Despite Businesses and the world at large looking at Finance professionals as a pariah, post-2008, the demand for Finance as an Industry and job function has returned in 2015. By 2024, financial operations are estimated to add 632,400 new jobs. From the worry that another crisis is just on the horizon, the regulatory environment in the industry has tightened. So has the increase in demand for auditors and accountants.
Broadly, the industry job function is divided into Investment Banking, Investment Management, Private Equity, Corporate Finance, and Research.
Investment Banking continues to be the job function of choice for the top 5 MBA programs. One reason for the surge is that Global Mergers &Acquisitions (M&A) activity picked pace in 2015 to 6% of the GDP at $5.1 trillion. The GDP ratio was slightly below the boom cycle of 2000 (10% GDP) and 2007 (8% GDP).
2015 was part of a trend of greater M&A activity, exceeding 2014's $3.4 trillion, but 2016 was a letdown with 40% lower M&A activity compared to the same period in 2015. These trends should not discourage MBA applicants. Based on deals announced, or aggregate deal value, JPMorgan Chase & Co, Morgan Stanley, and Goldman Sachs & Co - three top recruiters for the MBA programs, still dominates the job market.
After the increase in IPO activities in 2012 (Facebook), 2013 (Twitter) and 2014(Alibaba), the 2015 volume reached 1,218, below the 10-year median of 1,241 deals. But the average deal size was higher, taking the total capital raised in 2015 to $195.5 bn, higher than the 10-year median of $176.1 bn. Despite Chinese market demonstrating volatility, 2015’s Global IPO market was driven by China (55% of IPOs). For the first 6-month of 2016, the decrease in deals is 38% by number, and 61% in value, from the previous year.
As in 2015, 52% of Global IPO activities in 2016 were concentrated in Asia-Pacific. One major reason for the slowdown of US IPO market is the greater availability of PE (Private Equity) funds ($500b in May 2016), higher than the amount raised during boom time (2006-07). In the first half of 2016, PE firms sponsored 49% of the companies entering the US IPO market.
The Investment Banking (IB) vs. Investment Management (IM) seems to confuse even the most well-read career switchers.
In simple terms, Investment Bankers (IB) sells while Investment Managers (IM) or Asset Managers buys securities. Do remember that we are not talking about individual investors or bankers, but institutions, and brokerage firms. IB does the packaging and sells, while IM buys what IB is offering with the goal of increasing the value of the asset.
Investment Bankers (Income) = Fees from Transactions
Investment Bankers (Primary Activity) = IPOs + Mergers & Acquisitions
Investment Managers (Income) = Percentage of the Total Assets under Management
Investment Managers (Primary Activity) = Invest Money + Manage Portfolio + Promote Products
Although the primary activities of Investment Managers seem more than Investment Bankers, the ambitious MBA Finance professionals start as associates in IBs, with the goal of someday starting a Hedge Fund like Kenneth Griffin (Citadel), who earned $1.7bn in 2015. Unfortunately, burnout is a common occurrence in the job function.
With 100-120 hours per week expected from associates in Investment Banking, the high payout Bonuses might dwarf in front of the life satisfaction that a regular schedule and lower stress levels an Asset Manager experiences.
If hours do not bother you, then MBA in Finance will open up opportunities in Investment Banking (M&A), and Hedge Funds – two of the most lucrative career paths in the short-term. Pre-MBA experience in Healthcare, Technology, and Manufacturing can give candidates a unique advantage, as most of the deal flow happened in the three sectors during the past couple of years.
Top 5 MBA in Finance
5) Harvard MBA
If you want confirmation that General Management programs are slowly dying, the emergence of Harvard MBA among the Top 5 MBA for Finance is the latest proof. The class of 2018 attracted 41% from Economics/Business background, the highest percentage represented in the latest class – 3% higher than STEM. When you look at the Pre-MBA industry, 11% are from Financial Services, along with 15% from Venture Capital/Private Equity, taking the total percentage represented in Finance to 26%.
Finance 1, Financial Reporting & Control (FRC) and Finance 2 are the required courses in the Core Curriculum. The core focus on Finance builds the analytical skills required in Corporate Finance, widens the understanding of Capital Market & Financial Institutions, and familiarizes students with the concepts in accounting. Finance 2 builds on the knowledge acquired during Term 1 and demonstrates how to make decisions for firms after evaluating investment options that include mergers and acquisitions, Leveraged Buyouts, IPOs and hostile takeovers.
The second year is divided into Elective Curriculum and Field-based learning experience. With 120+ courses, students can specialize in Finance, and Accounting and Management. The Finance focus in the 2nd year allows students to experience Field Courses in Private Equity projects, and Entrepreneurship through Acquisition.
The reputation that Harvard fetches one of the best post-MBA salaries along with Stanford holds true for Finance major as well. The total guaranteed salary for the 2015 graduating class was $180,000 with $40,000 bonus. 29% of the class chose a Finance job function post-MBA.
The above post in an Excerpt from the Chapter - Top 5 MBA in Finance. Download F1GMAT's Comprehensive MBA Research Guide from our Store for complete analysis and ranking.
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