Tuesday, October 27, 2009

The Race to Keep Up

How is it possible for MBA students to keep up with what's going on in the world of finance, to keep up with headlines and industry news stories--when they have case groups, final exams, recruiting events, and meetings with professors? How is it possible for corporate-finance associates or even well-established VP's in finance to keep up--when they have strategy meetings, budget deadlines, client presentations, pitchbooks, hundreds of e-mails, and a burdensome in-box?

Yet everybody expects everybody to be on top of financial events, trends, updates, innovation, new products, and even financial gossip. Keeping up with what's going on and having a view or special insight about financial events can make a difference--in a promotion, bonus, or (for students) in getting an offer. Those who are in the know tend to stand out and are often relied upon to teach or show others.

The world of finance evolves and changes as quickly as markets are updated, as quickly as money is transferred from one end of the globe to the other, and as quickly as one time zone closes business only to open up minutes later in another time zone.

MBA students and professionals in finance today should probably be aware of Obama's plans for financial regulation, should understand what might be driving recent upticks in equity markets or general behavior in bond markets, should be aware of general trends in the decline in the dollar (or the China's insistence on keeping its currency de-valued), should understand why it's important for banks to maintain large cushions of capital, and should be aware of the recent death of Lazard CEO Bruce Wasserstein, one of the most prominent M&A bankers over the past 25 years, and its impact.

MBA students and professionals should probably be familiar with recent industry talk about the growing influence of high-frequency equity traders or the necessity for a clearinghouse or settlement system for those infamous credit-default-swaps.

It's a constant, maddening struggle to keep up. Consortium students say it's a challenge to keep up when a group paper is due tomorrow or exams follow thereafter. Even MBA professionals say they must find precious time to keep up with headlines and trends. Are there tools and short-cuts to perform well in the day job and be an expert on current events?

Reading financial publications cover to cover daily would help. But who has time to do that? Is there a short cut to determine what's important, what should be skimmed, and what should be read?

It's helpful to scan all headlines of the Wall Street Journal and the Financial Times everyday and then assess what's important or not. Both the Journal and the Times have news summaries and digests that summarize news items. Both also provide clues of who's reading what by reporting the most popular stories in their online editions.

Skimming headlines is a quick, easy, five-minute way to keep up, although this won't provide depth in relevant topics. So it's necessary to scan to determine what's necessary for follow-up. If you have an interest in private equity, then if you see a headline about Blackstone, KKR or the Carlyle Group, you should note to follow up later. If you have an interest in high-yield markets and you see headlines about trends in pricing or new issues or changes in ratings at certain companies, then you should note to follow up later.

Some financial magazines are excellent sources for keeping up and providing perspective--especially for finance professionals who need information, who need it in appropriate depth and who need it presented in a sensible, summary manner. They include Institutional Investor and Investment Dealers' Digest magazines. (See http://www.iimagazine.com/ and http://www.idmagazine.com/.) The problem is these magazines are often inaccessible and expensive. But banks, trading firms, and business schools make them available or provide a means to gain online access to them.

The articles in both are detailed, but the topics cover all aspects of corporate finance, banking, trading, and investing. They are especially good at covering hedge funds and private-equity firms, where general information about them is hard to come by.

Just as much, they cover the people and firms. Sometimes bankers have said they have learned more about their institutions by reading about them in Institutional Investor. Few professionals have time to read all the articles. Yet it's an advantage to know what's being written about or discussed and to know if you need to become an expert in the topic, you know where to go to get a quick tutorial.

Other publications cover finance adequately, although not in the same depth as those above: BusinessWeek, The Economist, and Bloomberg. For some busy students or busy VP's, scanning and assessing the headlines in those publications will suffice. For sure, those periodicals are more accessible and less expensive. Bloomberg covers people, firms, and funds very well. The Economist provides a concise summaries of finance theory, events and product and incisive insight.

For corporate and investment bankers, Dow Jones has just unveiled a new site that will help students and professionals to keep up with deal flow, IPO's in waiting, new ventures, private-equity transactions, and who's who this week or month. The site, www.dj.com/product-investment-banker.asp, is being launched and will require subscription, but serious bankers or students of banking should explore it.
Don't minimize the value of networking. That helps people keep up, too. Being out and about, talking to peers, colleagues, classmates, and clients can help you be informed and up to date. Cornering an expert at a corporate event and asking him/her about a certain market, firm, or product (and his/her views) can be an optimal tutoring session on the latest. Attending industry-related seminars, symposia, and events also help in keeping up. These events often provide fat handouts on an esoteric subject. You may not have time to read them thoroughly, but grab them and know you have a ready summary when you need them.

Keep in mind, nevertheless, trends, perspectives, events and topics change steadily. Almost weekly. What was in the Journal's headlines last week are long gone by next month. So it's better to have a consistent approach and a steady habit to stay on top, keep up, and assess the whirlwind of financial activity around us--without becoming overwhelmed by all the information or being slowed down by all that might be unimportant.
Tracy Williams

Wednesday, October 21, 2009

October: How Mentors Can Help

Consortium MBA students across the country are submerged in case studies, core courses, finance, accounting, team meetings, and sessions with professors and the career-development office. Most will admit that b-school (especially at top schools within Consortium) is a challenge. A beast. But it can be tamed.

This might also be the peak time when students seek guidance, encouragement, input, feedback and help. In the midst of overwhelming, exhaustive coursework, students must plan careers and find jobs for the summer or full-time positions--and still get good grades. CFN's mentor program, launched in August and now under way, can help Consortium finance students.

But not just those mentors assigned by CFN. Any Consortum alumnus or any finance professional--with varying levels of experience, interests, and expertise--can stand ready to share wisdom, help students make connections, or act as a sounding board for students who are trying to make tough decisions with almost time to spare.

Mentors in the CFN program should be seeking out students for a second-round of discussions with assigned students. However, that doesn't prevent others from reaching out to students, too, or making themselves available.

With October almost gone, mentors can help in many ways. There are numerous possible topics to review with students. First-year students know the ropes now. They've figured out a way to handle the grind, but so much still lies ahead. Up to the plate step mentors.

1. Recruiting strategies. Finance students by now should have developed a recruiting strategy--a Plan A, B and maybe C. They like to bounce these strategies off experienced alumni or other professionals. At this point, many are deliberating over broad industry segments and want to narrow their options. Investment banking vs. private banking? Hedge funds vs. investment management? Corporate treasury vs. commercial banking? Big firm vs. boutique? New York vs. Chicago? London vs. New York? Equity research vs. credit research? Fixed-income vs. equities? Financial consulting or financial management?

Many students have already designed plans, but crave help in polishing the strategy. Sure, they can speak with career-development offices and meet with professors, and those meetings will be invaluable. But the icing on the cake is a special one-on-one brainstorm with another Consortium finance alumnus or another person with similar background and passions, who can tell the real stories about how a deal is done or trade is made, who can make a proper introduction, who can describe how to manage the delicate work/life balance, or who can describe what it's like to be a woman or person of color in an intense banking environment.

At this point, students would like to narrow industry segments and broad opportunities before they head into the holiday season.

2. Targeting specific companies. Many have targeted companies they may want to work for. Yet they want more information about what goes on inside. What is the culture? What is the career path? Is the company telling us the truth? How does the company manage MBA newcomers in a downturn? Should they be worried about the company's reported financial woes? Students know they must be well-informed about the firms they like, but they want information beyond what they read on the websites or in annual reports.

The information, too, helps them narrow their choices. Mentors can help guide students and provide the right kind of information (or connect students to somebody else who may know).

3. Making connections. Students are told all the time they must network, reach out to others, and make contacts at the firms they want to work for. This is crucial in banking, in private equity and in venture capital--especially if students want to get on the "closed list" for interviews. Many students, however, are not sure how to go about making contacts. Or with mounting work to be done for accounting, macroeconomics or operations-research class, they don't know how to reach out to get results.

Mentors can step up to help in many ways. A mentor who works at a firm a student aspires to can introduce the student to the right people at the firm, can offer background on who's who at the firm, and can suggest who can provide more information about a department or business-unit leader. The mentor can also suggest how to approach others.

As the relationship blossoms, mentors will tell students what they need to know, what they won't hear from recruiters, and what questions they ought to be asking. For Consortium students, mentors will help them understand a firm's approach to diversity. Is diversity a check-the-box process there, or is it a passion from top management to first-year associate? Consortium students want to know.

4. Time management. How often have b-school students described how they didn't realize the workload would be enormous and recruiting demands would hit them hard the first week? MBA students eventually learn how to juggle the daunting demands, but mentors can offer more tidbits, hints and short cuts--how to handle mid-term exams while trying to schedule information interviews, how to do homework about a bank while trying not to miss the meeting with the case group.

5. Finance and accounting. In banking and finance, it's important to do well in finance and accounting. It's critical to show competence in these areas. Mentors might be able to help students understand difficult finance concepts or help show how the same will be applied in real-world deals. Mentors might also help students demonstrate in interviews or informal meetings how they have mastered important concepts.

6. Keeping up. In the recruiting process, prospective banks, firms, and funds want to see students who not only know the theory and have aced tough courses, but they want to know if students are keeping up with industry topics. Are students aware of the Obama administration financial proposals? Are they aware of the big, headline deals that took place last quarter? Do they have an opinion about widespread concern about derivatives? Do they agree with financial bailouts of banks and auto companies? Do they think they are working? Do they have a view on the current high-yield bond market?

How can students manage courses, recruiting demands, extracurricular pursuits and still keep up with the front and middle pages (in depth) of the Wall Street Journal? Mentors can guide students, remind them what the important industry issues are, and help them shape well-informed opinions about the issues of the day.

This is that time of the year when students crave direction and guidance as they refine their strategies and juggle everything in sight. Mentors, when they make themselves available, will have a lot to talk about with students.

Tracy Williams

Tuesday, October 13, 2009

Banking or Bust--A Year Later

Ken Alozie's Bankingorbust website is now over a year old and continues to be useful to anybody in the early years of a career in investment banking and corporate finance--whether you are a first-year MBA student or a banking associate hustling to become a vice president.
Alozie is a Consortium alumnus from Michigan's Ross School, who worked at Lehman Brothers in corporate finance, among other firms. He has experience in mergers and acquisitions and leveraged buy-outs.
The site offers a textbook worth of information, guidance, tidbits, reminders, and warnings. It focuses on all aspects of technical skills and requirements. Banks and funds hire associates, assuming a minimal level of technical competence. Business schools teach this level of expertise. Alozie's site tries to package and summarize some of that expert knowledge.
Don't think of it as your first-course business-school finance text. It avoids details of theory and offers concrete summaries of what you need to know to do deals, to value firms, to assess debt capacity, to recapitalize balance sheets, to merge firms, or to issue stock publicly. In some ways, it is a focused refresher; in other ways, it's the real-world approach to corporate finance.
Accounting is the foundation of finance; hence, the site helps you improve your understanding of accounting concepts--especially those that help you improve modeling skills in preparing cash-flow projections, valuing firms, or analyzing of financial statements.
Beyond technical summaries, the site provides lots of tidbits and reminders. In a business driven (besides elaborate technical models) by people, contacts and networks, the site offers a long list of people you should know and why you should know them. For example, bankers ought to know who the leaders in the industry are--today or historically, heroes or villains (Carl Icahn, William Donaldson, or Dick Fuld). Or the few leaders who happen to be women or people of color (Ray McGuire at Citi, Kenneth Chenault at American Express, or John Rodgers at Ariel).
For students, the site helps in preparing for interviews--not just informational interviews, but tough, mind-boggling technical interviews where banks put students on the spot with technical questions that might stump even experienced managing diretors.
There are also tips and hints on how to be more competent with Excel spreadsheets and using them to create or devise the most esoteric of financial scenarios.
A glossary is included and helps students and professionals in transition with the industry's jargon--whether they are buzz words flaunted at cocktail gatherings or arcane accounting terminology used to merge two firms. Each term is described clearly and succinctly.
As a Consortium alumnus, Alozie designed the site with other Consortium students and alumni in finance in mind. Investment banking, private equity, or investment management can be contrued as one big, hard-to-penetrate club. The stakes are high, the risks enormous, and the payouts (in certain years) handsome. That makes the club hard, near-impossible to join. Alozie tries to help knock down doors to find an entrance to it.
A year later, Alozie continues to update the site. Today, he himself is polishing his own skills, expertise and experiences by studying for a Masters in finance at London Business School before he re-enters the club.
Tracy Williams

Wednesday, October 7, 2009

Diversity: Work to Be Done in the Trenches

We expected it--the flood of post-crisis commentary, critiques and books on what happened, who was at fault, and how it may happen again. One book chronicled the implosion of Lehman Brothers. At first, it appears to be just another account of the financial bubble and ensuing collapse, as told by a Lehman vice president, Lawrence McDonald. (The book, "A Colossal Failure of Common Sense," eventually made New York Times best-selling lists.)

And one wonders what unique story, inside information or special insight a mid-level VP might have about the demise of one of Wall Street's most storied names. McDonald was a distressed-debt trader at Lehman for only four years.

But with the help of a ghost writer, the book offers an abundance of drama about Lehman going under--from the vantage point of the trading room. The trading room of a major investment bank is its heartbeat, its eye of the storm or its center of all market activity. The trading room is noisy, bustling, frantic--almost the size of a football field. McDonald had a ring-side seat and tells a story of disappointment, defeat, and despair. There is suspense, even when we know the ending.

There is, nonetheless, a disturbing aspect to his story. The subject of diversity and the indifference those on the trading floor had to inclusion and to reforming a culture that was once centered around white males.

McDonald tells how Lehman's president Joe Gregory was fixated on diversity. "He was consumed by it," he writes. Gregory would have diversity assemblies, and he would preach diversity "as if we were running a friggin' prayer meeting."

McDonald suggests Gregory might have been too focused on topics related to culture, recruiting, and inclusion and not sufficiently focused on the firm's exposure to risks or its overblown balance sheet.

Lehman in its last years made admirable progress in at least trying to create a culture of inclusion, recruit people from under-represented groups, and make a public statement about its commitment to diversity. (Lehman regularly hired many Consortium graduates each year and had begun talks to become a bigger supporter.)

Lehman may have failed because of hubris, a disregard for risk management or an overly leveraged balance sheet. But it didn't fail, because it decided it needed to get with the times on the diversity front.

McDonald says those on the trading floor at Lehman ("down in the trenches") dismissed all the fanfare about diversity: "The whole scenario really bothered a lot of people, especially hard-nosed traders who, after hours of real stressful work out there fighting the world, were then being marched off to these meetings and rallies to support (Gregory's) trumpet call for equality."

He goes on: "(Gregory's) mission for diversity drove (a senior research analyst) mad. She had no time for any of it....Most of (the traders) didn't care about the cause...."

Elsewhere in the book, when Lehman appointed Erin Callan CFO in 2008, he describes how colleagues deduced she was selected in part because of (Gregory's) "devotion to underdogs and minority groups."

McDonald provides a convincing account and argument for why Gregory and CEO Dick Fuld should be blamed for Lehman's collapse or for not selling the firm sooner when they had a chance. He shows how they insulated themselves from the rest of the firm and were not competent enough to understand the risks of a market bubbling over or a balance sheet shackled with debt.

Those are likely reasons for Lehman's failure. But a firmwide campaign to embrace inclusiveness wasn't. Diversity is about respect for the talents of all and a spirit that all are competent and can contribute. It's not, as McDonald's traders were suggesting, a wasteful time commitment at the expense of other important corporate objectives.

McDonald's portrayal proves a couple of things, known to many people all along:

(a) With such common attitudes in the trading room, it's easy to understand why it has been difficult for people of color and women to penetrate the tight circles on trading desks, a circle closed in part because of the enormous amounts of money that can be made and shared by few.

(b) Senior management at many top firms has done an admirable job in committing resources and personnel to manage diversity and inclusion, but there is still a lot of work to be done in the trenches (trading floors, deal rooms, research offices, etc.). Lehman had gone so far as to threaten traders' bonuses if they didn't wise up to the firm's diversity mission, but traders were still reluctant to embrace it or go along.

While McDonald apparently sided with the traders and, like them, grew tired of Lehman's growing emphasis on diversity, it probably worked out well for him to have spelled out these scenarios to remind all that there is still work to be done in those trenches.

Tracy Williams

Monday, October 5, 2009

On Campus: Ready to Seize Opportunity

Mid-October approaches for Consortium finance students. For many, that means mid-term exams (final exams for some at Dartmouth, e.g.). It means, too, getting immersed and possibly getting exhausted by the demanding recruiting process.

For some campuses, it means a trip to New York for annual Wall Street visits, where students get a chance to network, meet new contacts, plan information interviews, secure full-time offers for next spring, connect with Consortium alumni, and learn something directly from bankers, traders, and investors of all kinds.
The week enhances what they study in class. On the one hand, students want to make contacts, ask questions about opportunities for next summer for full-time slots, and schedule information interviews.
On the other, they may want to test theories they learn in class: For example, "How relevant are computations of weighted-average-cost-of-capital?" "What are the real-life lessons of having endured the financial crisis?"
In the weeks to come, CFN will select and share students' impressions and experiences--especially a post-crisis view of Wall Street. To date, students say companies are cautious, but the doors are not as closed as they were a year ago.

NYU-Stern doesn't have classes on Fridays, permitting students to spend a whole day on recruiting activities, if they wish. This year, first-year students are paired with second-year students with similar interests, where second-years get to pass on wisdom of how to get the right internship, how to make a resume' look good or how to handle both mid-terms and recruiting at the same time.

Stern's Consortium students in finance agreed to get together to practice interviewing, fine-tune the "30-second pitch," and trade stories about networking and reaching contacts.

At Michigan-Ross, CFN students acknowledged how well prepared they are, as banks have begun to make presentations and network among students. They see the advantages of having had the Consortium experience at the Orientation Program or having taken advantage of contacts, guidance and information from CFN.

Yale's finance club has scheduled a "Day on Wall Street" in mid-November. Consortium CFN students will be involved. Yale students will get to network at JPMorgan and Morgan Stanley.
At Dartmouth, Tuck finance students spend their "Week on Wall Street" this week. Tuck has done this for years and sees the benefit of students slipping away to Manhattan once first-quarter exams are done. Students comb through financial circles in New York to connect with other Tuck alumni and learn as much as they can about finance opportunities and specific financial businesses. This is the week that really helps students decide what they want to--trading, banking, asset managing, investing, etc.

CFN students at Tuck recently met to discuss recruiting strategies. They expressed interest in investment banking and venture capital. Many of those interested in banking, but without banking experience, will attend the week on Wall Street.
Tuck CFN students are creating a database to permit them to share finance contacts with each other and other general, useful information.
Later this month, an investment-banking class from Indiana will be in New York with a non-stop schedule of meetings, sessions, and interviews with alumni, bankers and other finance professionals.
For all, students appear to be hopeful and confident, ready to pounce on opportunities they find--fortunate that the dismal aftermath of last year's market collapse is receding.
Tracy Williams