1. Debt Capital Markets and Debt Capital Market Investment Banking
1.1 Debt Capital Market
|Definition: Debt Capital Market is a financial market, in which corporations and governments raise funds by trading debt securities. Specifically, issuers or traders offer bonds/debts and investors purchase those securities. The debt securities can be bonds, credit default swaps, and ect. As opposed to Equity Capital Market where investors receive dividends based on the performance of the issuers, bond investors will be paid a fixed coupon rate regardless of the issuers’ performance.|
1.2 Debt Capital Market Investment Banking
|Definition: Debt Capital Market Investment Banking (DCM) refers to a product group within the Investment Banking Division of an Investment Bank. The division is simply the transaction advisor for business owners (such as companies and institutional investors), and governments, or local authorities in debt instruments including bond issuance, loans, leveraged buy-outs, and refinance of existing debt. The DCM group offers sufficient capabilities to provide high-quality services across various industries. The nature of advisory is different, yet in fact, the group works closely with the M&A, S&T team in the Investment Banking Division.|
2. Debt Capital Market Investment Banking: Career, Salary, and Responsibility
2.1 Career Progression and Salary
The career progression and salary at DCM resemble any groups in Investment Banks. You will start off your banking career as an Analyst, then move up to Associate, Vice President, Senior Vice President, and Managing Director.
The table below shows the salary with respective positions, the numbers listed on the table are averaged numbers surveyed from multiple respondents, for reference purpose only:
|Position||Promotion Timeline||Base Salary (USD)||Total Compensation (USD)|
|Analyst||2 -3 years||80K – 90K||150K – 200K|
|Associate||2 – 3 years||150K – 180K||250K – 400K|
|Vice President||5 years with a strong performance||200K – 300K||500K – 700K|
|Director/Principal/Senior Vice President||5 – 10 years||250K – 350K||500K – 1,000K|
|Managing Director||450K – 600K||1,000K+|
2.2 Working hour
Compared with M&A teams, the working hours at DCM groups seem less intense. While the M&A working hours can be up to 90 hours during the busy season for junior levels, it is just around 60 – 70 hours per week for DCM people. Working on multiple live deals and transactions sometimes could lead to overtime-working.
DCM’s responsibilities cover a vast swath of debt products. DCM bankers conduct financial analysis, create a memorandum, communicate with the client, and keep abreast of market updates to arrive at the most insightful advice for clients. Specifically, the debt products are Originate, Structure, and Market. The deals differ depending on what type of issuer is and what terms of the issuance are.
These are the most common responsibilities:
- Pitching: It is considered slightly technical. The responsibility includes identifying, contacting potential clients, and holding strategic discussions with interested parties on debt issuances. Both investors and issuers often have a ton of questions regarding interest rates, benefits of debt issuances, and market news. Your primary job here is to address these inquiries to establish trust with clients.
- Memorandum Writing: An Analyst exploits information about the client and its industry to craft a set of key points. These main points will be formed into a compelling investment thesis, or “Information Memorandum”. These memoranda help investors, business owners and transaction advisors gauge the potentials of the issuance.
- Financial Models: Conducting financial models in DCM is more straightforward and basic than those in M&A group. These models allow bankers and clients to determine a reasonable valuation, and assess how the deals should go, and whether the company should issue debts, or seek to refinance and restructure.
- Deal Execution: The DCM will work directly with Sales & Trading teams to execute the engagements. S&T teams will rely on memoranda with granular and comprehensive analysis to find and distribute bonds to potential investors.
- Market Updates: You might have to keep your fingers on the pulse of industry trends to set valuation expectations for the clients and help them plan their timing. The up-to-date market news is summarized in a deck. The deck often includes the number of offerings in the market, the volume of each offering, noticeable offering terms, and the amount of money/capital appealed from these issuances.
- Business Cases: It is similar to market updates, you have to stay abreast of latest market trends/news, and pile up similar case studies to entice both the client and the investor whenever they reach out to you to ask. To perform well, you should research to get several offerings under your belt, and walk clients through key terms and the company’s performance.
3. Investment Banking: Debt Capital Market vs. Merger & Acquisition
Both M&A and DCM are product groups within the Investment Banking Division (IBD). While the former is considered the most coveted group to pursue in IBD yet with highly pressure working hours, the latter offers more comfortable hours with similar compensation.
Here’s a quick overview of how different they are:
|Debt Capital Market||Merger and Acquisition|
Type of deals
Merger and Acquisitions
60 – 80 hours/week
80 – 90 hours/ week
Basic and straightforward
|Interaction with Clients||
Rarely happen for Junior levels
Similar (Table above)
Similar (Table above)
Internal Transfer to other groups
Private Equity Firms
Private Equity Firms
4. Pros and Cons of Working in Debt Capital Market Investment Banking
- Various deal types of debt: You will be exposed to a variety of types of debt transactions including government bonds, corporate bonds, refinance, and syndicated loans. Generally, debt securities are often considered complex, yet less apparent information for investors, which requires bankers to learn and dive in deeper to work and convince clients.
- Great exit opportunities: Your exit opportunities can be Private Equity (low chance), Hedge Funds (decent chance), Asset Management, Corporate Finance, Corporate Development, and Credit Agencies/Firms (Leverage our Career Planning Tool). In these options, your chance at Hedge Funds, Credit-Focused Firms, Asset Management Firms is more decent, since you have experience in bonds, and debt investments. Corporate Finance and Development are realistic as you work on restructuring and refinancing. Plus, Credit Agencies/Firms are also viable options to get into.
- Various industries: You work across various industries including Healthcare, Real Estate, Oil & Energy, and etc. This gives you a big opportunity to find the most suitable industry for yourself to work in. Working across many industries makes it possible for you to switch industries easily thereby.
- High compensation: The salary and bonus at Investment Banking are handsome, even after tax deductible. The compensation is set at the same level while the working hours are “much” more comfortable than M&A people.
- Interaction: While M&A people seem to focus a hundred percent on laptops with financial modelling and valuation, DCM people tend to collaborate with other product teams and speak closely with clients about deals and transactions more often. Those who don’t like such boredom in technical issues and pressure from working in M&A can choose DCM groups to work.
- Intense working hours: Put M&A groups aside, compared with other industries, working in DCM is quite intense, requiring you to devote 60-80 hours a week to working. You rarely have free time to work out, and hang out with friends and family. You should expect this life in the first few years.
- Narrower exit opportunities compared to M&A: Since experience gained from DCM might not be relevant to Private Equity, your chance to get into Private Equity is slender compared to M&A bankers. Though the debt transaction volume is enormous, the Debt Capital Market is not as dynamic as Equity and M&A. It is a disadvantage if you want to exit to fancier firms like Mega PE or Middle Market PE.
- Specialization in debt securities: You have opportunities to work across different industries, yet the specialization is around the area of debts and bonds.
5. How to get into Debt Capital Market Investment Banks?
Getting into Debt Capital Market is similar to getting into any groups in an Investment Bank. The application process is the same. The difference is you will choose your preferences by ticking boxes in the application form. In general, if you receive offers after Superday, you can be placed in any industry groups or product groups based on your own experience and your skills. However, if you are interested in the debt and bond, you should let recruiters know. The HR department and group leaders are quite flexible, they will consider your preference. The competition is lower compared to M&A means you will have to compete with more people. Below are necessary steps to follow if you want to have an upper hand in the recruiting.
5.1 Common pathways to get into Investment Banking
Classification: Investment Banking Division (IBD) as Tier 1, Sales & Trading (S&T), Equity Research (ER) as Tier 2
The step-by-step guide created with 6 steps gives you the best shot possible at landing one of the most lucrative careers in finance. However, in this article, the pathway to get into Investment Banking is summarized with 4 main steps as follows:
- Resume / Cover letter
- Internship / Relevant Banking Experience
If you want to learn about the detailed chance of landing in investment banks, you can check our Wall Street Career Planning Tool. The tool examines the chances of getting into Wall Street for different backgrounds. It provides the big picture of Wall Street’s job market and acts as a career guideline for you to land your dream job.
For freshman and sophomore:
- Tier 1 summer analyst internships at Bulge Bracket banks are getting more and more competitive. If you have little to zero relatable professional work experience, applying for an Bulge Bracket internship in your freshman and sophomore year is infeasible. However, freshman and sophomore year are golden times to secure a summer analyst in junior year. You should start early and apply for an internship / part-time position at wealth management firms (most realistic if you don’t have a strong network), or ideally boutique investment banks & small private equity funds – this takes a lot of smart networking and some relevant finance course / experience though.
For junior and senior:
- If you are unable to secure a Tier 1 IBD, S&T internship at Bulge Bracket banks, you should focus more on Tier 2 positions at Middle Market & Boutique banks or Sales & Trading and Equity Research. These are considered less competitive, yet still require a lot of smart networking and selling your relevant banking experience on your resume (link to our product). In the worst case scenario, you are struggling to land an investment banking internship, then internships in Private Equity, Hedge Funds, Venture Capitals, Corporate Development, Management Consulting, Big 4, and Valuations can be viable options. These industries provide a significant overlap or deals directly with investment banking. After equipping yourself with relatable experience, you can apply for full-time analyst roles whose recruitments happen annually.
Top 20 MBA programs:
- Associate roles at Bulge Bracket Banks are highly sought-after targets by MBA students. Top 20 MBA students have a decent chance of getting into both Tier 1 & 2 careers given the school’s prestige and strong alumni network. They are often approached by Bulge Brackets’ recruiters right at the campus. The key to win a full-time associate role upon graduation is to grab a summer associate internship right after the first year of MBA. You will need to bankify your resume and know how to sell your background (link to our product), especially if you did not work in Finance before your MBA.
Outside-top-20 MBA programs:
- Though students outside-top-20 MBA have less competitive advantages than highly achieving top 20 MBA students, they have certain chances of landing jobs at Bulge Brackets. Provided that you have strong finance-related work experience, and do a crazy amount of networking through LinkedIn or profession connection, you can stand a good chance of breaking into Bulge Brackets. In addition, you should consider Middle Market banks and Boutique banks since your chances there are higher. If your work experience is much irrelevant, or your background is not as strong as top 20 MBA students, then your chance is slim even at Middle Market banks and Boutique banks.
- Professionals with several years of relevant work experience in Big 4, Consulting, Valuation firms, etc can apply for associate roles and some customized professional programs. Over the past few years, Bulge Bracket banks have offered many slots to experienced professionals. A lot of recruiting programs and events are designed with the aim of diversifying the human capital. The programs vary from firm to firm. For example: Goldman Sachs has Neurodiversity Hiring Initiative, Career Pivots series for professionals who want to learn about the firm and get into the banking career. For this category, your chance will be more decent if you apply for associate roles at Middle Market banks and Boutique banks. The key to win a job at large banks always sticks with having relatable practical work experience and an extensive network with pro-investment bankers.
For a detailed assessment of your chance of getting into these Tier 1 & 2 division/ careers, leverage our Wall Street Career Tool.
Make your resume stand out and finance-oriented
The investment banks generally look for two key differentiators on your resume.
- History of excellence (i.e. GPA / test scores, awards & honors, brand name, competition wins, leadership)- Quick fact: Goldman Sachs recommends applicants to submit their SAT scores to increase the chance to pass the application round.
- Interest for finance, specifically investment banking (i.e. school major, clubs, related coursework)
- Relevant Experience (i.e. past finance-related internships, past relatable work experience) – Investment banking internships (i.e. IBD internship) work best.
Mistakes: Candidates often just list their activities rather than putting their accomplishments.
Beyond basic mistakes listed out above, what are some of the other common mistakes candidates make? If your resume is not “bankified”, it will be difficult to get past even the 1st screening round. BankingPrep Resume Toolkit (embed a link to resume product) is here to make your resume stand out among the piles of thousands of prominent candidates, and make it finance-oriented even for non-target backgrounds. Your profile will be proofed properly to make sure it has absolutely NO mistakes.
Once you have finance-related experience, the most effective way to get an Investment Banking interview is to network with your school’s alumni. If there’s no alumni at your targeted banks, you better find current professionals in investment banks by connecting with them on cold calls, LinkedIn, or emails
You should start networking as soon as possible. The ideal time to start networking is 6-12 months before the application begins.
For MBA graduates:
You have to start networking as soon as you get accepted to MBA programs. Similar to the undergraduate group, you should reach out to your school’s alumni first, then current professionals who can give you the most insightful information source.
Mistakes: A lot of students reach out to investment bankers when they do not have any finance-related experience. It won’t look great. You still can connect with them, but it will be better if you can explain detailed plans for your upcoming internships and jobs, and you are looking for their advice.
The internship is considered a prerequisite to land a place in bulge bracket investment banks. Although relevant finance internships in other financial corporations and firms are appreciated, investment banking internships always work best.
- To improve your profile to break into large banks, you need to have at least 1-2 finance-related internships. If you do not have an internship from a bank or a financial services firm, activities such as student-run investment funds in college can be used to support your profile. This is an example of a student’s resume without an internship (link to resume product)
For MBA graduates:
- Internship is particularly important. That’s why you definitely have to have one finance-related experience pre MBA or during MBA. If your pre-MBA full-time jobs are irrelevant to banking and finance, it will be very difficult to get into. Let’s equip yourself with at least one summer associate internship at investment banks/private equity firms/ hedge funds. Here, Investment Banking internships (summer associate programs) always work best.
The interview process will include multiple rounds. Normally, there will be three rounds. The first round of application is to screen candidates’ resumes. The second round of application is to assess candidates’ practical abilities via short interviews. Specifically, if a resume is qualified, the candidate will be sent a link to complete a video-recording process – HireVue as some firms are deploying (i.e. two behavior/technical questions to test the analytical abilities, presentation abilities, etc) or phone screen, which is still popularly used by investment banking firms. The final round of application is Superday, when chosen candidates are gathered in the office or nearby hotel to meet interviewers in person. Superday (U.S)/ Assessment Centers (EMAM) are designed to assess both your technical capabilities and physical/mental stamina. Here, in order to receive offers, most highly-achieving candidates will have to get through an intense interview day (simulating the real working pressure) with a myriad of questions largely hinged on their respective division/industry preferences in their application.
What do recruiters evaluate?
Investment banks will evaluate your skills, your technical knowledge, and how you are interested in the position you apply for. Many questions are designed to test these competences. Simply put, interview questions will be around 3 main parts:
- Behavior questions (often asked in HireVue/Phone Interview)
- Fit questions (Superday/Assessment Centers)
- Technical questions (Superday/Assessment Centers)
In which, behavior questions largely resemble fit questions asked during Superday. Some say that HireVues/Phone screen just asks you behavior questions. However, as mentioned above, you can be asked both technical questions and behavior questions right after you proceed to the second round. The full list of interview question samples and what you need to prepare, let’s check on investment banking interview questions. Presented below is the short version of what you should do to have an upper hand in interviews.
How to prepare and ace an interview
You can visit our interview questions articles for analyst and associate roles for more details.
#1. For fit/behavior questions, this is the part where you tell your stories with interviewers. Thanks to these questions, recruiters will learn how your previous academic and work experience fits into the division/industry you apply for.
The questions in the first place always surround:
- Introduce a little bit about yourself / Walk me through your resume
- Your strengths and weaknesses
- Your achievements and failures
- Future plan and why Investment Banking?
What you should prepare here are crafting your own stories (reflecting your achievements, past experience, transferable skills and leaderships), and backing up small personal stories to answer questions related to strengths and weaknesses.
If you have some disadvantages in your profile such as low GPA, non-target background, fewer outstanding accomplishments, fewer finance internships, and etc., you have to prepare stronger responses to make up for these “real weaknesses”.
#2. For technical questions, what you will be interviewed always sticks with accounting, finance, valuations, and practical deals.
- Accounting: Financial statements (types of financial statements, links between different types of financial statements), revenues, operating costs, EBITDA, debt & equity, etc.
- Finance: Equity Investments (stocks), Fixed Income Investments (government bonds, corporate bonds, commodities, currencies) , Derivative Investments (options, futures, forwards, swap), etc.
- Valuation: Valuation metrics and multiples, (Discounted Cash Flow, LBO modelling, etc.), knowledge about mergers and acquisitions, etc.
Beyond technical comprehension, investment banking’s recruiters also want to test your knowledge about the market, practical deals and companies. Your work is to keep abreast of news about markets, imminent IPO, bond issuances, and mergers & acquisitions on a daily basis. The questions largely depend on your experience shown on your resume. That means if you present your active involvement in transactions/deals, you might get many questions about it. Discussing the deals is considered the most challenging part in an interview.
BankingPrep Interview covers topics and knowledge systematically, providing you comprehensive guides to ace an interview for banking roles. What stories you should tell, deep-dive interview questions you should rehearse will be included in the Investment Banking Guide.
6. Interesting Facts
In practice, the transaction advisors for debt issuance can be different groups in Investment Banking, beyond Debt Capital Market group. The difference exists because there is a different division of debt-product groups in Investment Banks varying from firm to firm. Yet put simply, the other most popular groups also advising on debt issuances are Finance (Leveraged Finance) and Corporate Banking Advisory.
There are several classes of bond. The most repeated types are investment-grade and high-yield bonds. The Leveraged Finance often focuses on originating, structuring, and executing bank loans and high-yield bonds for corporate clients. The high-yield bonds typically associated with high risks bring higher returns for investors. A lot of transactions in the Leveraged Finance group involve leveraged buyouts, refinancings and restructurings.
Meanwhile, though the nature of advisory resembles the leverage group with originating, structuring and executing bond engagements for clients, the difference here is the Debt Capital Market tends to work on Investment-grade bonds. The Investment-grade issuance is commonly deployed to fund business activities of the corporates. The issuance is syndicated and distributed to different investors, highlighting the difference from the banking loans below.
Corporate Banking means exactly what it sounds like: Focusing on bank loans that are recorded on the Balance Sheet. As opposed to Debt Capital Market, the loans are rarely syndicated to outside parties. The banking loans are regarded as debt so the group also shows its presence in debt capital raisings.
DCM can be a stepping stone for you to get into Hedge Funds and Investment Funds. It might not be as high-profile as M&A in Investment Banking – according to a lot of comments. However, if you don’t find it suitable for your future profession, you still can transfer internally between different groups in Investment Banking. Equipping yourself with necessary knowledge and skills by moving into industry groups or M&A enables you to get into Private Equity more easily. Also, compared with other industries, the DCM compensation is competitive and generous. So why don’t you give it a try, an entry-level job could possibly transform your mind.