Investment banking has traditionally been a lucrative business. Investment bankers have always been in the news for the excessive amount of money that they made while the rest of the world was struggling. However, the relentless negative publicity that the industry has received in the past has changed the way it functions. Also, external circumstances such as the pandemic have resulted in negative effects on the investment banking industry.
The coronavirus pandemic has created recessions and depressions all over the world. As a result, in almost all markets, individuals, as well as companies, are not very comfortable investing their money. They would rather hold on to their money for some time rather than invest it in the short run. This has created a world where capital resources are scarce. The job of investment bankers is to allocate capital resources efficiently
Markets all over the world have become increasingly competitive. As a result, the prices of goods and services are going lower. This is having a ripple effect on the finance industry as well. Companies are facing shrinking margins, and hence the cost of capital is going down as well. The problem is that the investors are already afraid to invest money. In such a scenario, they expect more compensation in order to induce them to invest
Investment bankers play the role of advisor to many companies. Sometimes they advise companies about how they must restructure their finances to avoid bankruptcy. At other times, they advise their clients about mergers and acquisitions.In each of these cases, investment banks often have access to the books of these firms
In many cases, investment banks are unable to find counterparties to the products that they have created. In such cases, they are often forced to hold the position on their books. This can be very risky since derivatives are highly leveraged as well as volatile. Hence, the financials of the investment bank can be severely impacted in the event of a downturn
The bottom line is that trading and selling of derivatives has become an important business of investment banks. In fact, this is what investment banks are now largely known for. This line of business has also brought a lot of disrepute to investment banking as too many scandals have emerged within a short period of time
The timing of the market is the most important factor. It is a known fact that most public issues are timed to coincide with the bull phase of the market. The bull phase of the market is known for frantic buying.
Investment philosophy is based on the synergies of value and quality. We intent invest in relatively undiscovered businesses with long growth potential. To qualify for our portfolio, companies must have the several qualities most relevant to long-term growth-qualities recognized and rewarded over time by investors-and be selling at a price below their intrinsic value
We strictly follow bottoms up approach and all companies have to clear our careful and detailed checklist. This approach means we can consider a broad range of securities investments across market capitalisation. We are not limited or have any biases found within several firms pledging to invest only on the basis of quality, growth, earnings momentum or value
