Question by IvyLeagueBch: Lehman Brothers investment job?
I am currently applying for an internship at Lehman Brothers. I’m not sure what the difference is between “capital markets” and “securitization banking” and “investment banking.”
Any info on that (Yes, I realize I should know the difference, but this is an internship…so I presume training.)
Best answer:
Answer by frank m
They are all part of the same machine. The Capital Markets portion of the bank raises money for firms, and in this case it is likely all debt-based capital; it refers to the sales (call mutual/hedge/pension funds and sell them bonds), trading (price bonds), research/strategy (analyze markets), and banking groups (work with issuers of bonds and structure bonds) that cover that process. Capital Markets generally includes Investment Banking, which at most banks includes securitization banking. Investment Bankers can do anything from work with Toyota to help it raise money to build more cars, to structure the bonds that Toyota is selling to investors in a way that will get the most money for Toyota (and the banker, of course). Securitization Banking is focused on MBS/ABS/CMBS bonds, which derive their cash flows from a pool of assets (for instance car loans originated by Toyota Finance) rather than Corporate Bonds that derive cash flows from the revenue the corporation earns while doing business (i.e. revenue Toyota earns from selling cars). Securitization is definitely where you want to be – it is where all of the real money is flowing around, but the general public is completely unfamiliar with it. CDOs and especially CRE CDOs (Commercial Real Estate Collateralised Debt Obligations) are going to be particularly hot in 2007, although I don’t know about going with them over the long-term. Some Consumer ABS such as Auto Loans/Leases and residential mortgages (especially subprime or HEL) will likely be very interesting this year because both of those markets will likely have the greatest hardships (and you don’t care if they don’t do great since you’re not getting a significant bonus at this point, but you’ll probably have an opportunity to learn a lot). If I could start over, I’d start in structuring, there will be (and already is) big demand in new markets for folks who have some structuring experience to segue into trading, banking, even origination. But I’d also like to start over in Sales – you’re forced to know a little about everything, and all of my co-workers in sales make big coin (they get handed accounts, and get paid whether the trade makes money or not – you can’t beat that). I’ll stop here, but if you want more feel free to send me a message under my profile – if you haven’t interviewed yet, I’ll shoot you some recent Lehman research so you’ll have some good questions to ask.
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