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Tag: Investment Banking

Capital Structure Optimisation and Capital Raising Strategies

Posted on by Imarticus Learning

Effective capital structure optimisation and capital raising strategies are crucial in shaping a company’s financial health and growth prospects and are important aspects of investment banking.

The composition of a company’s debt and equity, known as its capital structure, significantly impacts its ability to finance operations, pursue strategic initiatives, and maximise shareholder value. This blog explores the key considerations and strategies involved in capital structure optimisation and capital raising, considering the nuances of financial flexibility, fiscal discipline, risk management, and growth aspirations.

Capital Optimisation

Capital optimisation refers to managing and balancing the receivables and payables of an organisation. An organisation can establish a practical solution with minimal disruption while accomplishing the desired effect with capital optimisation. Usually, an optimal capital structure of an organisation is the perfect balance of equity and debt.

For an organisation, debt is cheaper than equity as it costs less in repayment. However, debt can also cause an organisation to go bankrupt. Organisations must find the point at which the benefit of debt equals the cost of operation.

How to optimise a capital structure?

Deciding an optimal capital structure for an organisation can be very difficult. Before making the final call, managers must consider the impact of their decision on the market.

The most practical approach for a company is to raise capital using debt rather than equity, as debt signalling is positive news. Additionally, debt is cheaper than equity as companies get tax relief on interest.

On the other hand, raising capital through equity can cause dilution and is considered a negative signal. Equity is also costlier because the company pays the dividend from the after-tax income.

The debt or interest tax shield is a significant solution for optimising capital structure. It helps reduce the tax amount from the debt interest payments. The calculation process of the tax shield is given below.

Interest tax shield = Interest expense deduction ✕ Effective tax rate

Capital Raising

Capital raising is the procedure an organisation undertakes to acquire funds required for new projects and expand old projects and businesses. 

The organisation can issue stocks or bonds to its investors in exchange for their investment in the company to raise capital. These stocks usually offer the investors a share in the company.

There are various ways to implement successful capital raising. These include Initial Public Offerings (IPO), private placements, venture capital funding and crowdfunding.

Strategies for Raising Capital

Capital raising is primarily of three types, as described below:

  • Financing Debt

Debt financing means you must pay the principal amount and a fixed interest you agreed on back to the lender. 

Third parties pay the fund or the capital in debt finance. Such lenders include banks, bond markets, financial institutions, and private equity funds. While raising debt means access to fast cash at a low-interest rate, it also entails a decrease in the credit ratings of an organisation. 

Debt repayment does not depend on the company’s business performance. Hence, the debt must be repaid even if a business is not performing well.

  • Financing Equity

The second most common way to raise capital is through equity financing. Equity financing is raising funds by selling equity or a share in the company’s ownership.

The investors can be anyone with the funds available to them to meet the valuation of the stocks set by the company or its owners. The stock market is the most crucial method for raising equity. The company must not, however, overvalue its equity, or it will lose prospected investors.

The most significant advantage of equity financing is that no interest repayment is required, making it a much less risky approach than debt financing. However, it also means giving up a portion of your control over the business and consulting the investors or shareholders before making significant decisions.

  • Hybrid Financing

Hybrid financing, as the name suggests, is a combination of debt and equity financing.  A hybrid financing solution is a lot more flexible as it provides both the company and the investors with a lower-risk option. It also ensures access to a broader range of investors.

The negative side of hybrid financing is that it is more complex and often gives investors an upper hand over the company’s expenses.

Conclusion

Optimising capital structure and implementing effective capital raising strategies are critical for businesses aiming to achieve sustainable growth and maximise shareholder value. Striking the right balance between financial flexibility and fiscal discipline, aligning capital structure with business strategy, and employing various optimisation strategies can help companies navigate the complex landscape of capital management. An investment banker can help with this.

Enrol in Imarticus’s Certification in Investment Banking Operations programme to learn the fundamentals of financial markets, trade life cycle, risk management and regulations. This investment banking course has a job-focused curriculum and offers dedicated career services for candidates seeking a career in investment banking.

Learning investment banking has never been this easy

Posted on by Imarticus Learning

Dreaming about securing a permanent position in the investment banking industry and achieving that goal can be pretty tricky. Since investment banking is a growing sector in finance and business, it is one of the most demanded career paths among students. The promising expansion in investing, selling and trading play a major role in the growth of investment banking. The year 2021 saw a massive upheaval in the Indian investment banking sector and deal-making businesses as there was unexpected flooding of IPOs and stock share sales.

The overall hike was more than three times that of 2020 when investment bankers made only 776.7 crores whereas they scored a whopping 2.000 crores in 2021. It is statistically possible that investment banking in India will grow by 8.5% in 2022. So learn investment banking in the easiest way ever to celebrate your dream and become more aware and skilled in finance.

Technical Skills Required to Become an Investment Banker

There are certain hard skills that an investment banker needs to hone before joining the industry. It is unavoidable to squeeze in the little space left for new bankers without highlighting essential skills on your resume. Investment banking courses that groom students to acquire these skills are the best. Here is a list of some technical skills that will make your investment banking career easier: 

Basic Excel

Learning a few basics of Excel like Pivot Table, Data Validation, Look-Up functions, and Macros proves handy when you are aspiring to become a banker. Skills like analyzing clients’ financial data, creating monetary models for them, and forecasting are must-haves in this field.

Python

One of the most suitable programming languages for banking is Python. Learning how to use this simple programming language might come in handy when you are planning to go ahead with investment banking. Python is used to handle tasks like security analysis, risk and trade management, asset management, automated trading, etc. 

JAVA

One of the core skills that an investment banking candidate must possess is knowledge and control of Java. Java is the most used programming language for banking tasks as this helps build software programmes that contain humongous volumes of data. Also, this programming language comes with a tight and powerful security management feature that aids in investment banking tasks. Credit, fundamental, or macro funds typically need Java to operate.

C++

C and C++ are two of the most pivotal skills one can acquire to step further above on the ladder of success in the investment banking sector. C++ is mostly used to handle low-latency applications related to automated trading or market making. Bankers deal with C++ when they have to process quantitative-driven funds, quantitative finance and analytics. C and C++ are popular because of their reusability and speed.

C#

C# is essential in building GUI (Graphical User Interface) for the client company. It also plays a major role in creating mobile apps and websites. For investment bankers, C-Sharp is thus a useful language to enhance their skills for brilliant job opportunities.

Ruby

An efficient candidate for an investment banking position would be expected to have a firm knowledge of Ruby. Ruby is a high-level programming language that is mostly used in financial sectors for making payment systems like e-wallets and payment gateways, and monetary dashboards. Also, it covers significant tasks like asset management and Big Data. 

Power BI

An important data analysis tool is Power BI by Microsoft. Any type of banking, including investment banking, would require this tool for creating data visualisation. So thorough control over this tool would be an effective skill to have as an investment banker. 

Soft Skills Required to Become an Investment Banker

It gets easier if a candidate works on gaining personal skills related to this field while also pursuing related technical skills. Below are the few soft skills that help an investment banker stay rooted in the industry in the long run:

Analytical and Problem-Solving Skills

Analytical and problem-solving skills can save a candidate from getting rejected in mass competition. Data analysis, data visualisation, research, and critical thinking are all part of analytical and problem-solving skills. These soft skills distinguish an amateur from a professional.

Project and Time Management

As an investment banker, one needs to work with investors and client companies to manage the projects given to them. It is crucial to have a balanced perception of how to settle the project within a limited time.

Mathematical Skills

Finance is zero without numbers. So it is compulsory to own a strong calculative mind when dealing with investments.

Conclusion

There are multiple online and offline investment banking courses with placement assistance. But choosing the right can be difficult. Have a firm grasp of the technical and personal skills to become a successful investment banker with the Certified Investment Banking Operations Professional programme.

This course will enlighten you with in-depth knowledge of various product lines, and a better understanding of trade life cycles. Land a precious job at the leading banks with this programme’s efficient placement services and prepare yourself better through mock interviews and resume enhancement.

Why Should Management Aspirants Opt For an IIM Calcutta Investment Banking and Capital Markets Certification?

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A manager has great responsibilities, he/she is the one who directs and takes the most important decisions. He or she is also in charge of finding strategies for the company to achieve its objectives. If this is what you envision for your professional future, at Imarticus we offer you the best option to prepare you for this position. The IIM investment banking and capital markets course will give you the basics and advanced knowledge about mergers, portfolio management, sales, and more. 

What Will You Learn About Investment Banking?

Conceptually speaking, investment banking is an activity focused on the procurement and intermediation of resources to carry out operations of sale of companies, mergers, and acquisitions, issuance of shares for the entry of new investors (traditionally done in stock exchanges), placement of debt bonds in the market, or for the development of new companies or projects.

Thus, for investment banking to be able to carry out its intermediation and resource management activities, it develops services and basic activities to identify the financial situation of the companies it supports. These activities are financial analysis and diagnosis, company valuation, financial advisory services, the main one being the financial structuring of projects. 

In the executive program in investment management, we offer, you will learn about:

  • financial accounting and analysis
  • financial management
  • financial economics
  • debt capital markets
  • equity capital markets
  • mergers, acquisitions, and restructurings
  • portfolio fund management
  • securities market research and valuation
  • securities market sales and trading
  • securities market regulations

In the context of company sales, mergers, acquisitions, or demergers, it is important to clarify that it is necessary to be well prepared and to have a thorough understanding of Investment Banking and Capital Markets to value and structure them. For this reason, Imarticus has partnered with IIM Calcutta and now you have at your disposal a leading programme that will allow you to achieve all your goals.

Why Is It Important for An Executive to Know About Capital Markets?

The capital market is a financial market that promotes the development of a country’s companies since it is through this market that securities representing a company’s financial assets are bought and sold and are listed on the stock exchange. It is therefore essential that aspiring managers have a solid knowledge of the capital markets.

The functioning of the capital market is based on the constant buying and selling of securities issued by companies. Through the capital market, companies acquire financing from savers and investors who buy their shares, then channel this money and convert it into productive development with which they generate profits in which all shareholders can participate in the proportion in which they hold shares in the company.

On the other hand, two types of markets coexist in the capital market:

  • The primary market: These are the direct purchases that an investor makes from the company issuing the securities.
  • The secondary market: These are the buying and selling movements between private individuals, i.e., between investors who buy and sell the securities they own among themselves. 

 

In summary, investment banking and the capital market are tools through which the productive development of companies is boosted, giving value to the money of savers, who benefit from the growth of the company in which they invest their capital. It functions as a vehicle between investors and companies so that both parties can obtain profits and keep the money in constant movement. IIM Calcutta’s investment banking and capital markets certification will enable your career aspirations.

What is the Scope of Investment Banking in the Future?

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The scope of investment banking is remarkable. But, due to recent economic shifts, the investment banking industry has faced significant challenges. Following the Covid 19 crisis, banks experienced critical changes in financial regulations and client expectations. They have also witnessed a change in working models, technological advancements, and market democratisation. 

More than 30% of private and public sector banks in the economy today have a horde of NPAs (non-performing assets). This also run into quite a loss of a few thousand crores. With such significant changes, it is crucial to look at the future scope and trends of investment banking.

Trends in investment banking

Let’s look at the trends in investment banking in 2022.

The consumer is the king

Banks have realised that putting customers first can reap significant benefits. Customer satisfaction is essential to their success. As a result, banks are experimenting with new methods and tools to respond to customer inquiries. In addition, they are focusing on resolving customer complaints fast and increasing customer satisfaction. Basically, they are treating their consumers as kings.

Investing in Big Data

Banks are using master data management and data lakes to use their massive amounts of data. Furthermore, they are investing in big data and hiring a workforce that is well-versed in technology and skills. Banks believe that data becomes a valuable mining resource for discovering client insights. It is also helpful in developing new market strategies and launching new products when modern data analysis tools are used.

Using Artificial Intelligence and Machine Learning

Banks are increasingly relying on the power of artificial intelligence to predict data, launch new products, and close deals more quickly. AI accelerates data processing, automates essential but critical processes, forecasts real-time trends, and so on. That’s why banks are allocating budgets to use artificial intelligence and machine learning.

Using Marketing Strategies

Firms and banks are focusing on marketing their new and existing products. With the most recent marketing tools and strategies, they can cover their losses incurred during the pandemic and increase overall profit. In addition, they are using the most recent marketing software and CRM to increase customer satisfaction and popularity.

Scope of investment banking in future

Banking will look very different in the future. As a result, banks must prepare to face changing consumer expectations, emerging technologies, and new business models. That is why the banks need to start putting strategies in place now to help them prepare for banking in the future. 

After analysis of the current scenario, it is certain that the field of investment banking has a great scope in the future. But the prerequisite for the same is a lot of rules and regulations. Their implementation and follow are much required.

Safeguard Banks

It is crucial mainly that the big guns of the industry can strengthen the foundation of the banks well enough to prevent them from being affected by anything in the future.

The President and CEO of the Federal Reserve Bank in America brought the world’s attention to the fact that it was essential to ensure that none of the banks ever get big enough to fail. But as we can see, especially in our present economic conditions, many banks in India are so big that if they ever forget, there would be grave economic chaos.

Strategies to prevent bankruptcy

There is a general consensus in the global economy that banks are required to be put under scrutiny much more often than they are present. As a result, the governments have begun to brainstorm various schemes and initiatives which would prevent the banks from actually going bankrupt.

Strengthening Banks

The Financial Regulation Depositors Insurance Bill is one such bill that has been passed in the form of a radical change to strengthen banks well enough to not face any damage due to an impending economic slowdown.

While some are trying their best to bring in and develop various mechanisms for developing and strengthening banks, some feel the need for the economy to do away with investment banks altogether. These people justify their statements by saying that such banks only exist for a few people’s benefit and not for the whole society.

Conclusion

But the economy is growing in proportion to the growth of the population worldwide. In such a scenario, it is essential for investment banks to evolve enough to serve the economy and society. Therefore, while there is immense scope for the investment banking sector in the future. Professionally trained and skilled individuals are in demand in investment banking.

Also Read: Career and Scope of Investment Banking In India

Want to Become an Anti-Money Laundering Specialist? Learn More About Job Roles

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Financial institutions have to pay special attention to each customer and transaction to identify any fraudulent activity. A bank that has strong anti-money laundering policies will prevent people from depositing illicit money into any bank account.

Security policies are the main concern of financial institutions if they want to stop losses. Not only the financial institutions, but the government is also strict when it comes to money laundering.

Young enthusiasts that are looking to build a career in banking/finance should learn anti-money laundering skills to earn a better job offer. Read on to know more about anti-money laundering and different job roles in the industry.

Understanding money laundering via financial systems

In the money market, many criminals try to coat the source of their incomes. You cannot deposit money obtained from any illegal activity in banks. Money laundering hides the source of the black money and makes it white. The dirty money is moved around in a financial system and, multiple transactions are made to confuse the bank officials. It also includes depositing black money in small amounts or transferring black money to a foreign country.

best investment banking courses with placement in IndiaOnce the dirty money is cleaned via money laundering, criminals can use it to finance criminal activities.

It will not only affect the financial institutions but also affects the country and the citizens.

Financial institutions have strong AML (Anti-money Laundering) policies in place that stop criminals from depositing money.

Performance areas of anti-money laundering jobs

The day-to-day job responsibilities of anti-money laundering professionals in banks are as follows:

  • Anti-money laundering experts have to analyze the money market and uncover the pertaining risks within the financial institution. They are also involved in identifying and monitoring suspicious bank accounts or transactions.
  • Anti-money laundering experts are aware of the current alerts generated by the law enforcement authorities. Many times, they help law enforcement to catch a money launderer.
  • Procedural vulnerabilities and loopholes in the financial system are identified by anti-money laundering experts. All those areas that can be exploited by money launderers are identified by anti-money laundering professionals.
  • Anti-money laundering professionals also offer expert advice to financial executives for maintaining high-risk accounts.

What are the job roles in Anti-money laundering?

The financial market is complex and, criminals are also using advanced money laundering techniques. There are different types of anti-money laundering jobs that work together to stop the movement of black money. The top types of anti-money laundering jobs are listed below:

  • Junior Compliance Administrator: People who join the AML industry become junior compliance administrators. They have to carry out routine AML checking and administration of compliance processes in the bank.
  • Risk & Compliance Officer: A risk & compliance officer will be involved in KYC (Know Your Customer) activities. The risk officer is also concerned with CDD (Customer Due Diligence).
  • Fraud Investigator: Fraud investigators uncover the source of fraud in any financial institution.
  • Chief Compliance Officer: It is responsible for forming better AML policies for the financial institution.

How to learn more about AML?

Many young bankers are choosing online risk management courses to know more about AML. The Certified Investment Banking Operations Professional course offered by Imarticus can be the right choice. This course will teach you about financial markets and risk management. You will also go through case studies to know more about real-world AML processes.

Conclusion

In this digital era, criminals are conducting complex money laundering attempts. To stop those attempts, banks need expert AML professionals in the coming years. With an online course in risk management, you can learn the required AML skills. Start your risk management course now!  

Top 5 Regulatory Changes in the Investment Banking Operations Industry

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The investment banking industry is responsible for raising capital for businesses. In 2021, investment banks will help their clients in identifying revenue-generating opportunities. The investment banking operations industry must perform per some of the regulatory norms. Regulations for the investment banking operations industry are decided by the central/state government. If an investment bank fails to comply with the regulations, it may go through legal hassles. Besides finance professionals, investment banks also need expert compliance officers for following the regulations. There are investment banking courses online that can help you in learning regulatory compliance. Before you search investment banking courses online, you should know about these five regulatory changes.

 

  • Lending limits

 

The exposure limit for investment banks is decided by the central government. The exposure limit defines the amount of loans banks can give to borrowers based on their total funds. The exposure limit is often revised by the central government and investment banks must follow it. The current exposure limit for banks in India is 15% for a single borrower. For a group of borrowers, the exposure limit for banks in India goes up to 25%. The exposure limit can be increased by 5% for financing infrastructure projects. Investment banks often identify capital ventures and invest themselves. While doing so, they should not lend more than the exposure limit to avoid legal hassles.

 

  • Cash Reserve Ratio (CRR)

 

Financial institutions in India must keep a certain amount of cash with RBI (Reserve Bank of India) to meet payment obligations. The CRR is decided by the RBI and changes all the time. Investment banks must keep an eye on the current CRR to avoid any legal hassles with RBI. The current CRR for financial institutions in India is 3%. It means that if the deposit of a financial institution increases by INR 100, then INR 3 will have to be deposited to the RBI.

 

  • Operation norms

 

Once an investment bank has been incorporated, it must conduct operations according to the regulatory norms. According to the norms, an investment bank must list its shares within three years of its incorporation. The regulatory structure also defines the percentage of foreign shareholding. As for now, the foreign shareholding is restricted to 49% in India (maximum). Investment banks can increase foreign shareholding further but only after contacting RBI. The latest regulations also state that financial institutions must open 25% of their branches in rural areas where banking facilities are limited.

 

  • RBI

 

RBI will only set the banking regulations in India for all investment banks. The RBI Act launched in 1934 has given this power to the RBI for deciding the banking regulations. All investment banks that are incorporated under the ‘Companies Act’ will have to follow the RBI regulations. Often, RBI reviews the regulatory structure and makes changes. Compliance officers must keep an eye on the latest announcements from RBI.

 

  • Investment Advisors Act

 

The Investment Advisors Act brought a paradigm shift in the investment banking sector. Before this act, investment banks misinformed investors to curb the competition. In 1940, the Investment Advisors Act was created in which all investment banks had to register themselves. The fees collected by investment advisors are also regulated by this act. An investment banking certification can help learn more about the regulatory structure.

Which is the best investment banking course in 2021?

Imarticus Learning provides an investment banking certification in partnership with London Stock Exchange. The Certified Investment Banking Operations Professional course will help you in launching your investment banking career. With an industry-endorsed curriculum and career guidance, you can build your investment banking career. Start your CIBOP course with Imarticus now! 

Role of Technology in Investment Banking

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Today, technology is key in turning trading strategy into trading profit. Technology enables new pricing models and products to be delivered to the market. The Investment Banking industry thrives on the flow, analysis, and interpretation of information and technology is often the edge that gives a bank a competitive advantage.

Technology spans across  Investment Banking  functions and underpins every deal that is made. When a system is unavailable, millions of dollars can be lost. So robust systems and infrastructure are more than important, they are fundamental to IB’s ability to operate & make profits.
Another challenge is the evolving regulatory burden of the financial sector. Technology has to do more than keeping up; it has to drive the changes and developments necessary to keep IB’s ahead of the competition.
IB’s rely on advanced technologies in the front office to enable high-speed and high-frequency trading. Until now, the upfront benefits from this activity have been so enormous that the complexity and inefficiency of post-trade processes and systems have often been overlooked.
This is changing at a fast pace. The highest performing investment banks are now using their front-office technologies in bold, innovative ways as a source of competitive advantage for the whole business. By concurrently enabling interdependent business functions, such as risk management, settlement and financial reporting, these technologies are transforming the way organizations ‘think’, ‘react’ and ‘operate’.

There are a number of reasons for the change in this trend:

  • Management requires integrated, proactive technology infrastructures that can anticipate the impact of new market and regulatory developments and adapt to the same.
  • Technical leaders are under mounting pressure to get a return on their massive investments in technology by using these assets to drive down costs, as well as increase revenues (traditionally the principal focus for front-office technologies)
  • This increasing emphasis on ROI means Technology leaders need to develop flexible IT systems/assets, that, by adapting to business change, can appreciate in value over time.

Understanding complex technology is one aspect, but a firm grasp of business problems is also essential. IB technologists work closely with the sales, trading floor, middle office operations to develop the software that enables them to make the split-second decisions or use their creativity and initiative to enhance state-of-the-art front-to-back systems and databases. Whatever the task may be, IB technologists work in a fast-moving environment where solutions move from concept to implementation in weeks and months rather than years.

 

What Do You Do As an Investment Banker?

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What is Investment Banking?

Investment banking can be defined as a specific decision of the banking industry that engages in advisory-based financial transactions on behalf of their clients that ranges from individuals to corporations and governments. The investment banking division is responsible for raising capital for their clients from public or private investors. Investment banks leverage their large network and expertise to connect investors with excess funds and clients with profitable business opportunities looking for investors.

In the broad sense of things, the investment banks help to channel funds in the economy efficiently using their expertise in the domain. The Investment banker course also provides services related to the underwriting of debt and equity securities for various corporations. They also help with the mergers and acquisition deals, facilitate the sale of securities, broker trades for corporations and investors, and provide financial guidance to their clients on profitable investment avenues.

Role of an Investment Banker

Now that we have understood what investment banking is and what the investment banks do, let’s understand the role played by investment bankers and how they add value in this industry. We will look at the role of investment bankers in context to the functions of an investment bank in the economy.

  • Role of Investment Banker in IPOs and Underwriting: One of the major functions of investment banks is facilitating the underwriting services to private corporations and other entities. You must have heard of Initial Public Offerings (IPO), during IPOs the private company is seeking funds from the public by selling the company’s shares at a predetermined price.A lot goes into selling the share of a company to the public; a major role is played by investment bankers in facilitating the IPOs.First and foremost, before offering the shares to the public, the valuation of the company is done to determine the optimum prices for shares. Investment bankers play a huge role in researching and conducting financial analysis to analyze the financial well-being of the firm.

    After conducting a complex analysis the price of the security is determined. Selecting an optimum price is important to avoid any subscriptions or oversubscription scenarios. Investment banks act as a mediator in the IPOs and also acts as underwriter for shares issued.

  • Investment Bankers in Mergers & Acquisition: Another important role of investment bankers is highlighted in the mergers and acquisition deals. Mergers and acquisition deals are carried out by companies who are looking to benefit from coexistence and mutual synergy.It helps companies to avoid competition and collectively profit from improved synergy. In the case of acquisitions, a company acquires another in the process and takes over its operations and customer base. Mergers and acquisitions might look simple but it involves a lot of work on the part of investment bankers.
    They are responsible for finding the best competitor for the deal so that their client s could benefit from the M&A deal.Investment bankers have to leverage their network and expertise to identify the perfect fit. It also involves doing the valuation for companies so that a fair price is established for the sale or purchase of another entity. Investment bankers help to determine if the price offered by another company is fair or not (in case the company is being acquired) and determine the fair value of the other entity (in case the company is acquiring).
  • Investment bankers as financial advisors: In addition to M&A deals and underwriting services, investment banks also provide advisory services to their clients. Generally, the advisory services provided by investment banks are limited for corporations, government entities, and high net worth individuals.Various new financial instruments are complex and need expert guidance during investment, for example, alternative investments. The investment banker also guides their clients on these investment avenues after factoring in their risk appetite and return expectations.

Understanding Mutual Funds: Are They Safe?

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What is a Mutual Fund

There are different assets and holdings to invest with higher and lower risks in the financial market. A mutual fund works as a company that pools money collected within a diverse set of investors. This money is invested in a varied set of securities, or financial products, such as bonds. The whole set of holdings is known as a portfolio. The management of the funds is carried out by money managers who find the right allocation, optimizing and monitoring the capital gains for the investors.

This limits the decision power of its investors. Indeed, holders do not have voting rights. As a matter of fact, the ownership of the fund is represented by the shares. The gains and losses will then be distributed proportionally among the shareholders. Mutual funds are attractive to conservative risk profiles, as they are affordable, diversified, and allows the investors to easily redeem any fees.

Types of Mutual Funds 

Depending on the nature of the securities included in each fund, the mutual funds can be categorized into different types.

Some of the most common funds are denominated money market funds. This type of fund has a lower risk and is made through short-term instruments. The safety of the fund responds to the type of investment, which is made only through safe assets.

As aforementioned, the risk profiles respond to different types of mutual funds. To more aggressive risk profiles, bond funds address the investment through bonds. Stock funds, conversely, allocate the investment using corporate stocks of a diverse nature (regular dividends stocks, non-regular ones, index funds, or specialized sector funds of a specific industry). Finally, target-date funds manage the investment with a varied set of financial assets, shifting the mix periodically.

Risks Management

Any type of investment has an inherent risk associated with it, which varies according to the sector and types of assets used to invest. The nature of the mutual funds makes them very suitable for risk-averse profiles. Mutual funds reduce the risk through three axes: volatility, concentration, and inflation control procedures. For the former item, a systematic investment plan (small investments in short time intervals), such as those applied in a mutual fund, reduces the risks derived from the market variability.

Following with the next one, i.e. concentration, the famous financial advice gives us a clear hint on the strategy used: “One should not put all the eggs in the same basket”. As mutual funds are defined mostly as a vehicle of investment in varied sectors using different assets, the impact on diversified portfolios allows investors to foresee and prevent dramatic loss. Lastly, the funds also have advantages in terms of taxation, such as tax savings and a paying free-tax scheme for the returns.

Why Should You Partner with Imarticus to Learn About Financial Assets?

In partnership with LSED Academy, we offer a holistic, practical program to certify professionals in Investment Banking Operations. In a more competitive and complex financial work market, we offer a complete 180-hour program to not only get a deep understanding of complex financial assets and products but also to enhance the possibilities to get salary hikes and career development.

The 360-degree program alternates from the comprehension of complicated financial products trade life cycles, risk management courses, and market regulation modules, focusing also on the development of soft skills.

Conclusion

Being able to understand and manage investments using innovative financial assets is a crucial skill to work within the financial market. You can become a part of the Imarticus working force, participate in the investment sector and improve your salary. Get a certification online in banking operations with Imarticus. Join today!

How is Digitalization Impacting Investment Banking?

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Everyone is aware of how the entire banking sector is advancing. In order to keep up with the industry, rapid adaptation of digitalisation is one of the main priorities of the banks. Digital transformation in all forms is the current global movement faced by all the banks. There are some of the major strategic priorities like Customer experience, Data intelligence, Operational efficiency and Financial insights and almost all the banks are treating transition with utmost importance. A bank has different divisions like Investment Banking, Retail Banking, Commercial Banking, Global Banking, etc and you will come across digital transformation in every division of the banks. 

One of the most profitable fields in the financial industry is investment banking and to understand what is investment banking all about, here are some broad pointers to keep in mind before you go through the rest of the article. Investment banks advise governments and organisations on how to raise money, how to merge or take over companies, and how to reshape the business most effectively. An investment banking division will have five key areas: – Equity Capital Markets (ECM), Debt Capital Markets (DCM), Leveraged Finance, Restructuring, Mergers & Acquisitions. While M&A focuses on business advisories related to mergers and takeovers, ECM and DCM focus on advising organisations and governments on raising capital. Leveraged finance is fairly like DCM but there is an involvement of larger risks. Restructuring is where bankers analyse the structure of a business. For example, debt/equity ratios. Once the scrutiny is over the company is restructured in the most effective way to run the business successfully. 

An investment bank is responsible for taking care of underwriting stocks, managing M&A, and also being the financial advisor of the organisations, governments or other financial institutions. For them, their scope of growth and making a profit depends on the contacts that an investment bank has firmly established over the time period. Start looking at the list of leading investment banks; how they have evolved over the years and what they are today, you will have a sketch of what is investment banking all about. 

Now since the coronavirus pandemic, the need to adopt digital transformation has doubled and to put up with today’s competitive market, the banks are left with no choice but to accept changes brought into the system. Upon completion of digitalisation in the investment banking division, the services become seamless with the help of emerging technology and the services are shifted to online platforms with lots and lots of data stored and driven from the backend. With the advancement in technology, investors and investment bankers are now prone to the usage of Artificial Intelligence, the Internet of Things, Blockchain and other technologies as a part of their everyday job. There is a reason why investment banking industry is known to pay a handsome salary and it is all the nerve-wracking hard work and extra hours of dedication that counts for it. 

As mentioned earlier, this banking division is one of the profitable fields and hence, the career in investment banking is also positive and growth-oriented. The range of an investment banker’s salary starts anywhere from Rs.2.46 lakhs per annum and goes up to 70 lakhs per annum. To understand why investment banking and how you can establish a reputable career in this field, you can start by doing a professional course in a program called CIBOP (Certified Investment Banking Operations Professional). This course offers you an above-the-line experience you would require to sustain and succeed in this industry, that is if you pick a career in investment banking.