Investment Banking

2.2.1. Investment Banking

Terminologi i n v e s t m e n t b a n k digunakan untuk menjelaskan organisasi yang melakukan
fungsi khusus investasi dalam intermediasi keuangan. Istilah investment bank muncul di Amerika
Serikat pada awal abad ke-19. Investment bank tidak menjalankan fungsi intermediasi keuangan
secara umum seperti menerima tabungan dan menyalurkannya kembali kepada publik retail
( Andrew Tuch, 2006). Pada awal dikenalnya, investment bank disebut dengan merchant bank atau
money market corporations .
2.2.1.1. Customer Segment Customer Segment Customer Segment
Segmen nasabah utama investment bank adalah korporasi, pemerintah dan investor individual yang
ingin berinvestasi di pasar keuangan. Individual yang menjadi nasabah investment bank salah
satunya nasabah High Net Worth Individual (HNWI). Batasan minimal untuk disebut sebagai
HNWI ini beragam berdasarkan berbagai sumber. Boston Consulting Group mengatakan individu
yang masuk ke dalam HNWI adalah mereka yang memiliki kekayaan di atas US$5 juta, sedangkan
Cap Gemini Sogeti/Merryl Lynch membatasi kategori HNWI di atas US$1 juta. Kekayaan ini
mencakup saham, surat berharga, deposito, di luar aset properti15.
Andrew Tuch. 2006. Investment Banking: Immediate Challenges and Future Directions. Legal
Studies Research Paper No. 06/63. http://ssrn.com/abstract=952243. Accessed: 26 Juni 2012.
14 Istilah merchant bank untuk investment bank dikenal di Inggris hingga saat ini.
15 Private Banking, Produk High End Perbankan, http://www.infobanknews.com/2011/07/privatebanking- produk-high-end-perbankan/, 21 Juni 2011. Accessed : 26 Juni 2012. 16 Andrew Tuch.
2006.op.cit. hlm. 3 17 Ibid.

It should, however, be appreciated that the search for excellence by private bankers has its cost. It
needs no explaining that major investments are necessary for providing the infrastructure needed for
effective tailormade private banking services. This activ- ity is expensive and labour intensive in
terms of advisory and management skills, but when it is done properly it allows a sound return (see
Chapter 3).
The competition in the personal banking market is so tough that second rate out- fits will
sink and disappear. Credit institutions, investment banks, brokers, asset managers and other
financial organizations targeting private banking should appre- ciate that, to a fairly substantial
extent, private clients are discriminating individuals, and rightly so. Their professional instincts tell
them that they should choose their bank with care.

1.8 Synergy of private banking and institutional investments

The European Central Bank recently reported that, for the second quarter of 2004, data on financial
investments by investment funds, insurance companies and pensions funds suggest that the portfolio
allocation behaviour of institutional investors has continued to shift towards riskier assets. 12 This
increases the need for both invest- ment research and damage control. The assumption of greater
exposure cannot be confronted with the worn-out tools of the past. Investors need to understand and
appreciate the exposure that they are assuming with their assets. Part of this issue is the

concentration of risk. In the UK, pension funds, insurance companies, unit trusts and investment
trusts currently com- mand some 90 per cent of British funds under management.
About fifty firms account for more than three-quarters of this total, and
The share of the ten largest entities is 32 per cent.

This high concentration provides a basis for herd-like movements in the markets, and it also
places enormous power in the hands of a very small group of people. The problem is that
accountability and transparency are not as high as they should be, while fees are usually heavy and
structured in a way that often rewards failure in wealth management.
The strategy followed by banks to face up to the challenge posed by institutional investors is
that of strengthening their investment banking, as well as equity research and fixed income research
arms. Faced with mounting costs and the assumption of great exposure, however, some credit
institutions have shed their investment banking activities. This policy has backfired.
A study in the UK in 1999 demonstrated that British banks, such as NatWest and Barclays,
that dropped their investment banking arms (NatWest Markets and BZW, respectively) in the midto late 1990s, suffered an attrition of their private banking activities. This became particularly acute
at the high net worth individuals end.
The major reason for such attrition, this study has suggested, is that by eliminating their
investment banking activities the credit institutions deprived themselves of the skills of rocket
scientists and other professionals who designed and marketed new products for the area of overlap
between investment banking and personal banking (see Figure 1.7).
Classically, investment banking research has been considered to be a must in attracting and
retaining a clientele of institutional investors. But as affluent individ- uals become more
sophisticated in their market evaluation and investment decisions, private banking clients are
increasingly acquiring an institutional investors business philosophy, characterized by:
Advice-led but self-made investment decisions (see Chapter 7), and
A relationship based on quality of investment advisors and account managers.

Therefore, credit institutions, investment banks and other fund managers must offer their
private banking clients first class research services to cement their relationships, and continue being
ahead of the curve. As shown in preceding sections, this policy has associated with it major
expenses, including systems, procedures and technology that should be used with the objectives of:
Improving performance,
Contributing to cost reduction, and
Promoting earnings enhancement initiatives.
In the background of all three bullet points should lie a policy able to maintain high private
banking and institutional banking standards. On the one hand, funds