#goldmansachs #jpmorgan #investmentbank Investment banks are pivotal players in the financial markets and they handle so much capital that a bankruptcy, like the one of Lehman Brothers can bring a crisis like in 2008 and 2009. So what is their role in the financial markets? The first and most obvious is wealth management. They manage people’s assets, mostly wealthy people and of course they have a lot of insight given the fact that they have a lot of insider information.
They offer consulting services for the same matters like risk management, asset management but they work a lot with companies seeking investments.
This can be direct investment, just like a normal bank or they can use their strong preleasing power to allocate the bonds/stocks.
What do we mean for preleasing power? Is the ability to find investors willing to buy in the asset, which can be a bond, a stock etc…
Here we come to the next business where they operate: they help companies and even municipalities and countries to allocate their stocks and bonds. Let’s say that you’re a company and you want to raise new capital to build up a new factory, you go to an investment bank and the investment bank will find the investors that will buy your bonds or stocks so that you can finance your operations. As I said, even municipalities and countries go to investment banks in order to allocate their bonds.
Here we come to the next very profitable operation that investment banks are specialized in: IPOs.
IPO stands for initial Public Offering. It happens when a company that is private decides to sell its shares to the public on the stock market. The role of investment banks is to find institutional investors willing to buy the stocks.
In the end they counsel companies on mergers acquisitions and they find investors in case that more capital is required in order to close the deal.
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