Structured finance is a broad term for the practice of creating bespoke financing instruments outside of mainstream loans or financial securities. This is important for clients (usually large organisations) with complex or unique financing needs that conventional balance sheet-based financial products cannot fill.
Structured finance works by combining risky standalone instruments (e.g. securitised debt, mezzanine financing, or equity capital) into a consolidated package that provides “safe” liquid assets for a client organisation. Practitioners start by rigorously analysing all the risks involved in a transaction. They then work out how to transfer the risks to different parties involved in the transaction in amounts that are acceptable to them, and with returns proportionate to the extent of risk a stakeholder is willing to stomach.
Professionals in this field will often specialise either in a particular business sector (e.g. oil and gas, telecommunications, infrastructure, etc.) or in a specific niche such as leveraged finance for buy-outs. This level of expertise enables structured financiers to customise instruments to the specific requirements of a transaction, asset, or project.
Careers in structured finance can be very challenging – jobs in this field require a deep understanding of the financial world and all its problems. As such, recruiters usually fill roles by hand-picking candidates from graduate programmes who show an aptitude for this line of work in the course of their rotations.
Structured finance teams are typically small (between five to twenty members), with ad hoc deal teams formed under the supervision of an experienced deal leader for specific transactions. Individuals within a team may also specialise in a specific sub-sector.
For instance, in an oil and gas-focused team, one member may concentrate on the development of oil and gas fields and how to fund such projects, while others focus on raising funding for refineries, pipelines, or petrochemical plants.
Professionals in this line of work can become recognised experts in specific fields or sub-sectors over time. It’s an area of work for those who enjoy thinking out of the box, and coming up with creative combinations of debt packages and financing instruments to fit clients’ specific needs.
Recruiters filling structured finance roles look out more for a hunger to win, innovate, and find interesting solutions to complex problems, so graduates who showcase the raw aptitude requirements are usually brought onboard for their attitude. Sector-specific or financial structuring knowledge will usually be learned on the job.
Analytical skills and a good eye for detail are crucial for this line of work. You will be thoroughly examining all the issues which might affect a transaction’s outcome and doing sophisticated modelling of its likely performance. For instance, how might external factors such as changing construction costs or commodity prices damage a project’s ability to meet its obligations, and how would you offset those risks in your proposed package?
Strong verbal and written communication skills are as must as well. Professionals in this sector work closely with a mix of team members from different specialisations, and will also have to break down complex financial concepts for clients and other stakeholders.
Other key skills in this line of work include having the entrepreneurial drive to see deals through to their completion, problem-solving skills to think out of the box, and strong client-facing abilities.