When it comes to advisory functions in the investment banking division, debt capital markets (DCM) often falls in the shadow of the more glamorous M&A teams. But while M&A and equity capital markets are about longer-term relationships, the DCM teams work in a fast-paced environment which relies on a high volume of transactions rather than a few big ticket deals.
This is both an unusual environment for an advisory team and an exciting place to work, believes Rashid Zuberi, global head of the financing and solutions group (FSG) at Deutsche Bank. FSG is Deutsche’s name for the division that originates bond deals in its DCM team. He joined Deutsche Bank in 1996, and before that worked as a particle physicist at CERN in Switzerland.
DCM teams deal with companies, financial institutions, governments and groups of countries (called supranationals) looking to issue debt in order to expand their business or invest in existing capacity. Unlike other parts of investment banking, DCM teams both originate the issuance of debt (usually bonds) and can help to arrange the syndication which brings the bonds to market. Syndication teams are particularly involved with ensuring that the deal goes smoothly on to the secondary markets, where investors then trade the debt instruments.
Zuberi says there’s a lot more to working in DCM than most people assume, and thinks there are clear reasons for choosing it over M&A.
What does the debt capital markets team of an investment bank really do?
DCM can mean a variety of things. It comprises both origination of debt deals and also syndication, which essentially forms the bridge between those who bring in the deals and the secondary market. Originators speak to clients on potential issuances – this can be a company that is coming to the market for the first time, or one trying to benefit from a concurrent deal that involves origination and loan syndication. Our clients can be corporates, financial institutions, sovereigns or supranationals.
DCM is no longer all about bonds. Yes, originators might be working on new bond issuances, but there’s more to it these days.
How has the sector moved on then?
It’s more about providing a solution to a problem for clients, than simply advising them to issue debt. So, a bond might be the answer to their problem, but you should be presenting a menu of options available to them – bonds, loans, hedging options or refunding existing debt products. We should be helping them make the right decision.
So, what does that mean for career options?
In the past, you would have dedicated bond originators, but people like that are few and far between now. Ultimately, if you want to succeed in DCM, you need to be able to originate multiple products. Developing a breadth of experience, rather than becoming an expert is important – and also what we know our graduates want in their careers
Generally, people focus on one client segment – you might be a financial institutions group (FIG) originator, for example, or focus on sovereigns, but people also move around.
Why should graduates want to work in debt capital markets over other front office investment banking jobs?
DCM is extremely interesting because you get to interact with clients from the start. If you look at M&A, it may take a while before you start interacting with the CFOs or CEOs of the companies you work with. At VP level you might have some client contact, but really it’s more when you’re a senior VP or director.
From day one in DCM, you’re thrust into the limelight, working with clients’ risk and treasury functions. They don’t care what rank you are, they just want to find a solution to their problems. These problems are usually unique and idiosyncratic and therefore require a lot of initiative and knowledge – so the learning curve in DCM is very steep.
The structure of the underlying products can vary significantly to other advisory functions in investment banking, but you have to originate solutions for clients during often stressful times for them. I think it’s this consultation process that makes DCM more interesting than other parts of the business.
What’s the workload like?
M&A gets a lot of negative press for working hours at the junior level. Juniors are learning the tricks of their trade on how to value companies, while the senior guys are out on the road. The perception is similar in terms of structure in DCM, but are people here at midnight working on pitch books? Absolutely not. Our graduates tend to come in at 8.30am and it’s a long day if they’re here past 7pm.
What three characteristics make you good at your job?
Curiosity. Essentially, in DCM you are presented with a problem and you need to break that problem down to its constituent parts, compartmentalise those and come up with a solution. You have to sift through a multitude of information, and work out what is the main issue you must solve. 95% of solving a problem is defining it – and that takes curiosity.
The second thing is the ability to work as part of the team. Yes, that’s a cliché, but your work involves many people and you need an open discussion, and that means teamwork is vitally important.
The final thing is being able to communicate in clear and precise terms. Clients have a complicated problem and they want to hear what the simplest solution is that will cost them the least.
What’s the best part of the job?
The best part is working with a client who feels they have a problem that is the end of the world, and being able to solve it. It’s like getting top grades at school.
And the worst?
The worst part is that you can spend an extremely long period of time coming up with a neat, unique solution for a client and they may go with something else.
If you could give some advice to your 20-year-old self, what would it be?
I’ve always viewed my career as an opportunity – which is why I’ve always taken chances when they’ve arisen across the organisation. So, my advice to my 20-year-old self is to be open and not pigeon-hole yourself.
Longevity in investment banking is down to being able to reinvent yourself when the opportunity presents itself. I’ve been here since 1996, and I’ve set up an insurance and pensions group at Deutsche Bank, managed to convince the firm to invest money in Abbey Life assurance business, I’ve been the COO of the capital markets business and now moved back into a client facing division in CIB.
Personally, I’d be bored if I didn’t move between roles, but I’d say that any experience makes you a more valuable commodity, so don’t specialise from day one.
What interview question do you always ask?
It’s a pretty simple one – If I gave you a million dollars to invest, how would you spend it? Most people coming into investment banking know a lot about the stock market, but little about bonds, so it’s a test. It’s rare that I get a good answer. But I want people to be succinct, and not waffle – it’s a test of how they communicate and reason through a problem. If I’m working 12-hours a day with them, I want to know that they can communicate well.