In my opinion, finance is one of the most exciting careers in MBA programs. Students are attracted because of remuneration potential (working with money should not leave you short of money, just as fish in water will not die of thirst, well not a perfect comparison - but almost!) and remarkeable access to almost all business lines (capital is the lifeblood of every business).

Many finance careers are quite hard to get into, and I felt business school provided an excellent entry point.

The top finance career opportuniies available in an MBA program are with investment banks (investment banking, sales and trading and research streams), investment management (mutual funds and hedge funds) and finance function in a large corporation.

Investment Banks - working as an investment banker

Perhaps one of the most rewarding careers (financially)- these guys are the power brokers on wall street. In business school jargon investment banker refers to someone who provides mergers and acqusitions advice or helps raise capital for large corporations (IPO and Bond deals).

I feel that the people who are attracted to an investment banking career have smooth social and networking skills, are aggressive by nature, and are not loath to working really hard. I am told that the 100 hour weeks in the book "Monkey Business" is not an exaggeration - although bankers have easy months too. In good years, investment banks hire a relatively large number of MBAs for this position and are open to taking people from all backgrounds. Many students insist they did not get into the career for money (!) but for remarkable access it provides to the top financial management in large corporations (as an associate you may be dealing with senior management of your clients). Some also liked the exit options the careeer provided - say private equity or a CFO position at a large corporation.

Investment Banks - working in capital markets (Sales, Trading and Research, or ST&R)

This was also a popular choice among my classmates (I think Chicago GSB places more students in this stream than any peer school). Since all the three roles are different, I will describe each of these in detail. This is probably the career I know most about because I chose this path.

ST&R careers involve dealing with secondary financial markets (acting as a market maker for existing stocks, bonds, and complex financial products). The career attracts a very wide variety of personalities (financial nerds working in exotic derivatives to liberal arts types - and there is no pattern among backgrounds of people who do well!). I felt if you like markets, there is room for you in this industry, given the diversity of positions available through the ST&R channel. Also, at all the top banks I came across a number of people who have switched across roles and products(another guarantee that you will never get bored!).

Hours - This career path has a reputation of benefits similar to i banking without the perils of hard work. Although the hours are not as rigorous banking, there are many many exceptions - so tread with caution if you want an easy life! Some groups (especially in exotic products and structuring) work long hours as their work is not really tied to market hours. With vanilla products getting increasingly getting automated, this is the direction that the industry is likely to take (read: people have to work harder). Having said that, the work is generally more cerebral and intense. The compensation varies wildly with the market, your performance and luck (like everything else in life).

Sales careers - as a sales person you are developing relationships with institutional customers to earn more business for the firm. You help your clients by executing trades for them and by provding market insights you receive from other clients and from within your firm. Many sales people are quite technical, and they cover a very wide variety of products. They do not risk the firm's capital. A majority of MBAs going in ST&R stream go into sales.

Trading - traders take risks with the firm's capital. (and hopefully make profitable bets for the firm!). Traders are quite specialized in the product they cover, and often deal with multiple sales people to get business. Their compensation is generally tied with the profits they generate. They are paid to make intelligent decisions on risk returns. In investment banks, there are two types of trading positions - proprietary and market making. Most traders start in the latter, where they make markets for a specific product. They work closely with sales people and provide liquidity to their customers, and spend a fair amount of time speaking with customers directly to fish for information in less transparent markets.Proprietary desks are generally staffed with former market makers who chose to exit the client business and they compete directly with hedge funds.

Research - the role of a research associate is to publish reports, answer technical queries from clients and trading desks, and help secure more business from clients. Research associates may work in equity, fixed income or derivative products areas. People going in this career gain an indepth understanding of the financial product they cover. Some become researchers for life, many join trading desks or investment management firms.

Recruiting for both investment banking and capital markets career starts after 2 months after the start of the MBA program, when all the major banks line up at the campus to hire for their internship positions. A majority of those hired decide to go back to the firm after internship.

Investment Management (IM) Careers - Institutional funds and hedge funds

The IM industry is buyer of securities. There is less selling involved, and people who want to make investment decisions for a living are attracted to this career. Although the compensation is not as volatile as investment banks (on both + and - side), the hours are generally better, and some people just like the idea of staying away from selling. This is also a good option if you dislike New York City as this industry is scattered throughout the country.

Real Money funds (or institutional funds) - Most institutional funds have very few spots, as the industry scales up very well (e.g. the same number of people can manage a larger pool of money) and people generally get into this career for life. Having said that, the industry is open to hiring people from different backgrounds if they convince the employer about their passion for investing. It is said that this industry has drawn heavily from the baby boomer demographic - read more spots have been opening in the coming years. In the words of Prof. Cochrane at Chicago GSB "this is the only industry where ameteurs beat professionals consistently" - yes, according to research, most funds underperform the S&P 500 index! Given this information, there may be plenty of room for innovation here.

Hedge funds - At the time of writing there are 8000+ hedge funds in the United States. This is a good news because there are many spots. This is also a bad news because they offer a large variety of opportunities and compensation. Most hedge funds do not have an established 'associate program' - they are not going to train new comers formally - so people who go into these careers should have a fair idea about the industry (they should know what they are doing).

A majority of the recruiting activities for this career occurs in the second year of the MBA program, as the funds do not have an established internship program of size.

Finance in a Company

This career attracts fewer students (simply because there are fewer spots). Associates work in accounting, financial management as well as mergers and acquisitions. The environment in a corporation involves less selling, and generally the hours are lighter. If work life balance is your primary goal - this may be a great option. Many investment bankers choose to move into these roles late in their careers.

Private Equity

Private Equity, when refered to in business school, implies investing in mature industries. Typically private equity funds identify an underperforming medium sized corporation that generates good cashflows, borrow heavily against the corporation's assets to pay off the existing owners, sell the unprofitable divisions and turn around the rest. The company management often makes an investment and retains a stake in the firm.

The industry is more keen on hiring experienced professionals, and is not a mainstream career out of business school. Lately, with the explosion on the number of deals, I think there is a lot of buzz and coolness associated (many a first year student has claimed he/she loves PE, although not sure why, and many go into investment banking with the goal of moving into PE later). One has to see how long the bubble lasts.

In the words of someone I met recently - "Private Equity is a strange animal - the nature of job is a hybrid between consulting and investment banking. The strategic expertise goes in turning around an underperforming business. The financial expertise goes in raising capital and efficiently designing the capital structure. It is no surprise that this industry draws its talent pool from these two industries." The hours seem to be somewhat in line with investment banking.

Venture Capital

Venture capital funds seek to invest money in nascent high technology ideas which have the promise of becoming profitable businesses. This is a high risk, high reward game - the chances of success of an idea are small, but a success has a very handsome payoff potential. Google, Yahoo, etc. all depended on VC money for their initial growth and their investors were rewarded. Besides providing early stage financing, a VC firm also nurtures the company with its expertise in hiring, management and strategy.

VC industry likes to hire people with experience in nurturing and running startup companies in a cash constrained environment. They value operational experience tremendously. It is not a very popular career for MBAs, although a handful of students choose to go in this industry.

Bibliography

Investment Banking/LBO

Monkey Business by John Rolfe and Peter Troob - (a very entertaining read)

Barbarians at the Gate by Bryan Burrough and John Helyar

Sales and trading

Liar's poker by Michael Lewis. An entertaining read on the wild bond market in the 1980s.

F.I.A.S.C.O. by Frank Partnoy

Venture Capital

Confessions of a Venture Capitalist by Ruthann Quindlen

Hedge Funds

When Genius Failed by Roger Lowenstein - a must read story of LTCM

Hedgehogging by Barton Biggs

Inside the house of money by Steven Drobny

(c) Pratyoosh. All opinions expressed above are personal, and do not reflect those of my current or former employers or educational institutions. Use this at your own risk!