Global Capital Markets (GCM)
What is GCM?
- GCM refers to the division where the financial products are created before they are available for trading
- The capital markets division produces tailor-made solutions for clients to access the global capital markets.
- The capital markets division of an investment bank is usually divided into equity capital markets (ECM) and debt capital markets (DCM):
- Equity Capital Markets
- Bankers help companies issue IPOs (raise money by issuing shares)
- This involves setting an appropriate price, advertising the shares to fund managers and other potential investors and running the books before the shares are publicly traded.
- Apart from this, ECM is involved in underwriting equity derivatives, convertible debt and hybrid instruments.
- Debt capital markets
- Deal with issuing of various types of bonds.
- This includes government bonds, investment grade corporate bonds, high yield bonds etc.
- These are also referred to as fixed income instruments.
What does it take to produce new financial products?
- When a company wants to issue new shares or bonds they usually ask many investment banks for proposals on how to execute the transaction
- Based on this and the banks’ track record they will decide
- Once a bank is chosen, the next step is due diligence, i.e. going through financial statements and checking operational and legal risks, just as in M&A
- The target is to understand the company in order to be able to highlight strong points to potential investors and informing them about the risks.
- At the same time, the required documentation needs to be prepared, which can be a long process involving bankers, lawyers and auditors.
- The next step is marketing the new product to potential investors.
- Finally, the bank needs to determine an appropriate price and run the books.
- In job in capital markets requires extensive financial modelling, valuation, as well as analysts of accounting and taxation aspects. So, you must be good with numbers, and have high attention to detail
- You need to understand the technicalities of company financing but also of market dynamics
- Following the financial crisis, banks are less busy issuing complex financial products than before, but having the mathematical and analytical skills to deal with complex financial instruments might be helpful in case they once again become popular.
- Excellent communication skills are also essential, as you’ll be dealing with clients from early on in your career.
- Also, it is important to be a team player. Unlike in trading, where individual excellence can product huge rewards for the bank, in capital markets all work is team based with specialists working on different steps of the whole deal.
- You need to be deal-oriented– you will be judged based on the number and the volume of deals closed.