Presentation Careers in Credit Research Aiwmi May 27

Careersin Credit Research and Analysis

Confidential, Copyright AIWMI


To define the Credit Research Market & the services.Provide an idea of its size and recent growthExamine the career opportunities in the Credit Research industryDescribe the competitive landscape and the ways to reach there.Introduce CCRA Certification program as a gateway to careers in Credit Research and RatingsAIM of this presentationConfidential, Copyright AIWMI


Definition of Credit Research and AnalysisCredit Research and AnalysisResearch to assess the overall credit quality for Investments into its fixed income related instruments

Fixed Income is an Investment that has an up-front capital Investment and pays interest on a regular basis

Credit research usually includes credit analysis, fixed income valuation, credit rating. credit assessment, formulating credit strategy and credit enhancement



Fixed Income - Products Common financial instruments:Bonds/DebenturesCertificates of Deposit, Fixed depositsMoney Markets Instruments (short term)Loans (including foreign current loans)Others



Credit Analysts has to look at all the risk factors for a company unlike equity analystsCredit Analysts can be a qualified person with appropriate credit knowledge like MBAs, CFA Charterholders, Chartered accountants, Graduates or any credentialed professional money manager. As we understand.Confidential, Copyright AIWMI


Client SegmentsCredit Research roles are targeted at any part of business where there is a need for new capital for e.g. for SMEs, large corporates, private companies, special purpose vehicles, individualsThe roles could be targeted for independent analysis like a credit rating analyst or a portfolio analyst for a buy side/sell side firmConfidential, Copyright AIWMI


Depth of Credit ResearchSource : http://www.zerohedge.com/news/visualizing-tbtf-hub-and-spoke-representation-scale-free-modern-bankingConfidential, Copyright AIWMI


There areonly 51 stocks in the worldthat arerated by more than 50 sell-side equity research analysts. Of these49 are in India. Theonly 2 stocks outside India are Apple and Intel. (MS Report).Equity Research per se has bulk supply and few jobs which is inverse compared to the total capital out in the world

Equity is over playedConfidential, Copyright AIWMI


Bond market Size global - $123.2 tn (BIS Dec 2012)CDS market size globally - $27 tn (BIS June 2012)Equity market size globally - $50 tn

Globally equity is only about 25% of the total capital available while debt remains 75%. Market Structure/size

Credit Rating Agencies like CRISIL, ICRA, CARE, FITCH, Moody's, S&PCredit Information Companies like CIBIL, Equifax, Experian and HighmarkBanks/NBFC Retail and institutional Credit, Other loansBanks Treasury dept. buying and selling G-secMNC Banks Fixed income trading desks, ResearchKPOs Tracking international Bond marketsMarket Players for CreditConfidential, Copyright AIWMITheAbsoluteReturnLetter,July2013Much Ado about Nothing


CCRA Competitive LandscapeGlobal PlayersIndian PlayersRatingsHighHighCapabilitiesSource : logos are taken from respective companies website and are not for marketing purpose.Confidential, Copyright AIWMI


SalariesConfidential, Copyright AIWMI


Recent Regulatory updatesNSE Launched its Debt trading segment recently and trying to promote it, other key exchanges are planning as well

RBI Announced/approved CDS Guidelines in 2012 and all regulators including PFRDA, IRDA, SEBI etc. allowed mutual funds to trade in the same

RBI is actively changing competitive landscape for debt/debentures etc with changing guidelines, rules

Recently around 20+ corporates applied for banking license and that will open up banking jobs plus Nationalized banks are expanding



Present Market Scenario JP Morgan: Credit ResearchEach Credit Research senior analyst focuses on one or more industries, comprising anywhere from 30 to 70 companies.Analysts use knowledge of the industry, the companies and the fixed income market to issue bond and credit derivative recommendations.Copal Partners A Moodys CompanyThe role is ideal for someone who is a domain expert on one or more sectors and wants to move from being an analyst to a manager.A key longer term component of this role is also to structure and devise a rule based Artificial Intelligence system that can automate Research output.



Fidelity Fixed Income/Credit ResearchThis division is home to Portfolio Managers, Research Analysts, Traders and Quantitative specialists. And they work on either the Equity side (stocks) or on the Fixed Income side, otherwise known as Credit (bonds, gilts, and so on).Career Opportunity at AMBA Research : ANALYST/ ASSOCIATE VICE PRESIDENT - FIXED INCOME AND CREDIT RESEARCH Standard Chartered Credit ResearchThe Global Credit Research team, headed by Kaushik Rudra, comprises two areas: Credit Analysis and Credit StrategyPIMCOs approach of Credit Research for a better InvestmentCRISILCRISIL is a global analytical company providing ratings, research, and risk and policy advisory services.



Long Hours (less hours than Investment Banking)Life will revolve around companies A lot of phone time / meetings with clients, other banks, lawyers, & internal colleaguesCredit analysisFinancial Statement Analysis / Modeling and Industry StudiesMust know your clients better than the competition Investor Calls / PresentationsCompany press releases as well as reports in the media10-Ks, transcripts, sell-side research etc.,Broad product experience / limited understanding of each productCompetitive / High Pressure EnvironmentCan be said about any position at a bank. Especially front office but also middle and back.

Role of a Credit AnalystConfidential, Copyright AIWMI


Analyst Role / ResponsibilitiesCareer / Role BenefitsFinancial analysis and financial modelingCompany valuationComparable analysisPreparation internal credit / approval memosIndustry and company researchDeveloping client presentationsMarketing material (i.e. Teaser, Confidential Information Memorandum)Updating all internal databases and systemsAdministrative tasks (set up calls, fax, FedEx, etc.) Banking-like training programs Greater access to superiors & senior managementTruly understand corporate growth, financial analysis & capitalizationDevelop strong knowledge of many industriesAnalysts tend to wear more hats than in larger banksQuality of life: Hours, flexibility, goals & expectationsDefined career paths & competitive compensationOpportunity to change career path both internal / externallyIntroduction to numerous business owners

Career ConsiderationsCareer Options Firm TypesEnvironment Work / Life BalanceCommercial banksFinance companies / specialty fundsHedge funds and mezzanine fundsRating Agencies etcTrading Desks 10-12 hour days, weekend work depending on firmMedium/High stress levels: Pressure to perform, competitive environment & demanding superiors with little room for errorMultiple deals / companies / projects at one timeWork frequently with others in deal teams of 2 4 people within your groupFrequent fire-drill deadlines for client driven approvalsFrequent meetings & conference calls throughout the dayConfidential, Copyright AIWMI


Association of International Wealth Managers (AIWMCM )Based in Switzerland, Non-profit Association established in 2007 to promote & strengthen global education in private banking industryAIWM is affiliated to Swiss Financial Analysts Association (SFAA). SFAA is a global forum for financial analysts and was set up in 1962.Confidential, Copyright AIWMI


Association of International Wealth Managers (AIWM)Association founded by: AZEK , founded in 1990, the Swiss Training Centre for Investment professionalsLawInContext, online legal & training service created by global law firm Baker & McKenzieCentral Law Training(CLT), UKs leading provider of postgraduate legal training & course provider of renowned STEP Diploma in International Trust Management.Confidential, Copyright AIWMI


Currently present in Switzerland, France, United Kingdom, Germany, Italy, Luxemburg , Hong Kong & Monaco.Recently launched in South AsiaAIWM Member NationsConfidential, Copyright AIWMI


Role of AIWM IndiaAssists graduates in acquiring core competencies in finance & in qualifying for key positions within the industry Established to set a globally recognised standard for the qualification of wealth management & Credit Research professionals Facilitates clients access to first-class, reliable and comprehensive advice & services.Confidential, Copyright AIWMI


AIWM Indias ObjectivesTo facilitate research & high quality education in field of international wealth management & credit research.To provide an internationally recognized certifications in private banking (CIWMCM) & Credit Research (CCRACM)To create a forum for the interchange of ideas and information in the finance and wealth management fieldTo assist a world wide network of private banking experts & financial analysts



Certified Credit Research Analyst (CCRACM ) ProgramAdvanced international professional certification for credit research professional, developed by industry experts.Has corporate acceptanceGlobal, regional and local education componentProgram developed by highly qualified academics & practitioners; skilfully combines both theory & practiceConfidential, Copyright AIWMI


Strengths of CCRACM ProgramEnsures an in-depth knowledge of Credit Research and Credit StrategyFocuses on Credit AnalysisProvides access to rating methodologies, industry practicesTeaches sophisticated techniques & takes holistic approach to a Credit Ratings, Analysis and ResearchConfidential, Copyright AIWMI


Profile of Aspirants for the CCRACM Program Candidates aspiring for a career in the following domains should pursue CCRACM program:Credit AnalysisCredit RatingsCommercial and Retail Finance Investment BankingPrivate EquityPrivate BankingBanksEconomic ResearchPortfolio ManagementFund ManagementAcademicsConfidential, Copyright AIWMI


CCRACM Examination StructureThe designation combines a topic-based and levels-based approachBoth progression and topic specificity are present There are two levels of examinations covering all topic areasConfidential, Copyright AIWMI


CCRACM Examination StructureLevel 1 testsKnowledge and understandingProblem solvingLevel 2 testsProblem solvingEvaluation and judgemental skillsConfidential, Copyright AIWMI


CCRACM Examination Structure

Examination paper structure:

CommonExam hoursNo. of papersLevel 1 21Level 2 31 52



CCRACM Examination Structure

Examination paper structure:

CommonExam ScheduleLevel 1& 2 Online NSE Exams



CCRACM Examination StructureTopic areas Level 1Understanding of Financial Statement Analysis Balance Sheet, Profit & Loss Statement, Cash-flow, Ratio & its analysis, Accounting Policies, Projections, Red Flags Credit Specific Analysis Liquidity Analysis, Stress Case Testing, Scenario, Base, Bear Bull, Covenant Testing with Projections, Comparison- Sector vs. Global, Liquidation Scenario, Event, M&A, LBO Understanding of Bonds/ Bond Maths Bonds, Covenants, Pricing, Spread, Curves, CDS, Seniority Ranking, Rich Cheap Analysis, SWAP, OAS, YTW, Term Structure & its theories, Duration, PVBP Confidential, Copyright AIWMI


CCRACM Exam StructureTopic areas Level 2Credit Ratings Basics 4C Model, Types of ratings, Default rates, Recovery rates, Business, Industry, Financial and other risks, Scenario Analysis, Sovereign Ratings, Methodology, CIBIL/FICO Credit Strategy Pair trade, Basis trade, Rating Analysis Trends, Sectors, etc., Debt maturity profile, Retrace analysis, Sector charts, Efficient frontier, Commodity based traders, FX-based correlation, Senior vs. sub, CDS trader Analysis, Company charts Credit Enhancement : Structuring, Types of enhancement Others : Related party transactions, Management analysis, Overview of fixed income markets around the world, Distressed InvestingConfidential, Copyright AIWMI


Eligibility- Minimum Work Experience N.AMinimum Qualification during Certification Graduation (Students of final year of graduation can register)

Pathway to CCRACM CertificationConfidential, Copyright AIWMI


ConclusionCredit Research Analysis will always be a critical function for financial institutions. The market is growing with the entry of various institutions & products. Credit Analysis in this scenario provides a true differentiator and sustainable competitive advantage.



Thank You

Association of International Wealth Management India (AIWMI)Regus, Level 9, Platina, G Block, Plot C-59, BKC, Mumbai-51Email: [email protected] Web: www.aiwmindia.com

QueriesConfidential, Copyright AIWMI


**

Presentation Careers in Credit Research Aiwmi May 27

Documents

Transcript of Presentation Careers in Credit Research Aiwmi May 27