC played a major role in the emergence of the Eurodollars market, making London a key partner for US banks’ European activities. When financial markets started their meteoric expansion in the 1980’s, London was ready to take advantage of it. Adding to that, the city had managed to build long term advantages such as a very favorable regulation through unquestioned political support from both Tories and Labor, a top-notch financial and legal system, and the highest concentration of highly qualified workforce you could find in Europe. It goes without saying that London’s success is first and foremost to have managed to become the financial capital of the economic heavyweight that Europe is. London is more of an investment heaven that any other European capital thanks to the British government’s unquestioned support but belonging to the EU was a required to be the EU’s financial hub.

The financial consequences of Brexit so far

Nevertheless, the Brexit is a slow and rather improvised process, and European financial hubs are interdependent, so it was in all parties’ interest that London did not collapse following the Brexit announcement. In the wake of Covid-19, the European Commission allowed European firms to keep using London’s clearinghouses as they currently do until 2022. The shift is happening slowly, and it is difficult to predict the long-term consequences of Brexit. Nevertheless, EU rules state that some trades such as euro-denominated derivatives, must be executed on an EU trading venue, so it is unlikely that London will keep its European competitors at distance for long. Soon after the Brexit was officialized, firms had already shifted about 7,500 staff and more than $1.6 trillion of assets to the EU, around 15% of US banks’ assets. However, while European financial centers have apparently benefited from Brexit, the US has by far been the main beneficiary of the new trading landscape. The direct regulatory consequence of Brexit is the loss of passporting rights, so the rights to trade are dependent upon equivalence decision made by the EU Commission. The City of London currently only has an equivalence arrangement in two areas of financial services, but the US have 22 arrangements. So, New York and Chicago have been executing many of the trades that London could not do anymore, as European financial centers who have passporting rights cannot rival with American cities’ capital markets. That is why Martin Heneghan and Sarah Hall (LSE) consider that so far, Brexit created a negative-sum game for European finance. What would make the EU’s hubs much more attractive is the capital markets union, which has been discussed for years with no progress so far. If that were to happen, European financial centers would finally take over most of London’s financial activity resulting from European economies, and the strength of a unified European capital market would prevent New York and Chicago from being the main beneficiaries of Brexit.

And the winner is…

What is happening so far is a decentralization of financial activities, each capital trying to emphasize their advantages to benefit as much as they can from Brexit. Dublin and Luxembourg’s fund-management hubs made it the priority destination for major, insurers, Amsterdam has attracted trading firms with its fast fiber network, and Paris and Frankfurt are battling to become the main hub of Euro clearing’s $75 trillion dollars market. But unlike what is often heard in the French media, nothing suggests that Paris or Frankfurt will be the financial sector’s obvious choice, quite the opposite actually: the competition is tight, and each city has its own advantages to offer. The focus on those two cities is due to the fact that both aggressively campaigned to become London’s heir, and their economic weight and political strength are long-term advantages that few other cities can rival with. Nevertheless, nothing indicates so far that Dublin, Amsterdam or Luxembourg are being left behind. Amsterdam is actually the winner when it comes to trading activities, as shown on the graph below (source: Financial Times). The low corporate tax and fintech activity of Dublin and the massive investment funds located in Luxembourg are other advantages that could sustain a decentralized finance system in Europe, therefore denying Paris or Frankfurt from taking it all.

Overview of the jobs’ redistribution: an opportunity for ESSEC finance students?

Although it will not be clear which city will have benefited most from the Brexit before 2030, you might be interested in checking the current trends of the major banks and investment firms where ESSEC students seek employment. Here’s what the think tank New Financial reported as of late 2020. In total, 440 financial services firms moved their staff due to Brexit, 135 firms choosing Dublin, 102 firms choosing Paris, 93 for Luxembourg, 62 for Frankfurt, and 48 for Amsterdam.
Bank of America is moving a significant part of its markets business to Paris, more than 400 people, and part of its banking business to Dublin. Barclays’ chose Dublin also and moved 250 people there. Blackrock is making Amsterdam its EU hub, but it also has an office for alternative investments (hedge funds and private equity) in Paris. The major French banks, BNP Paribas and SocGen, are obviously relocating to Paris, where their HQ are, and similarly Deutsche Bank is relocating to Frankfurt. Citigroup had planned to make Frankfurt its post-Brexit markets hub, but staff reportedly rebelled and lobbied to be moved to the French capital instead, because of culture, schools and proximity to London. Nevertheless, only 5% of the 6,000 people working in London for Citigroup were so far moved. JP Morgan initially expected to move most of its banking and markets businesses to Frankfurt after Brexit, but subsequently decided to move to Paris too. JP Morgan is however moving its asset management and wealth management businesses to Dublin and Luxembourg respectively. Credit Suisse planned to move its EU-focused investment bankers to Frankfurt post-Brexit, and its salespeople and traders to Madrid. Deutsche Bank’s European headquarters will clearly be in Frankfurt, where the bank’s global head office is located. Goldman Sachs is moving its investment banking and markets businesses to Frankfurt and Paris after Brexit. It is moving its asset management business to Dublin, but also opened new offices in Milan and Stockholm. In total, 500 GS jobs are leaving London. HSBC, which already used Paris as its European hub, is moving 1,000 people there. Morgan Stanley moved its investment banking and markets business to Frankfurt, and its asset management business to Dublin. Nomura and Standard Chartered chose Frankfurt, each moving around 100 people. The same goes for UBS, who decided to move 200 people to Frankfurt.

Although London remains the main financial center and employer in Europe, and while it is unsure if any city will replace it, London’s monopoly will inevitably end, and many jobs will be created or redistributed in the 5 competing European cities. All in all, if you wish to work in finance at some point, keeping up on the post-Brexit evolution of financial centers in Europe is a must.

Related posts on the SimTrade blog

   ▶ Alexandre VERLET Classic brain teasers from real-life interviews

   ▶ Alexandre VERLET Working in finance: trading

About the author

This article was written in May 2021 by Alexandre VERLET (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).