Pay Gap Between Industry & Product Groups?
From my understanding, most 1st year analysts at the same bank, regardless of group, make the same base salary. However, bonuses may vary. Obviously bonus depends on both the individual’s and the group’s performance, as well as market conditions. But it seems the pay gaps widens even more as you move into senior positions. So which groups overall, industry or product, make the most in TC? I know this may differ significantly between banks, but I’m still curious. For example, would a LevFin MD make more than an Industrials MD? What about M&A compared to Healthcare? Would you make more long term if you moved from an M&A in a product group to M&A within a specific industry? Any insight is appreciated, thanks!
Comp difference between groups comes not from "being in a specific group" but rather how that group preforms. This can be due to the bank gaining market share, the sector/product doing well, etc.
An example is lets say M&A going gang busters across all sectors, the M&A group at a bank is probably going to going to end up pretty well compensated that year. Or Lets say just healthcare is doing well they might have a good year.
One rule of thumb is generally junior comp won't/shouldn't change too much across groups and then product groups will probably have more even keel years based on the fact these groups can have one sector doing well and still have work to do.
I would add to that, that sector market conditions have an effect as well. Deal flow and the types of deals when oil is $40/barrel (likely a lot of restructurings); $60; and $80 (lots of M&A) plays a large role.
Yes, my apologies if I didn't make that clear. Strong performance can happen in any sector (TMT, Consumer, FIG, Industrials, etc.). What drives each sector is going to be different, but coverage group comp is going to depend on if your group is doing well or not.
Coverage groups own the client relationship. Oftentimes, though not all the time, product groups do not own the client relationship, and are more focused on executing a deal once the coverage group originates it. Some really good product teams can originate deals through their own network, but that’s rarer than the coverage group doing so in my experience. Otherwise why would the coverage group exist?
A couple corollaries that follow:
Coverage is more resilient than product in a downturn
Product groups get the axe faster than coverage groups in a cyclical downturn. SPAC teams are an extreme example of this. Not many left on the street now that this product has fallen out of favor. Tough sledding for ECM teams the last handful of years, too. Without much in the way of IPOs or follow on equity offerings, why continue to keep around the huge ECM team the bank needed during the 2020-2021 bonanza?
Meanwhile, banks have incentive to keep more of the coverage team around because they need to stay in front of their clients to bring in deals when the environment improves.
Banks pay originators, and coverage originates more than product
Not saying product teams are a bunch of layabouts, but coverage is more focused on origination (especially seniors) so they get paid more.
Don’t mean this to come across as “coverage good, product bad”. Product teams are valuable. Unsurprisingly, they know their product better than the coverage teams do.
Just my $0.02.
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