Working in equity capital markets (ECM) is the best all-round job at an investment bank, but only if you can handle the pressure of billion-dollar underwriting deals, said Richard Sleijpen, executive director, ECM at UBS in Sydney.
Sleijpen, who’s worked for UBS Australia for almost 10 years and moved from debt capital markets (DCM) to equity in 2008, reckons ECM roles demand a diverse range of skills, from pitching and risk management to numeracy and business nous.
He spoke to eFinancialCareers about what it takes to make it in ECM, why global banks aren’t yet ready to ramp up their recruitment, and how working in Australia can kick start an international career.
In 2008, when UBS more closely aligned its ECM and DCM business to create a capital markets division, I was offered the chance to move from DCM into ECM. It was at the height of the financial crisis and because of the market focus on company balance sheets and structured debt, I saw an opportunity to apply my DCM knowledge to the equities business. It was a huge learning curve. Sure, they both have “capital markets” in the title and require you to pitch, but the market, the products and many of the skills differ. In fixed income, you are often primarily marketing and distributing products. But in equities, you are often providing the actual underwriting, and this makes for a very different risk proposal – the risk is more intense from both a bank and a personal perspective.
That’s also a big point of difference; the pool of clients in DCM is smaller. In Australia, for example, you might have the four major local banks making up the majority of your deal flow and fees. By contrast, in equities, your potential client base is basically the top-300 companies on the stock exchange. You need an even broader understanding of company earnings and what’s really driving their business.
It has to be the $3.3 billion block trade that UBS managed in 2010 for Royal Dutch Shell when it was selling part of its stake in the Australian petroleum company, Woodside – one of the largest block trades ever underwritten by a single bank. The length of time it can take from inception to execution of a deal like that is often underestimated, as is the personal tenacity and energy needed to see it through. There’s a vast amount of risk shouldered by a relatively small group of individuals. Not many people realise the amount of pressure involved with that level of risk.
You can get great confidence by pausing to think back on the successful deals you’ve done in the past. Secondly, you back the tried-and-tested processes at your firm, and you also take confidence from your teammates – seeing then in action during the deal and witnessing how they work under pressure with great integrity. You all feed off each other’s success.
In 2009/10 there was strong capital-raising activity in Australia, and by comparison, equity issuance is a lot lower now. But there are positive signs globally and in the Australian IPO market this year, and that may help ECM volumes improve; we may potentially be turning a corner.
We’ve recently taken on a new graduate in capital markets and the team is generally stable. But it’s still too early to look at broader hiring – we need a more sustained period of positive capital-markets activity for that to happen. That’s probably the case for most banks internationally.
Markets globally and in Australia have been tough over the past year. But this is partly cyclical, so I think that regardless of the market sentiment of the day, the fundamental motivations to enter the industry are the same as they always were. You must be interested in capital markets and in business, and you must relish the chance to work with the best minds in the business community. If you have a real passion for these things, yes, it could be the right career for you.
I think it’s one of the jobs within banking that requires the most diverse range of skills. You need a good awareness of the finer details of companies, you must be highly numerate, and be excellent at pitching. Yet being good at number crunching isn’t enough. It sounds like a cliché, but without interpersonal skills you just won’t succeed. Teamworking is important from day one; ECM work requires engaging with different parts of the bank; and you are speaking to clients, senior business leaders, every day.
It’s obviously not as large an ECM market as, say, London or other major financial centres. But it has the advantage of being a highly competitive market where a lot of banks are after a finite amount of business. That means you actually have to be very good to succeed here – the deals don’t come easy. That’s why people who come to work in Australia, or start their careers here, build great skills and can often use their experience as a platform to build a successful career in larger markets.