Tuesday, April 24, 2007

Thank you for the ipod!

Thank you so much to clearadmit, all my readers and fellow nominees and winners for contributing to my blog and keeping me going! To be honest, blogging would have been no fun with few readers and what I enjoy most about my blog is the comments and e-mails I receive from fellow students and applicants. It has been a pleasure for me to write this blog and I am happy that this pleasant hobby of mine has also helped fellow students and applicants in the process.

I am thrilled to receive a 30GB video ipod as a reward! My strategy of being a late adopter has paid off! I never actually bought an ipod since I was still waiting for prices to come down, and I had decided to purchase one next year during my exchange in Chicago. Now that won't be necessary anymore and I look forward to loading my hundreds and hundreds of CDs that I own onto my new ipod. Can't wait for it to arrive :-).

Congratulations also to winning applicant bloggers Rungee, Iday, Forrest Gump, and Rusgirl! Also, congratulations to the London Business School student bloggers The Divine Miss and Karlitos, as well as Benny from Tuck!! There is something to this room, I haven't told you guys but I'm actually living now in the same room that The Divine Miss lived in last year, so it seems to be the room, the view over London roofs must be inspiring. Let's see if Rusgirl can take over this room next year and uphold the tradition :-).

Thanks again and keep commenting and contributing :-).

Monday, April 23, 2007

Summer term courses

Summer term is busier than expected but I love all the courses so far, which is great. Going surfing over spring break might have energized me, but I also think the content and professors this term are better than last term, so I'm thrilled. Courses so far:

Marketing Strategy: this is a simulation game, Markstrat, that we are playing over several weeks. My study group is Firm E and we need to make decisions on product launches, R&D, advertising campaigns etc. over 5 periods or so. I like dynamic simulation games and am putting in more time than I should.

Management Accounting: this is a subject I thought would be quite boring, but it turns out it may be one of the more useful subjects they teach at business school. It goes under the header of cost accounting, which doesn't sounds fascinating at first, but it turns out it is essential if you ever have your own business - how do you allocate costs to your products? I do not only think that it will be useful to me at some point in the future when I have my own business - I also wish I had learnt about this before working as a consultant, I remember several instances where this could have been useful.

Managing Organisational Behaviour Company Audit: I had written earlier I didn't enjoy the class itself last term, though for the final exam I finally did the reading and loved the book, Reframing Organizations. So I did get a lot out of the course via the book in the end (perhaps I should have done the readings right away!). Over the last 4 days I went to Spain with my study group to do an "organizational audit" of a medium sized family business. We interviewed the president and all of the senior management on their motivation, relationships among the management, frictions etc., it was very exciting, time passed very quickly and we learnt a lot.

Macroeconomics: I only attended the introductory class and it appears to be quite something. Our professor is a hardcore liberal economist French guy, which is a spectacular and unusual combination. The readings seem to be interesting (so far I enjoyed Paul Krugman's The Myth of the Asian Miracle), and now I just need to get over our Operations field trip next weekend till I can actually sit down and focus a bit more on Economics, since this was my goal at the beginning of the term.

Operations: so far nothing spectacular, we have started a factory simulation game outside of the classroom but I haven't been much involved yet since I was in Spain over the last week - luckily I have a good team that is running the game at the moment. Other than that, I look forward to our visit to the Porsche and BMW factories next week. To be honest, I have never liked Operations too much and simply will never like technical engineery stuff, I am trying to find it interesting but it seems to be against my nature. I promise to try hard to learn something useful though!

Finance 2: this will be tough. Our professor is a Russian mathematician specializing in interest rate derivatives, which tells you all you need to know. Right now we are reviewing capital structure though, which isn't one of my favourites - even though I know I have to learn it - but I can't wait till we move on to derivatives. Not that it will be easy, but I definitely need it for my internships, so I will work hard for this course.

So you may see, things are busy and there is more than enough to do. Especially since I enjoy the classes I do more than last term. I was going to study Russian on the side and also work on my financial modelling skills, but so far it doesn't look like this is going to happen any time soon! But the important thing is that I'm enjoying the academics again, which was important to me.

Thursday, April 12, 2007

Impressions from the ground: the current job market in investment banking

Following Citigroup's announced layoffs - 1,000 of which are supposed to be in London - I think it is time to comment on the current job market for MBAs interested in joining global investment banks. I do not have any overall numbers and can only comment on what I can conclude based on what is happening with the class of 2008.

First of all, I think the headline of "1,000 bankers in London to lose their jobs", as proclaimed in yesterday's Evening Standard, sounds more threatening to future bankers than it is. Most cuts are made in back office and administrative jobs, obviously. Furthermore, if you talk about the few M&A or Sales & Trading jobs that will be shed, I would assume only those who are losing money would be shed - if you want to cut costs to improve profitability, you will not fire anyone who brings in profitable deals, as your profitability goes down if you fire profitable employees. So I believe, even those MBAs interning at Citigroup this summer should not be worried, though obviously I understand that some who may have rejected Deutsche or Lehman offers to join Citigroup over the summer might wonder if they made the right decision.

But moving on from Citigroup, our summer job recruiting season has given us some good insight into the job market in the finance industry. I remember when we started the year, I was impressed by how well the 2nd years had done last summer, but also concerned - if there were so many summer interns last year and they almost all received offers at the end of the summer or joined other investment banks full time, how many spaces would be left for us? I can now safely say that I believe hiring this year has been even better than last year, so my impression is that we are lucky enough to have entered the MBA and the summer recruiting season at a time when investment banks are competing hard to hire MBAs.

Why do I get this impression?
- First, what usually seems to interest most on the business week forum, what I would call the "Goldman Sachs Index" :-). Basically, their core school is Harvard and I believe if they could they would like to hire as many people as possible from Harvard and fill up the rest with Wharton students. When hiring is down, they will focus on their absolute core schools. But when they want to hire more, they will obviously expand their search and look at "lesser schools" such as Columbia, Chicago, London Business School etc. as well. This year, it seems they have made a record number of offers to our class. I don't actually know the number because I only know of those I know personally, so I only know they minimum number, but I know of at least 9 offers (across M&A, Trading and Private Wealth Management). Taking into account our class size, this would be similar to ~25 offers at INSEAD or Harvard. So it's not a bad start

- Secondly, you may have guessed, I could mention the Morgan Stanley index ;-). Morgan Stanley has always been happy to hire from London Business School, but they are also very prestigious if not to say elitist, so I think they have always been quite picky and only taken a handful of people whom they could not say no to. Well this year it has been quite different, I think they extended at least 10 offers in M&A as well as Sales & Trading that I know of, so again taking into account our class size, this is a considerable number. You can see that around 8-10% of our class will spend the summer at either Goldman or Morgan Stanley, which is not bad considering that only 40% aspire to work in finance

- Regarding the other investment banks, some of them have actually made a record number of offers this year. Deutsche has extended more than 15 offers and Lehman I believe almost 20 offers. Barclays must have extended at least 20 offers, because I know 5 in my stream alone who are joining Barclays Capital, then I know two others with offers from Barclays Global Investors, so my estimate of 20 offers is likely to be conservative. Then you have many other banks, such as Merrill, HSBC, JP Morgan, Credit Suisse, UBS etc. which have probably all extended around 5 offers each if not more

- Low yield: this is another indicator of how well it is going. I know some banks extended a lot of offers but won't actually get that many summer interns from our school because these people had too many other attractive offers. I know of one very good ibank that gave 7 offers for M&A jobs and only one guy took it

- The buy side: this is an area where our school can definitely improve compared to Harvard or Wharton. But I think we did quite well this year, and hopefully we can strengthen this area little by little. The Investment Management Club has definitely done a great job in marketing our class to investment management firms and hedge funds and it seems to have paid off. Fidelity, PIMCO and Capital Group have made several offers, as well as UBS Asset Management, T Rowe Price, and several smaller hedge funds and other buy side firms. There even seem to be quite a decent group of people going to private equity. I know there is someone going to Bridgepoint Capital, and someone else going to Actis Capital, which is big in PE investment in Africa and India. I can't say exactly, but I would think that about 20 of us are going to work in investment on the buy side

So where does this leave us? My impression is that of the 40% of us who came here with the aspiration of going into finance, about 15% are going into actual investment banking, about 10-15% into Sales & Trading/Markets, about 5-10% into Investment Management and about 5% into Private Wealth Management. So my impression is that those who came here with a clear idea of what they wanted to do, we have been lucky to enter an friendly environment, even though as I mentioned earlier the whole recruiting process did turn out to be more competitive than I had expected. At least, things look bright in the world economy, and I think the class of 2009 will encounter equally benign conditions next year.

Monday, April 09, 2007

Busy summer term ahead

Well, holidays are up and I better start blogging again, right? As Patxi pointed out, 1/3 of the MBA is already over, this is shocking! What has happened so far?

Autumn term:
  • immediately adjusted to living in London, where I have been dreaming of living since I was 13 (funnily enough, when I was back home over the holidays I found a very old diary of mine where I talk of how I want to spend the summer in London and would love to live there when I'm "old" :-) )
  • Made a lot of friends from all over the world
  • Enjoyed learning about Finance and Economics, as well as learning better how to analyze industries
  • Spent days and days agonizing over career choices
Spring term:
  • Decided I will definitely make a career change
  • Met many investment banks on campus and survived lots of interviews
  • Signed my contract for the summer with an ibank in London
  • Enjoyed Finance Class with Joao Cocco and pretty much suffered through all the rest
  • Celebrated the end of term at the Salsa & Sangria party when the exams were over
And the summer term ahead will be very busy...
  • Luckily, this is the last term of core courses. We have Macroeconomics, Operations, Marketing Strategy, and Management Accounting (whatever that is supposed to be)
  • I'll also take my first elective, Finance 2, which is focus on derivatives as far as I know
  • My study group is going on a trip to Barcelona to do research for our Organizational Behaviour project
  • We will visit Eastern German Porsche & BMW factories for our operations class
  • MBAT is coming up in May
So this should be enough to keep me busy over the next weeks. I also look forward to meeting the class of 2009 at admits weekend in a few weeks. I have been to some MBA info sessions here on campus so I have met a few applicants already, but in terms of admits so far I only know Rusgirl so far.