Investment banking is a division of banking focused on the creation of capital to be used by businesses. Investment banks are involved in underwriting equity securities and new debt for a variety of types of entities. They also offer guidance and advice related to the issuing of stock and it’s placement. Investment banks help with reorganizations, mergers and acquisitions, and handle trades for private individuals and institutions. Investment banks also handle the trading of securities related to their own accounts and develop strategies for improved results for clients.
The banking industry is divided into two basic segments. There are commercial banks and investment banks. Commercial banks focus on managing deposit accounts. Investment banks, on the other hand, work with clients to make buying and selling investments more efficient and profitable. Investment banks exist largely to serve business. They are involved in the buying and selling of stocks, bonds, and other types of investments and facilitate initial public offerings. Simply because of the nature of their business, investment banks take higher risks and have more latitude in their strategic decision making.
There are a number of excellent MBA programs which prepare candidates to work in investment banking and corporate finance. They include London Business School, NYU’s Stern School of Business, the Stanford Graduate School of Business, Harvard Business School, the University of Pennsylvania’s Wharton School, and the Booth School of Business at the University of Chicago. Graduates from these schools find work faster and earn more than people trained at other institutions. Dartmouth College’s Tuck School of Business, Darden School of Business at the University of Virginia, Paris’ HEC School of Management, and Spain’s University of Navarra are considered the world’s best schools for investment bankers and people involved in corporate finance.
Students hoping for a future in investment banking must take courses which deepen and clarify their understanding of economics, valuations, corporate theory and investments, and mergers and acquisition theory and modeling on the way to their MBA or CFA. They must also take basic accounting, statistics, management, and investment courses. Successful investment bankers also require a deep understanding of micro and macro economics analysis techniques. Investment banking careers can be incredibly lucrative. But the field is highly competitive and stressful, often requires very long working hours, has a high volume of work, and is very difficult.
One investment banker that has gone through the gauntlet of advanced study and a heavy, stressful workload and has emerged as a well-respected professional is Kenneth Griffin. A Harvard University graduate and founder and CEO of Chicago hedge fund giant Citadel LLC, Kenneth Griffin is at the helm of one of the world’s most successful and largest hedge funds. The company has investment capital in excess of $25 billion. The Daytona Beach, Florida native received a salary of $1.3 billion in 2014 and as of May, 2015 reportedly has a net worth of $6.6 billion.
Despite all the hard work and stress, it can be great to have a career in investment banking.