Capital Markets and Investment Banking
Capital Markets and Investment
Capital Markets and Investment Banking Process Paper
University of Phoenix
FIN 402 Investments Fundamentals and Portfolio Management
Instructor: Sal Sadiq
June 7, 2010
A company working toward elevating the funding via initial public offering (IPO) could nominate investment bank in support of underwriting the subject. The investment bank are identified as merchant bank because any regulatory constraint can apply to assistances of merchant bank IPO, given that within an IPO a business partakes for its initial period, and does not have complete awareness of the rules along with documentation, necessary for submission, and gaining clearance from the regulator.
The well-known merchant bankers worldwide are Credit Suisse, Goldman Sachs, and Morgan Stanley. Banks like Citi along with Deutsche possess investment banking experience. The underwriters assess along with examines company's present accomplishment, company's potential earnings, industry circumstances, competition within the same division, present local along with worldwide market circumstances, which can come to play when a decision on issue price was required. Companies also prepare on actions, such as conclusion of the set documentation needed through the regulatory organization. The underwriters put a price for activity normally a percentage of the issue size. If the issue size is huge, a band of merchant banks takes the responsibility of underwriting the issue; however, one merchant bank leads the group.
The portfolio construction can come into four steps. The first step is deciding the proper asset allocation for the individual. The establishment of personal financial condition along with investment targets starts the beginning for constructing a portfolio.
Vital items are taking into account such as the age of the individuals, and how much time the person has to develop the investments along with amount of capital for investing and forthcoming capital wishes. A second factor considers is personality and risk tolerance. People who recently graduated from college trying to begin his or her career will have different investment strategies versus people who are near the end of their careers and are looking to retire in the near future. Everybody wants to acquire high returns year after year; however, if the person has trouble sleeping when the investments take a drop, then increase returns are not worth the constant worry. Explaining the present condition along with the potential desires capital and risk tolerance should decide the direction that investments could allocate among different asset classes.
Normally, greater risk individuals handle, more assertive portfolio will display, dedicating big section toward the equities and decrease to the bonds as well other fixed-income securities. On the other hand,...