Finance is about understanding the purpose of money and how money is acquired, spent and invested. In this website, we will focus on Corporate Finance concepts.
What is Corporate Finance?
“Corporate finance is the division of finance that deals with how corporations deal with funding sources, capital structuring, and investment decisions. Corporate finance is primarily concerned with maximizing shareholder value through long and short-term financial planning and the implementation of various strategies.”
Corporate Finance can encompass many different roles across different sectors, organizations and geographies. In order to bring some structure to this website, I have broken down the content to cover the impact of Corporate Finance across the following four broad buckets:
Investment Managers / Buy Side
Investment Bankers / Sell Side
Corporate Functions / Issuers
Other
Buy Side
Buy Side refers to the institutions in the financial markets that invest in assets using capital raised from investors (individual or institutional) with an objective to maximize risk-adjusted-returns. Buy Side institutions perform the following roles:
Market their fund's past performance and unique proprietary investment strategies to attract clients to invest into their funds
Manage the client's investment with an objective of generating positive risk-adjusted return. This involves making investment decisions (buy, hold, sell) and managing risk. Also, important to note that the performance of the fund is directly linked to the compensation of the buy side fund managers. So, fund managers are incentivised to maximise returns.
Perform in-house research on potential investment opportunities; this includes creating in-house financial models and investment strategies. Buy Side Analysts read recommendations published by Sell Side Research Analysts.
Grow their assets under management (AUM) by seeking more clients to invest into their funds
We will discuss the following topics relating to Buy Side in detail through this website:
Types of Buy Side Institutions:
Private Equity & Venture Capital
Pension Funds & Hedge Funds
Types of activities Buy Side Institutions typically perform:
Portfolio Management
Research & Strategies
Sell Side
Sell Side refers to the institutions that create, promote and facilitate sale of assets to Buy Side investors. Sell Side institutions act as the intermediary between Corporations and Buy Side. For Example: If a Corporation needs to raise capital, Sell Side Institution will facilitate the capital raising process by liaising between the Corporation seeking capital i.e. Capital Demand and the Buy Side institution seeking opportunities to invest i.e. Capital Supply. In short, Sell Side professionals act as match makers and facilitate the process of Capital Supply meeting Capital Demand.
The Sell Side mostly consists of Banks and Advisory Firms. They perform the following roles:
Manage relationships with Buy Side Investors (Capital Supply)
Manage relationship with Corporations (Capital Demand)
Advise Corporations and Facilitate on a number of items including Capital Raising, Mergers & Acquisitions, Underwriting etc.
Perform Financial Modelling and Valuations to evaluate transactions
Design, Create and Execute funding structures that meet the Corporate’s and Sell Side investor’ requirements
Play a facilitator role, guiding the Corporate every step of the way through a financing process, including engaging in due diligence (commercial, legal, finance & tax) where required
Market and publish research views such as coverage of listed companies, market trends and commercial view of an industry/geography etc.
Execute trades in secondary markets for institutional investors. They also advise clients on entering and exiting financial positions
We will discuss the following topics relating to Sell Side in detail through this website:
Investment Banking
Sales & Trading
Research & Marketing
Commercial Banking
Corporate Functions
The "Corporates" refers to any public or private company. They are clients to the Sell Side. They are investments to the Buy Side. The Corporates can be in every industry, sector and geography. There are many Corporate Functions, but for the purpose of this website, we will focus on the use of Corporate Finance concepts in the following central functions within the Corporate:
Treasury Services
Financial Planning (FP&A)
Corporate Development
Technology Services
The Sell Side and Buy Side institutions are also "Corporates" themselves within the financial services industry. So, they will also have in house corporate functions. We will discuss in detail the corporate functions within a bank to understand how a bank funds itself, how it forecasts/plans it’s business plans and how banks are regulated within the rules set by the Central Bank /Financial Regulators
We also refer to the corporates as the "Issuers" as it is these companies that issue public or private securities for Buy Side investors to invest in through a process facilitated and advised by the Sell Side.
Retail Banking
Retail Banking refers to institutions providing financial services to individuals. Retail Banks are also referred to as Consumer Banks. We will focus on the following aspects of Retail Banking:
Checking and Savings Account
Debit and Credit cards
Mortgages
Personal Loans
Retirement Planning
We will also discuss Ring Fencing and Structural Reform requirements. These are now mandatory requirements imposed by regulators on Global Banks that have both Retail and Investment Banking operations. These requirements do not allow banks to cross fund investment banking activity with retail deposits. Capital and Liquidity are not fungible within the banks. We will discuss through this site the key changes in regulation since the financial crisis and how the banks have changed their business models/strategy to react to these changes.
Central Banking
Central Banking refers to the monetary authority that manages currency, interest rates and money supply of a country. We will focus on two key aspects of central banking:
Macroeconomics / Maintaining Financial Stability
Financial Regulation (Prudential and Conduct)
We will also discuss some of the key forms of funding the government and central banks make available for corporates to utilize. Given the crazy times we live in, we will specifically focus on the government funding/financing schemes available to corporates to survive the stress impacts of covid-19.
Soft Skills
Hard Technical Skills in Corporate Finance and Technology are great to have. But, these need to be complemented with relevant soft skills as well to progress in a professional career. So, we have dedicated a section to focus on the following key aspects of soft skills:
Leadership
Communication
Teamwork
Creative Thinking
Time Management
In these sections, we aim to provide frameworks for thinking and developing these areas of soft skills. These sections are not meant to be “preachy” in any way. These maybe taken as a guide or descriptions of best practices.
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