So What Does an Investment Bank Actually Do?

Last updated on July 30, 2017

Before the 2008-2009 global meltdown began, the term “investment bank” likely wasn’t present in our day-to-day life. This term is being used to refer to the activities including sales and trading, but investment banks do a lot more than it. It has two primary functions which involve- mergers and acquisitions (M&A) and capital markets. Both are being completed by the investment banking division (IBD) within an investment bank. An investment bank is simply a special type of financial institution which works basically in high finance by advising companies to access the capital markets such as stock market, bond market for raising money or other needs. For example, if any enterprise wanted to sell $5 billion worth of bonds for building new plants in Asia, then an investment bank would help it to find the appropriate buyers for the bonds and maintain the paperwork with an expert team of lawyers and accountants.

The Other Side of An Investment Bank

Generally, investment banks are divided into the buy side and the sell side. A lot of investment banks offer both buy side and sell side services. The sell side means selling shares of recently issued IPOs, placing bond issues, capturing market making services and helping the clients to facilitate transactions. The buy side refers to working with hedge funds, pension funds, mutual funds, in order to help them in maximizing their returns while trading and investing stocks or bonds.

Other Investment Bank Activities

The typical investment bank is responsible for the following activities such as:

• In raising the equity capital and debt capital
• Insure the bonds or helping to launch new products
• Involve in proprietary trading where teams invest or trade the organization’s own money for the private account.

The investment banks are also known as the private side of the bank. Most investment banks likewise have an open side – which is the place the deals and exchanging Division sits. This part of the bank purchases and offers shares for its customers as a byproduct of commission. Bankers in the deals and exchanging division perform one of two parts, or once in a while a mix of the two. Traders then taking a shot at the business work area will pitch thoughts and proposals to customers with regards to the sort of budgetary items they ought to be purchasing, e.g. a specific stock, product or cash. With the assistance of the bank’s exploration group, they will break down where they think the market is going and make proposals to customers in view of these perceptions. The traders with then execute these exchanges for their customers’ sake. The bank will gain a commission on each exchange it forms.

After the massive 2008 financial crisis, the industry was shaken badly that it led to a tedious economic recession and the disruption of the major financial institutions which involves Lehman Brothers and Goldman Sachs. The reputation of such major institutions was suffered during the period of the financial crisis. In investment banking career, the secret ingredient for long-term success and growth is to have the ability to hire and retain the brightest talent in Wall Street. In order to land interviews and job offers at top global investment banks, you have to network like a ninja for investment banking career. Developing relationships and cold-calling is the two methods of networking. Focus on developing relationships via weekend trips, information sessions, and informational interviews.