Life After Investment Banking —- by Amish Tolia
Many people choose to do Investment Banking as it creates a strong background in Corporate Finance and offers a wide rang of opportunity for the future. The solid base of finance and extremely large learning curve of Investment Banking offers a variety of positions for analysts completing the 2-3 year program. Below are various career paths that Investment Banking allows for and are common among those who have graduated the analyst program.
3rd Year Analyst:
Many investment banks will hire few of their analysts at the end of his or her 2nd year of the term to stay on as a 3rd year “Senior Analyst.” Most of the tasks will be similar to those of the analyst, however the Senior Analyst will gain more responsibility on projects often taking on the Associate role in some cases. This can be a common route for those figuring out what they want to do in terms of long-term career.
Associate Promote:
For some 2nd year investment bankers, the firm will ask that they stay with the bank and assume the Associate position. This can be a great opportunity for analysts to sometimes skip their MBA and go straight to the Associate role, which involves a vast introduction to new responsibilities and tasks. Associate promotes are common among banks if they feel the analyst is well prepared to fill the role.
Hedge Fund:
After working as an investment banker, most will come out learning a vast amount of information about corporate finance and valuing companies. As a result, many choose to delve into other sectors of the industry including Hedge Funds. A hedge fund is an aggressively managed fund portfolio taking positions in both safe and speculative opportunities. Most hedge funds are limited to a maximum of 100 investors. The main goal of a hedge fund is to get a maximum rate of return, using strategies involving options, short selling, and leverage. On the other hand, because they often use futures, swaps, and arbitrage strategies, one could argue hedge funds diversify away some of the investor risk of the stock market. Many investment bankers become analysts at hedge funds where they can learn a different side of the business and have a more active role in the company.
Private Equity:
Another exciting sector of finance is the private equity market. Many investment bankers will move to Private Equity Company after completing the analyst or associate role, as they may want to gain a greater knowledge of the buy-side market. Private Equity is a great way to learn about Leveraged Buy Outs and buy side transactions and many move to private equity to have a larger role in the company and be involved directly with acquisitions. Private equities are equity securities of companies that have not “gone public”. Private equities are generally illiquid and thought of as a long-term investment. As they are not listed on an exchange, any investor wishing to sell securities in private companies must find a buyer in the absence of a marketplace. In addition, there are many transfer restrictions on private securities. Investors in private securities generally receive their return through one of three ways: an initial public offering, a sale or merger, or a recapitalization.
Business School:
If analysts feel they are ready at the end of his or her two-year term, one option is to apply and attend graduate school and receive a MBA. This is common among analysts who feel they have gained enough experience to attend graduate school and who are ready to go back to school. After receiving an MBA, many go back to an investment bank and start at the Associate level. Graduate school can be a good option to seek other employment ideas and find a career path suitable for oneself.
