Capital Markets and Investment Banking Process Essay

Capital Markets and Investment Banking Process - Essay ExampleInvestment shores usually come three tasks first, they assist the companies in designing the securities which have features that be most appropriate for a current market second, they buy these securities and third, they resell them to the investors. (Fabozzi, 2008) Investment posits raise capital for their client companies through underwriting in which it purchases a whole block of impertinently securities and resells them to investors. In this way, the income earned is the difference of the amount given to purchase the new block of shargons and the amount received by the investors. Apart from Merger & Acquisition (M&A) advisory services, a banks another integral and core function nowadays is Investment Management in which the bank manages the coronations of clients. Security services be also an important feature for investment banks which include prime brokerage, support and securities lending. Regardless of the activity undertaken by the investment bank, it needs to focus on its portfolio construction and management which volition be done according to the portfolio strategy of the investment bank. This means the bank needs to make investments which determine successful trading that could be done by making risk management a confidential information priority. This would mean that if a company incurs a loss of on one of its investment, it should earn a meshing of over 11% on another to make it even. In this way, the company needs to construct a portfolio of investments which ensures a favorable position for the company. (Fabozzi, 2008) Factors to Be Considered Selecting Asset Classes For An Investment Portfolio Asset class means the distinct kinds of additions (e.g. bonds, equities and cash equivalents etc.), while making an investment portfolio, different classes of assets are added according to investment policies and objectives. For making an investment portfolio, it is generally cons idered that a well diversified portfolio is beneficial as it outweighs the losses through other lucrative investments. On deciding upon the asset classes, the companies need to consider asset allocation among different classes of assets. Studies show that 85 to 95% of investments returns are due to asset allocation policy and not survival of the fittest of specific stocks or bonds. While selecting classes of assets, major considerations should be given to the capital market expectations as to which classes of assets are expected to outperform others in short, medium or long term. For example, if the stock market is expected to be weak, there should be more bonds in the portfolio. Other factors that need to be considered while deciding upon the asset allocation are the objectives of investment which would consider the timings, the need of the investment and the expected return of the investment by the client. Risk tolerance and risk policies need to be given special consideration i n deciding upon the allocation of assets that should be in accordance to the bank and clients. Constraints associated with asset classes like liquidity, taxes, regulations etc and capital market assumptions are also few factors that should be considered. (Chandra, 2009) Describe the Capital Market Instruments Used in Investment Portfolio social organization The capital market is vital for a country as it matches the players who have excess funds with the ones who are in need of funds. The instruments are traded in these markets incurring a gain/loss on these securities.