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Bulge bracket banks are the world's largest global investment banks, [2] serving mostly large corporations, institutional investors and governments. The term "Bulge Bracket" comes from the way investment banks are listed on the "tombstone", or public notification of a financial transaction, [3] where the largest advisors on investment banking operations (mergers, acquisitions, IPOs, or debt issuance) are listed first. The term is primarily related to the financial advisory side of the business, as opposed to sales and trading.
Bulge bracket banks usually provide both advisory and financing banking services, as well as the sales, market making, and research on a broad array of financial products including equities, credit, rates, commodities and their derivatives. They are also heavily involved in the invention of new financial products, such as mortgage-backed securities (MBS) in the 1980s, credit default swaps in the 1990s and collateralized debt obligations (CDO) in the 2000s and today, carbon emission trading and insurance-linked products.
Bulge bracket firms are usually primary dealers in US treasury securities. Bulge bracket banks are also global in the sense that they have a strong presence in all four of the world's major regions: the Americas, Europe, the Middle East and Africa (EMEA) and Asia-Pacific (APAC).
The name comes from the way investment banks are listed on the "tombstone", or public notification of a financial transaction; [3] the more important banks in a syndicate are listed first. [4] There is often debate over which banks are considered to belong to the bulge bracket. Various rankings are often cited, such as Bloomberg 20, Mergermarket M&A league tables, or Thomson Reuters league tables, as well as other rankings.
According to biographer Ron Chernow's 1990 book The House of Morgan , "in the late 1960s and early 1970s, the top tier—called the bulge bracket—consisted of Morgan Stanley; First Boston; Kuhn, Loeb; and Dillon, Read." Morgan Stanley appeared above the other members of the bulge bracket by demanding and receiving the role of syndicate manager. While order within brackets was otherwise determined alphabetically, Chernow describes this positioning as being of "life-and-death" importance to the firms. Chernow says that Bache Halsey Stuart Shields Incorporated's name was chosen based on a desire to be placed as high as possible within its bracket.[ citation needed ]
According to Chernow, Morgan Stanley "queasily noted the rise of Salomon Brothers and Goldman Sachs, which were using their trading skills to chip away at the four dominant firms." In 1975, to more reflect economic reality, Morgan Stanley removed Kuhn, Loeb and Dillon, Read, and replaced them with Merrill Lynch, Salomon Brothers and Goldman Sachs. Chernow describes' Morgan Stanley's place at the top of the bracket as a "gilded anachronism" by the late 1970s. [5]
For Morgan Stanley, the doomsday trumpet sounded in 1979. That year, IBM asked the firm to accept Salomon Brothers as co-manager on a $1 billion debt issue needed for a new generation of computers... After much resounding talk, nearly everybody [at Morgan Stanley] voted to defy IBM and demand sole management. Morgan Stanley was shocked when word came back that IBM hadn't budged in its demand: Salomon Brothers would head the issue, as planned. It was a landmark in Wall Street history: the golden chains [of Morgan dominance] were smashed. [5]
By the 1980s a revised bulge bracket had been defined. The New York Times in 1987 reported that
Of these, six firms—The First Boston Corporation, Goldman, Sachs & Company, Merrill Lynch & Company, Morgan Stanley & Company, Salomon Brothers and Shearson Lehman Brothers—are so powerful that they make up the bulge bracket, so-called because more often than not they lead the deals, garnering the top tombstone spots. [4]
In the 1990s, the dominance of the bulge bracket firms was globalizing. In 2001 The New York Times reported that "The real battle for the bulge bracket is taking place in Europe." [6]
In 2020, the Corporate Finance Institute, a Canadian financial analyst certification organization, and Wall Street Oasis, an online investment banking and finance forum, listed nine investment banks as part of the bulge bracket category. [7] [8] Investopedia in 2022 listed the same banks. [9] As of March 2023 [update] , there are eight bulge bracket banks, following the acquisition of Credit Suisse by UBS. [10]
By extension, members of the international business community sometimes refer to leading business services providers as "bulge bracket". For example, this term has been used to describe a group of global, highly prestigious law firms with deep expertise across a broad range of topics. However, these firms are more frequently referred to as the Magic Circle (law firms) and Silver Circle (law firms). Similarly, "bulge bracket" has sometimes been used to describe the Big Three (management consultancies) (or alternatively "MBB") or the Big Four accounting firms due to their global reach and strong reputations in consulting and accounting services, respectively.[ citation needed ]
Investment banking pertains to certain activities of a financial services company or a corporate division that engages in providing advisory-based services on financial transactions for clients, such as institutional investors, corporations, and governments. Traditionally associated with corporate finance, such a bank might assist in raising financial capital by underwriting or acting as the client's agent in the issuance of debt or equity securities. An investment bank may also assist companies involved in mergers and acquisitions (M&A) and provide ancillary services such as market making, trading of derivatives and equity securities, FICC services or research. Most investment banks maintain prime brokerage and asset management departments in conjunction with their investment research businesses. As an industry, it is broken up into the Bulge Bracket, Middle Market, and boutique market.
Swiss Bank Corporation was a Swiss investment bank and financial services company located in Switzerland. Prior to its merger, the bank was the third largest in Switzerland, with over CHF 300 billion of assets and CHF 11.7 billion of equity.
Asset-based lending is any kind of lending secured by an asset. This means, if the loan is not repaid, the asset is taken. In this sense, a mortgage is an example of an asset-based loan. More commonly however, the phrase is used to describe lending to business and large corporations using assets not normally used in other loans. Typically, the different types of asset-based loans include accounts receivable financing, inventory financing, equipment financing, or real estate financing. Asset-based lending in this more specific sense is possible only in certain countries whose legal systems allow borrowers to pledge such assets to lenders as collateral for loans.
Salomon Brothers, Inc., was an American multinational bulge bracket investment bank headquartered in New York City. It was one of the five largest investment banking enterprises in the United States and a very profitable firm on Wall Street during the 1980s and 1990s. Its CEO and chairman at that time, John Gutfreund, was nicknamed "the King of Wall Street".
Prime brokerage is the generic term for a bundled package of services offered by investment banks, wealth management firms, and securities dealers to hedge funds which need the ability to borrow securities and cash in order to be able to invest on a netted basis and achieve an absolute return. The prime broker provides a centralized securities clearing facility for the hedge fund so the hedge fund's collateral requirements are netted across all deals handled by the prime broker. These two features are advantageous to their clients.
J.P. Morgan & Co. is an American financial institution specialized in investment banking, asset management and private banking founded by financier J. P. Morgan in 1871. Through a series of mergers and acquisitions, the company is now a subsidiary of JPMorgan Chase, one of the largest banking institutions in the world. The company has been historically referred to as the "House of Morgan" or simply Morgan.
The First Boston Corporation was a New York–based bulge bracket investment bank, founded in 1932 and acquired by Credit Suisse in 1988. After the acquisition, it operated as an independent investment bank known as CS First Boston until 2006, when the company was fully integrated into Credit Suisse. In 2022, Credit Suisse revived the "First Boston" brand as part of an effort to spin out the business.
S. G. Warburg & Co. was a London-based investment bank. It was listed on the London Stock Exchange and was once a constituent of the FTSE 100 Index. The firm was acquired by the Swiss Bank Corporation in 1995 and ultimately became a part of UBS.
A primary dealer is a firm that buys government securities directly from a government, with the intention of reselling them to others, thus acting as a market maker of government securities. The government may regulate the behaviour and number of its primary dealers and impose conditions of entry. Some governments sell their securities only to primary dealers; some sell them to others as well. Governments that use primary dealers include Australia, Belgium, Brazil, Canada, China, France, Hong Kong, India, Ireland, Hungary, Italy, Japan, Pakistan, Singapore, Spain, Sweden, the United Kingdom, and the United States.
Goldman Sachs Asset Management Private Equity is the private equity arm of Goldman Sachs, focused on leveraged buyout and growth capital investments globally. The group, which is based in New York City, was founded in 1986.
China International Capital Corporation Limited is a Chinese partially state-owned multinational investment management and financial services company. Founded in China in 1995, CICC provides investment banking, securities and investment management services to corporations, institutions and individuals worldwide.
TD Securities is a Canadian investment bank and financial services provider that offers advisory and capital market services to corporate, government, and institutional clients worldwide. The firm provides services in corporate and investment banking, capital markets, and global transaction services. It is the investment bank of Toronto-Dominion Bank Group, and has offices in 18 cities worldwide with over 3,000 employees.
A boutique investment bank is an investment bank that specializes in at least one aspect of investment banking, generally corporate finance, although some banks' strengths are retail in nature, such as Charles Schwab. Of those involved in corporate finance, capital raising, mergers and acquisitions and restructuring and reorganizations are their primary activities. Boutiques usually provide advisory and consulting services, but lack capacity to provide funding. After the Gramm–Leach–Bliley Act, investment banks have either had a retail deposit base or have had funding from overseas owners or from Wealth Management arms. Boutique banks on the other hand often turn to other banks to provide funding or deal directly with capital rich firms such as insurers to provide capital for deals.
UBS Group AG is a multinational investment bank and financial services company founded and based in Switzerland. Headquartered in Zürich, it maintains a presence in all major financial centres as the largest Swiss banking institution and the largest private bank in the world. UBS client services are known for their strict bank–client confidentiality and culture of banking secrecy. Because of the bank's large positions in the Americas, EMEA and Asia Pacific markets, the Financial Stability Board considers it a global systemically important bank.
John P. Costas is an American businessman, banker, and trader. He is the former chairman and CEO of UBS Investment Bank, where he oversaw the growth of the Swiss bank's investment banking franchise globally from 2000 to 2005. From 2005 through 2007, Costas was the chairman and CEO of Dillon Read Capital Management, a UBS proprietary trading unit and alternatives management company.
Centerview Partners is an American independent investment banking firm. Centerview operates primarily as an investment banking advisory firm. Centerview has 60 partners and 400 professionals with expertise across a wide range of industries, geographies, transaction structures and sizes.
Philadelphia financier Jay Cooke established the first modern American investment bank during the Civil War era. However, private banks had been providing investment banking functions since the beginning of the 19th century and many of these evolved into investment banks in the post-bellum era. However, the evolution of firms into investment banks did not follow a single trajectory. For example, some currency brokers such as Prime, Ward & King and John E. Thayer and Brother moved from foreign exchange operations to become private banks, taking on some investment bank functions. Other investment banks evolved from mercantile firms such as Thomas Biddle and Co. and Alexander Brothers.
Greenhill & Co., Inc. is an American investment banking advisory firm founded in 1996 by Robert F. Greenhill. The firm provides advice on significant mergers, acquisitions, restructurings, financings, and capital raisings to leading corporations, partnerships, institutions and governments across a number of industries. Since its inception, Greenhill has advised on transactions valued at close to $3 trillion.
An independent advisory firm is an investment bank that provides strategic and financial advice to clients primarily including corporations, financial sponsors, and governments. Revenues are typically generated by providing deal-specific advice related to mergers and acquisitions and financing. The WSJ noted in January 2016 that "boutique is a fuzzy label, defined as much by what these firms do as what they don’t do ."
For instance, Shanghai, the largest Chinese city with the highest economic production, and a fast-growing global financial hub, is far from matching or surpassing New York, the largest city in the U.S. and the economic and financial super center of the world.[ better source needed ]