Over the years, financial institutions have evolved bringing up diverse services to the demanding needs of the broad range of clients. Investment banks, unlike commercial banks, deal with investors, companies and the government. They assist investors in buying securities, support governments and companies issue securities, manage financial assets, and offer financial advice and trade securities. They typically aid the flow of funds and allotment of capital. They are financial intermediaries, a crucial link between providers and consumers of capital. They channel those in need of money for investment with those that have money to invest, and they also create markets that allot capital manage price in such financial transactions.
Investment banking is a charismatic industry featured by constant flux and revolution. Financial instruments have become very convoluted and dynamic leading to more competent financial intermediaries. Precipitation of ingenious instruments has flushed away financial markets and the border lines among disparate financial institutions have become extinct. To augment on this, the intricacy and competition, financial products, markets and techniques are evolving and fusing.
Investment banks are grouped into a hierarchy depending on the services they offer. At the top are top investment banks also known as the bulge bracket comprising of Morgan Stanley, Goldman Sachs and JP Morgan. Other investment banks are regionally based in the middle market like Piper Jaffray. The rest are small firms known as boutiques and are mostly located to an industry’s bond trading, technical analysis, program trading and M&A advisory. Within such firms exists various areas and groups within them. Some have an investment banking section that deals with providers of securities like firms and governments, sales and trading that deal with owners of securities and capital markets that merges the two.
Investment bankers like James Dondero on highlandfunds, on the other hand, don’t create or purchase anything; they only sell items that aren’t theirs. Investment bankers resort to diversifying so as to decrease the rate of risk and stand a greater chance of having enormous returns. Unlike venture capitalists who have funds they can tap immediately, investment bankers have a collection of investors who entrust their investments with the bankers for quality deals. During this process a lot of turbulence and bad reputation arise.
For James Dondero, the co-founder and president of Highland Capital Management, Investment banking has been a turning point for his career and a way to gain a positive reputation from a broad range of clients. Mr. Dondero’s experience in credit markets stretches thirty years and comprises of being among the authentic masters of the Collateralized Loan Obligation (CLO). The Dallas-based investment banker superintends investment activities and strategies for retail and institutional products at Highland Capital Management. The firm’s product offerings comprise CLOs, hedge funds, ETFs, REITs, private equity funds and institutional separate accounts.