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Investment Banks Destroyed - by Anton Kreil @Instutrade by Mind Map: Investment Banks Destroyed -
by Anton Kreil @Instutrade
5.0 stars - 2 reviews range from 0 to 5

Investment Banks Destroyed - by Anton Kreil @Instutrade

hedge funds

trader @ hedge funds

what they do, protect client's capital, make money in rising and falling markets, managing porfolios, traders are also known as portfolio managers (PMs), positive selection portfolio only, similar to prop traders @ inv banks, trade their own money + investors money


ustilise private investors (Clients) capital

important info, typically hold hedged (balanced) and diverse long/short portfolios

setup, management company, onshore, fees, annual 1%-2% management fee on assets under management (AUM), invoiced annualy to the offshore fund, used for infrastructure and basic salaries, annual 20% perfornace fee on profits, investors require portfolio manager to reinvest 50% of the performance fee back into the fund, tax is paid offshore, fund, offshore, holds clients money

what traders get paid (as of 2014)

Junior Portfolio Analyst (contractor), basic salary $160K, no bonus, no stock, can invest in the strategy, 1-2 years

Junior Portfolio Manager, basic salary $300K, bonus $400K, small amount of stock in the HF structure, 25% of the bonus reinvested in the strategy, lockup on individual terms, 3-5 years

Senior Portfolio Manager / Managing Director, basic salary $800K, bonus $3.5M, stock in the HF structure, 50% of the bonus reinvested in the strategy, lockup on individual terms, 3-5 years

Principals, limited by assets under management

investment banks

clients are

blue clip companies - mid to large size

pension finds

hedge funds

family offices

private equity companies

high net worth individuals - sophisticated investors

retail banks

investment banks have financial interest in their clients as well


primary market, where debt and equity is issued, clients raise money in debt & equity markets

secondary market, where assets (debt, equity) are traded after being made publicly available, debt, equity traded by the traders, setup, cost center / profit centrer = 4/1, typical equities division, inverse pyramid, support (technology, compliance, operations) 3500+, research analysis 200+, pension funds have their own analysts now, hedge fund sales 30-60 & long only sales 40-70, hedge funds sales generate commision generating ideas, sales traders 100, execution business, traders 100, genuine profit center, trader @ investment bank, what they do, 90% market making, agency - no risk to the client (80% of MM business), buy/sell on behalf of the client, trader is monitoring the algorithm, risk - on risk to the client (20% of MM business), performance is measured by % of commission retained (retention ratio), bad retention ratio is 50%, good retention ratio is 75%, most of the business "position unwind" is handled by algorithms, these positions are categorized as "negative selection portfolio", typical commission 5 basis points 0.05%, 10% prop trading, purpose is to gain back the commission lost in the negative selection portfolio, running long/short portfolios 1-3 month time horizon, portfolio size is down 80% in line with comissions, remuneration, facts, comision business is in structural decline since 2002, commission down 80% from 25BP to 5bp, inv banks tried to increase risk 2000-2007 to compensate falling commisions, after Dod Frank 2010 regulation prop trading exposure is down 80%, bonus comes from prop trading, down 80% since 2000 in line with commisions, majority senior traders get $300K gross (basic + bonus) at the moment

ustilise public shareholders capital

what traders get paid (as of 2014)

Fiancial Analyst (contractor), basic salary $65K, bonus $8K-$16K, no stock, 2-3 years, 20% make the cut

Assosiate (fulltime), basic salary $130K, bonus $80K-$160K, 15% stock, 5 year lockup (resignation penalty), 3-5 years

Vice President / Executive Director, basic salary $300K, bonus $200K, 20% stock, 5 year lockup (resignation penalty), 3-5+ years, most spend all their careers ate this level

Junior Managing Director, basic salary $475K, bonus $320K, 25% stock, 5 year lockup (resignation penalty)

Senior Managing Director / Partner, basic salary $800K, bonus $1.6M, 35% stock, 5 year lockup (resignation penalty)

trading and portfolio management industry landscape - vast majority of professional traders work @

investment banks

hedge funds


Pension Funds (long only)

Private Equity (non publicly traded assets)

Inter Dealer Brokers (institutional brokers)

Retail Brokers

Retail Banks

check out my website @TradeBreakdown

Institute of Trading and Portfolio Management - University Tour 2013 Filmed at University College London (UCL) November 2013 Institute Education