CAPITANT

MAGAZINE
THE STUDENTS GATEWAY TO FINANCIAL MARKETS

CONTENTS

3 INTRODUCTION
4 CAPITANT
6
THE TEAMS
10 FINANCIAL MARKETS?
12 GUIDE FOR STARTERS
13
PORTFOLIO AND RISK PROFILE
13
CONTAINMENT OF RISK AND VOLATILITY
14
EMOTIONS AND INVESTING
14
DETERMINANTS OF SHARES
14
RATIOS AND INCOME STATEMENT
14
BALANCE SHEET
15
MICRO AND MACROECONOMIC NEWS
15
ASSET CLASSES
15
SHARES
15
BONDS
16
ROADMAP
18 GLOSSARY OF TERMS
22 ALUMNI
23
CHRISTOPHE VAN WICHELEN EXCHANGE TRADED FUNDS
24
LUCAS STOOPS INVESTMENT BANKING
26
MATT MEEUSEN LEVERAGED FINANCE
27
JONAH LEMAIRE RETAIL PRIVATE BANKING
29
STEFAN VAN BOSSUYT ASSET MANAGEMENT

In 2007-2008, the worlds economic foundations were shaken by the implosion of the banking
system: a terrifying financial crisis. Stock markets crashed around the globe, banks held
worthless paper with many being communized and shareholder confidence plummeted.
Central banks acted as lenders of last resort, pumping massive amounts of money into
financial institutions. Governments were forced to massively increase their spending in a bid
to counteract the contracted consumption, leading to piling mountains of debt. Greece was
the first country to falter in the European Debt crisis, further decreasing confidence in the
financial markets and the general public started questioning the current system. Everyone
has questions regarding money protection these days. What is the risk of a particular asset?
How can I guarantee my income? Do stocks provide a good return in the long run? How do I
shape my risk profile?
Over the course of last year, investors felt that the markets were recovering, despite still
suffering from the financial hangover. More strict regulations and scrutiny resulted in in more
cautious actions on the financial markets. Our current situation may very well be described as
the turning point from a bearish sentiment towards a more bullish sentiment.
We at Capitant created this magazine for those of you who are interested in the exciting world
of financial markets. We start off with an introduction of Capitant, followed by an introduction
to financial markets in general. This is followed up by a selection of more popular investment
assets and general risk profiles. It is not our intention to give investment advice, rather we
wish to provide an objective guide regarding the working and rationale behind these markets
and their traded assets. We have also summarized all concepts to make it easier for you to
follow the financial news, allowing you a better preparation before entering stock markets.
Lastly, we have asked several of our alumni to write about their current experiences in the
finance sector, so some of you can already have a glance as to what to expect in their future
careers.
We hope to make financial markets more understandable for the younger generation. This
guide can be an excellent addition to the activities organized by Capitant during the next
academic years in Antwerp, Louvain, Ghent and Brussels.
We wish you a pleasant read & good luck!

Laetitia Boucquey
Director Belgium

Wouter Duyck
Director Belgium

CAPITANT
WHO ARE WE?

Capitant is a student organization aiming to introduce and guide students to the world of financial
markets. The non for profit company was founded in 2010 and has the following areas of focus.

To introduce students to the world of finance throughout extracurricular lectures and workshops
with members from prominent companies.

To gather students with more advanced knowledge about finance and invite them to discussions
and networking events, as well as organize lectures on more advanced subjects.

To offer career opportunities in collaboration with our partner firms and sponsors.

To offer an alumni network in which finance students have a platform for communication and
collaboration.

Furthermore, we wish to extend our focus beyond the financial world in order to truly see it in its
place within the global economy. We believe that finance cannot be seen as a separate entity from
entrepreneurship and creativity and as a means to create a globally better world.
The founding fathers of Capitant believed that the Capitant initiative is both an opportunity and a
necessity for finance students within Flanders. It is an opportunity because its introduction has been
unseen before in the area, where the more traditional faculty clubs pay little attention to developing
the homo economicus outside of the auditoriums. Many students wish to broaden their horizons and
knowledge outside of the classrooms and take their first steps into a professional life during their
studies. Capitant is able to provide these young leaders of tomorrow with a forum for meeting peers
and other valuable opportunities. Capitant is not an isolated entity, on the contrary, the organization
has been developing and maintaining strong ties with both the academic environment and universities
as well as with the traditional student life.
Capitant is active in Antwerp, Brussels, Louvain and Ghent, with further plans to expand its activities
to the whole of Belgium and potentially the entire Benelux area. Cultivating an international view,
Capitant is also in the process of collaborating with other financial associations from around the globe.

THE TEAMS

ANTWERP

Sam Vergauwen
Director

Michal Wouters
Vice-Director

Alexander Verdonck
Public Relations

Jonas Thys
Public Relations

Evelien Boon
Finance

David van der Laan

Finance

Kimia Namadchi
Human Resources

Nathalie Boeykens
Human Resources

Jef Zegeurs
Project Manager

Daimy Fok
Media

Benjamin Bergers
Media

Maureen Rutsaert
Marketing

Christophe Lambot
Marketing

Laurens Van Deun

Marketing

Lena Coenjaerts
Communications

Nelke Verhoeven
Communications

THE TEAMS

BRUSSELS

Alexandra Gschwind
Director

Kristof Verbeken
Vice-Director

Gill Balcaen
Public Relations

Dimitri Dekdouk
Finance

Jana Stepanenko
Finance

Albert Khaoutiev
Human Resources

Phil Buydens
Media & Marketing

Emre Simsek
Media & marketing

Josip Jezic von Gesseneck

Public Relations

Nicolas Mancini
Human Resources

THE TEAMS

LOUVAIN

Maarten Arnouts
Director

Jasmin Michielsen
Vice-director

Jonas Van De Wygaert

Finance

Sven Devos
Human Resources

Tim Verheyden
Media

Filip Renaerts
Media

Gregory Vansteenbeeck
Public Relations

Nathalie Van Rooy

Human Resources

Joeri Ovart
Public Relations

Sophie Harlet
Project

THE TEAMS

GHENT

Sam Clauwaert
Director

Robin Allaert
Vice-Director

Shana Raes
Public Relations

Thomas Batsleer
Public Relations

Thijs Hoste
Finance

Eline Janssens
Finance

Astrid De Keyzer
Human Resources

Arben Dervisholli
Project Manager

Pieter Saelens
Project Manager

Lennert Thomas
Media

Matthias Adriaens
Media

Thomas Impens
Marketing

Kim van der Mark

Marketing

FINANCIAL MARKETS?
WHY?

The primary role of financial markets (FM) is the allocation of capital in a (global) economy. But what is
capital? A broad definition would be to call it all primary means by which wealth can be created. It can
be used in production of goods or services. Price signals reflect how capital can be optimally allocated,
rational investors want the best bang for their buck. We could represent it with the following formula:
Capital = f (prices).

HOW?

Financial markets facilitate the trading of financial securities, commodities, currencies and other
tradable items. Consequently, this facilitates the optimal allocation of capital. Entities or people are
able to participate in trading, while low transaction costs and frequently updated information increase
functionality. The markets allow for the raising of capital by lending and loaning, the transfer of risk by
portfolio balancing, the storage of value and consumption smoothing through liquidity. Furthermore they
establish the product prices by aggregation of information. The following table shows the relationship
between finance participants, with financial markets in the third column.

RELATIONSHIP BETWEEN LENDERS AND BORROWERS

LENDERS

Individuals
Companies

FINANCIAL INTERMEDIARIES

Banks
Insurance Companies
Pension Funds
Mutual Funds

FINANCIAL MARKETS

Interbank
Stock Exchange
Money Market
Bond Market
Foreign Exchange

BORROWERS

Individuals
Companies
Central
Government
Municipalities
Public
Corporations

WHO?

Financial markets attract funds from investors and channel them to corporations, thus allowing them
to finance their operations and achieve growth. Money markets allow firms to borrow funds on a short
term basis, while capital markets allow corporations to gain long-term funding to support expansion.
Without financial markets, borrowers would have difficulty finding lenders themselves. Intermediaries
such asbanks andInvestment Bankscan help in this process. Banks take deposits from those who
havemoneyto save. They can then lend money from this pool of deposited money to those who seek to
borrow. Banks popularly lend money in the form ofloansandmortgages.
More complex transactions than a simple bank deposit require markets where lenders and their agents
can meet borrowers and their agents, and where existing borrowing or lending commitments can be
sold on to other parties. A good example of a financial market is astock exchange. A company can raise
money by sellingsharestoinvestorsand its existing shares can be bought or sold.

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WHAT?

All in all, the different types of FM broadly have seven functions they fulfil:
Lending and loaning. FM allow easy transfer of funds for investments and consumption. Surplus
sectors (like individuals for example) which save up can easily transfer their money to deficit
sectors (like companies), which tend to invest more. This is in fact the engine of a decentralized
market economy: you need money to realize your ideas. In this way, the following phenomena can
be realized:
Denomination intermediation: many small savers can fund a larger investment through combination
of funds.
Credit allocation: funds may be transferred between macro-economic entities (families, companies,
government and foreign countries).

Transmission of monetary policy (e.g. Basel III): financial markets and more particularly banks have
an intermediation function in which they transparently (at least they should) adapt to regulations,
which in turn affects the financial situation of all savers.

Accumulation of wealth. FM allow you to save up money and spread the use of this money over
time. By allowing banks to use this money for investments (asset transformation), they will pay you
interest at set intervals.

Risk transfer. By allowing FM to use your funds, you essentially transfer the risk of your investment
in a bank to the risks of the banks own investments. The bank spreads their risk by investing in
well diversified portfolios following for example the infamous capital asset pricing model, in a bid
to continuously achieve optimal risk-reward ratios.
Liquidity. Liquidity usually refers to the ability to finance increases in assets and paying off financial
obligations at payment dates without resulting in unnecessary losses or complications in the day to
day operations of the institution. Efficient FM should have enough liquid assets available for sale to
free up required funds. This should also allow for consumption smoothing: making sure that savers
can use their savings over time.
Price establishing. The institutions in financial markets put a premium on having continuously
updated information (attaining real-time), allowing them to make informed decisions. In doing so,
these institutions are able to provide price information on new and existing financial assets.
Aggregation of information. Besides the establishing of prices, the FM institutions aggregate all
existing information of financial assets, leading to economies of scope because research is not needlessly
repeated.

Efficiency. Ideally, FM should reduce the transaction costs for all parties involved.
(Author:Jelle Kleevens)

11

12

GUIDE FOR STARTERS

PORTFOLIO AND RISK PROFILE

The composition of an investment portfolio will always be a personal choice, based on your individual
risk profile. There are several factors that determine which product categories you prefer, such as age,
income and available capital. The portfolio can be built from stocks, bonds, ETF funds, Turbos, Options,
savings accounts and even real estate. Defensive investors will buy more safe investments with less
risk of capital loss, while dynamic investors prefer to take up more risk to obtain a higher return. Your
risk profile will have a major impact on your investment decisions and hence also on the achieved
efficiency. It is important to consciously deal with this to keep your portfolio in balance with your goals.
Every investor always tries to achieve the highest possible return weighed against the risks. The
portfolio provides a joint performance due to all its components, thus the weights that you assign to
each product are important. In the long run, shares perform generally better than bonds but the extra
risk should also be taken into account. When stock markets rise, shares will benefit most from this
boom (bull market), but in the event of a severe decline (bear market) they will be the first to go to the
wall. This volatility is a characteristic of the portfolio. Depending on your profile, your products will be
assigned a higher or lower weight in the portfolio. A dynamic investor would position 70% of its assets
in equities, while for a defensive investor, it would only be 20%.

CONTAINMENT OF RISK AND VOLATILITY

Volatility is a key factor that investors have to deal with. How would you react if you would buy a share
today and see it collapse by 15% the next day? Investing your entire capital on one specific moment in
one specific product therefore does not seem a smart decision. In order to avoid catastrophic losses,
the volatility of your portfolio has to be contained on the one hand by diversification and on the other
hand by spreading your purchases over time. Purposefully, you make sure that you dont back the
wrong horse and you dont put your eggs in one basket. The more advanced investor can cover his
positions (hedging) by means of buying options, both call and put, or by another derivative.
You dont spend all your hard-earned money on one stock, but you invest for example in a safe bond,
a couple of stocks and you retain some cash. All combinations are possible, in function of your risk
profile, in order to eliminate the risk of having one underperforming investment take down your entire
return. Other investments are profitable and balance your return. This way, weights are being allocated
to the chosen assets, even within the same asset classes. If you have a degree of preference in a
certain sector, it does not seem advisable to invest in one enterprise, but to spread your investments
over quality companies in the same sector. After all, stock performance within a certain sector is often
correlated, macro-economic news causes stocks to rise and fall together. This time, the companyspecific risk has been eliminated.
Spreading your investments over time will also contain risk. By for example investing each month or
quarter, you avoid purchases which are only time bound. If stock markets decline for a long time after
purchase, you are bound to that share price on that specific moment. However, regular purchases will
create an average purchase price, where you bought both when the markets were low and when they
were high.

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EMOTIONS AND INVESTING

Investors are often called herd animals, but nothing is further from the truth. Behind the rational
investor lies a person who is guided by emotions that affect investment decisions. If the markets
show a positive trend, investors will often enthusiastically do new purchases. At falling stock markets
though, the investors are waiting on the sidelines for the storm to settle. Another known phenomenon
at enormous price falls is a panic sale. Bad times often bring buying opportunities, especially if highquality shares are being punished along with the rest of the market. Market timing is one of the most
difficult decisions and many professionals consider exact timing impossible.
One can never predict with certainty when the stock markets will stop falling or rising, nor can one
predict the right moment to buy or sell shares. Emotions must be separated from investment decisions.
The investor must stick to strong principles and shouldnt get carried away in case of exaggerated
market sentiment.
The financial markets fluctuate heavily because they are tied to the global economy. Markets are
cyclically sensitive. The original weights of assets change constantly in your portfolio. The rebalancing
of these weights is often overlooked, but it is important for your investment strategy. Imagine you are
a defensive investor and you have gained a lot of profit from your stocks. The weight of this asset class
will suddenly be much higher than intended and it seems appropriate to take profits on this section.
The weight of the riskier assets is decreased again and capital is available again to invest according to
your risk profile.
The trade-off between risk and return must be kept in mind while creating the portfolio, and performing
a regular check-up on the weight of assets is certainly desirable. Following the example of the problem
with market timing, rebalancing may offer a solution to this question. After all, you sell high when
weight is increased and buy when the weight has fallen too far. Common sense to achieve a nice return.

DETERMINANTS OF SHARES

One of the most important tasks for an investor is to estimate the expected return and the risk per
share. One should keep in mind that not all shares should be treated alike, not even those within the
same sector.

RATIOS AND INCOME STATEMENT

Besides evaluating financial ratios of a company (such as the debt ratio, EBITDA, price of the share),
which give the executive board an idea about the companys performance, there are always some
general rules of application. We refer here to the type of business of the company and its balance sheet
and income statement.
The industry sector is a good example of a cyclical sector; it is subjected to variations of market demand
of its product and is substantially influenced by the economic climate. Therefore profit will fluctuate
more fickly than for other less risky companies where the expected cash flows are barely correlated
with the economic situation. Practical examples are to be found in the so-called defensive sectors such
as the telecom sector (the population is not suddenly going to stop watching TV) or the pharmaceutical
industry (the population will never stop needing medicine to cure diseases). Any changes in the
conjuncture will have immediate impact on the most cyclical shares, both up and downward.

BALANCE SHEET

The balance sheet offers a clear overview to the manager on how the company uses its input to generate
profit. By means of technical computations both solvability and profitability of the company can be
expressed in a number of ratios, making benchmark possible with its competitors. When looking at the
results at the end of the year, the focus can be rely more on the operational profit margin for example
and repeated cash flows.

MICRO AND MACROECONOMIC NEWS

Important to note is that micro and macro-economic news constitute an extremely important factor
for the valuation of companies. Constantly changing environments will have a significant impact on
its performance, both on the economic and financial side. As financial regulation can pressure net
profits (bottom line), political instability can hamper business investments. The real economy, again,
can be affected by a drop investments or net profits, causing the investors to grope in the dark. The
consequences are not always obvious, but yet, every investor has to take those uncertainties into
account in every investment decision and follow closely the news related to the world of economics,
finance and politics.

ASSET CLASSES

In the following section we will explore the commonly known assets. A Healthy mix of those products
can create a good diversified portfolio.

SHARES

A share is one of the equal parts into which a companys capital is divided, entitling the holder to
a proportion of the profits. A shareholder is economically seen as a partly owner of the company,
although strictly legal he is not. Shares are being traded on the stock exchange like the Euronext
Brussels in Belgium. Every day buyers and sellers can trade shares at a price they may deem desirable.
Shares are sensitive to variations of the economic conjuncture and therefore extremely volatile. Also,
shareholders are the last ones on the list to be refunded when the company goes bankrupt; this means
that any claim after bankruptcy is as good as non-existent.
The two most important rights attached to the ownership of a share is on the first hand voting right on
the general assembly en on the second hand dividend right. This implies that a portion of the annual
net profit will be distributed to the investors. This return on investment is called more specifically the
dividend yield.

BONDS

A bond is a marketable debt instrument issued by a government, company or other institution. It is a

loan that is issued that gives the investor an interest payment. The interest can be fixed or variable.
Bonds are considered safe since their return is known.
However, this doesnt mean the investor is safeguarded against risk. Companies change over time. This
means that you buy bonds bearing an interest, reflective of the institutions perceived creditworthiness
and financial perspective at that time. The companys position can change; it can perform better than
expected in the future, and thus your bond becomes more valuable (because the risk of the company
has decreased), or the situation can deteriorate, in which case your bond becomes less valuable. The
interest you receive isnt reflective anymore of the companys current financial situation and outlook.

15

ROADMAP

Before you start investing, we strongly recommend you create a fictitious portfolio. Once youve
registered and logged in, you can create a fictitious portfolio. Pick any shares youre interested in.
The advantage of this fictitious portfolio is that you cant lose any money, and you can check how your
chosen stocks react to certain types of news.
DETERMINE YOUR INVESTOR PROFILE
The first step in investing is largely self-knowledge. Determine your personal view on the trade-off
between risk and return.
The different types of investor profiles can be divided into three major groups;

DEFENSIVE CONSERVATIVE INVESTOR:

Chooses for security and will give priority for savings products. Invests a lot in funds and obligations
and performs little transactions on a yearly basis. Will prefer long term investments and holds a
buy and hold strategy.

16

NEUTRAL INVESTOR:
Has a better understanding of related risks and will be willing to undertake a higher level of
calculated risk in exchange for higher profit margins. Mainly invests in funds, obligations and
stocks systematically forcing him to perform more transactions than a defensive investor. The need
for fast and accurate information is a must in order to succeed.

DYNAMIC ACTIVE INVESTOR:

The most demanding type of investor. Trading within the stock market will account for at least 75%
of its transaction wallet. Does also invest in derivative products and performs a very high number
of transactions requiring a vast amount of information.

BROKER / BANK SEARCH

Whilst choosing a bank or broker to work with, there are a couple of important points one should
consider. Take your decision based on many different factors. A lot of investors are influenced by
transaction costs; costs related to buying and selling financial products. Although these are important,
one should certainly take account for other factors such as supply of products, provision (poundage)
costs and real-time streaming rates. This is comparable to a situation where you will have the case of
a broker with lower transaction costs but a reduced product portfolio requiring provisions to trade. In
comparison with many big banks, on-line brokers generally do have a substantially smaller product
portfolio and will keep their supply of products limited. One should watch out when considering the
provision as a fixed cost as it is payable and calculated for each security line an investor undertakes.
This can result in extensive amounts paid on a yearly basis when working with expensive bigger banks
unless you dispose of a wide range of financial products. Within most big banks, the use of real-time
streaming rates isnt done considering they use brokers for the execution of orders. This results in a
loss of speed whilst executing orders and comes along with high transaction costs we find in most big
banks. On the other side, the advantage of bigger banks is the fact you will be able to get personalized
advice whilst aiming for flexibility with a broker.
SELECT A BROKER AND OPEN AN ACCOUNT
When selecting a broker, make sure you consider the investor profile you have set for yourself in step
a). Some types of brokers focus on specific groups of investors to offer them specific benefits. When you
have decided which broker can offer you most benefits, you can start opening an account.
START TO KNOW YOUR BROKER
After you have opened an account, it is important to discover what your broker can offer to you. So take
your time to take a look at the brokers website or online support manual.
MAKE A DEPOSIT AND GET STARTED!
Did you know that?
You have to pay 0.25% stock market tax
There are 8 stockbrokers active on the Belgian stock market
There are 3 stockbrokers that offer a savings account
There are 100000 active investors in Belgium and that all online stockbrokers together
have 250000 customers
You have to pay a withholding tax of 25% on dividends
If you need more information or if you want to extend your knowledge about investing, dont hesitate
and contact the Capitant crew! We will give you the best possible information.

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GLOSSARY OF TERMS
STOCKS

BULL MARKET

They represent a unit of ownership of the capital of

a corporation which gives the holder voting rights.
A shareholder is owner of a part of the corporation
in accordance with the number of shares he has
bought. The value of a stock depends on the
success of the company and consequently can
trade at higher or lower prices. Stockholders have
a legal right on a dividend.

A market ruled by raising prices and positive

prospects. The name is related to the attack
strategy used by a bull which starts low and ends
high.

STOCK ISSUE
The issue of new shares.

CALL OPTION
A call option gives a buyer the right to purchase
a share for a certain predefined price. A seller
is obliged to sell the share at a predefined fixed
price if the buyer exercises his right. The buyer
speculates for rising prices while the seller
speculates for declining prices.

BROKER
CONVERTIBLE BOND
Stock exchange member that mediates the sale
and purchase of stocks.
BEAR MARKET
A bear market is a market with declining share
prices and bad prospects. The explanation for
this name is that a bear attacks from above to the
bottom.
BENCHMARK
Objective measure which is compared with the
result of an investment

Bonds that can be converted to shares of a certain

enterprise during a predefined period. The
conditions are defined at the moment of emission.
CREDIT RATING AGENCY
Standard & Poors and Moodys judge the
creditworthiness of banks and companies. With
their judge, they also give ratings which varies
from the highest rating AAA or triple A for
companies that are seen as risk-free until ratings
as BB or lower for risky enterprises.
CYCLICAL STOCKS

TRADING HOURS
The official trading hours are from 9 am until 5.30
pm during which continuously quoted financial
instruments are sold or purchased at the stock
market of Amsterdam and Brussels. Some series
of options have different trading hours.
BIDDING PRICE
The price a buyer is prepared to pay for a financial
instrument but without any seller prepared to sell
at that same price.

18

Stocks which are sensitive for economical

fluctuation.
DAY ORDER
An order which will be in the market during one
day. If there is no transaction executed at the end
of the day, the day order expires.
DEFENSIVE STOCK
Defensive stocks are reasonably secure stocks.
There wont be a lot of changes in the market
and these companies are not very sensitive for
economical fluctuations.

DERIVATIVE
A financial instrument (marketed exchange or
off-exchange) which derives its value from one or
more underlying values such as index, obligations,
commodity prices, other derivate instruments or
agreed index or arrangements.

year with or without a financial report. It gives a

true and fair view of the position on the balance
sheet date and the developments during the
financial year of the company. There is also a
quarterly report (every 3 months) or a semiannual report.
JUNK BOND

CONTINUOUS ORDER
Market order that can remain on the market during
several days when not immediately cleared. The
specific lead time of the order can be chosen by
the investor. Keep in mind that higher costs of
provision may be charged because of the longer
period of activity. Check the conditions that apply
for your bank/broker.
SECURITY PORTFOLIO
The collection of shares, bonds and other financial
assets that together form your financial wealth.
FUND
A fund is a collection of, for example, stocks
or bonds (or a combination) from different
companies. Investing in a fund automatically
entails some degree of diversification, which
makes them generally less risky than active
investing in individual stocks. Nevertheless,
funds are not risk-free and remain subject to
the market climate and fluctuation. Some funds
have a specific focus and can be geared towards
a certain industry or topic, which will impact its
performance. For example, a fund geared towards
the financial services industry will be more
sensitive to news about the banking sector.

A high-yield bond is a bond that is rated below

investment grade. These bonds have a higher
risk of default or other adverse credit events, but
typically pay higher yields than better quality bonds
in order to make them attractive to investors.
CAPITAL INCREASE
For a capital increase a company raises its capital
through additional shares, for example to be able
to finance an important investment. There are
several ways in which a company can do this:
Current shareholders get in proportion to their
shares some rights that allow them to buy the
new shares for a certain price. That certain price
is always well below the price of the share before
the capital increase, this is called the discount.
Alternatively, the company issues convertible
bonds, which will be refunded if a bond is
converted into new shares.
LOANS, BONDS, SAVING BONDS...
Funding sources that viand the debt of the needy.
In case of bankruptcy of the borrower the financier
will be refunded by the suppliers of the equity.
They give the holder during a certain period the
right to a fixed limited remuneration, the interest
fee. They will therefore often get the name fixed
income securities.

FREE FLOAT
LIMIT ORDER
Free float represents the portion of shares of a
corporation that are not locked-in by strategic
investors and freely tradable on financial markets

An order based on a fixed price. The price is the

maximum you want to pay or receive for a financial
instrument

ANNUAL REPORT
An annual report is a comprehensive report on
a companys activities throughout the preceding

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20

BONDS
A confession of debt issued by a government or
an enterprise. If you buy a bond you commit to a
loan, for which you receive a remuneration. At the
end of the term you will receive the nominal value
of your bond. Bonds are exchanged on the stock
exchange. A rising interest will result in a decline
of the bond price. While a decline in interest will
result in the rise of the bond price.
OLO (LINEAR BOND)
A linear bond is a dematerialized security issued
on the short, long en middle long run. Issued in
euros, with a prefixed interest. They are issued by
the minister of finance in successive installments.
There are circa 25 different linear bond lines on
the Belgium market: all bonds in a bond line have
the same characteristics.
PUT OPTION

During this time the orders are collected after

which a closing auction takes place that yields a
broadly supported closing price.
SPREAD
The difference between bid and ask price.
TRACKERS
Trackers are open investment funds which move
as closely as possible with an index, a basket of
stocks or a sector. Management costs are often
much lower than regular investments funds.
In the United States trackers are called ETFs
(Exchange Traded Funds).
VOLATILITY
Measurement of the degree of volatility of an
investment. Each share has a different volatility
relative to the stock market.

The buyer of a put option has the right to sell an

option at a prefixed price. The buyers speculate on
an interest decline. By underwriting a put option
you have acknowledged the duty to buy the shares
at a certain prefixed price if the buyer of the option
exercises his right.

WARRANT

CLOSING AUCTION

PROFIT PER SHARE

To make sure that the closing prices of a shares

doesnt depend on orders which happens to be
last, there will be a short commercial break of five
minutes before closing time of the stock market.

Profit per share is an indication of the maximum

dividend that can be paid out per share. The WPA
reflects how much profit available is per share.

The right to acquire shares or bonds of the same

company for a certain time and under certain
conditions. The warrant is actually a long-term
(call) option on newly issued shares.

(Authors: Christophe Van Wichelen and Lucas Stoops)

21

ALUMNI
22

Christophe Van Wichelen

Associate Professional Consultant bij CSC

EXCHANGE TRADED FUNDS

During my internship at BlackRock in Brussels,
I came in contact with Exchange Traded Funds.
Exchange Traded Funds, or ETFs, have changed
the world of investments during the last years.
The growth of ETFs is quite spectacular. Since
the introduction of ETFs in 1993, I grew over
1.500 billion dollars. Today there are more as
3.253 ETFs worldwide. The reason these funds
are so popular is due to the fact they are above all
very simple and flexible.
ETFs are part of Exchange Traded Products
(TNPs), which include other investment
instruments as well. Think about Exchange
Traded Commodities (ETCs) and Exchange
Traded Notes (ETNs). ETFs are funds that are
collective managed and they can be sold or bought
on a regulated market, just as normal shares
you can buy on the stock market. The benefit of
these ETFs is that they enjoy the advantages of a
normal stock as well as the benefits of the funds
that are managed collectively.
The big difference with the traditional fund that is
world known, is the fact an ETF follows precisely
an index with help of automated computers. In

other words, an ETF is not trying to outperform

an index like a normal fund does. This active
management is what you see at the traditional
funds which are trying to achieve as high returns
as they can get and try to beat the index.
As mentioned above, ETFs became mainly
popular because of the fact they are very simple
and flexible. This means among other things they
have very low management costs, compared to
traditional funds. This is because they dont try to
beat the market and dont actively manage their
funds. The costs that are charged for trading in
ETF are expressed in the Total Expense Ratio, or
TER.
To make sure an ETF achieves the same result
as the index, it has two options. In both options it
physically holds the effects of the index it follows.
The first technique is called replication, where all
effects of the index are kept. The other technique
is replication through optimization, where the
ETF only holds a few effects of the index. The
ETFs in Belgium are composed via the physical
replication.

23

Lucas Stoops
Analyst at J.P. Morgan

INVESTMENT BANKING
The investment banking industry has experienced
some enormous changes over the last couple of
years. Bad press, more regulation, deleveraging
of the balance sheet, massive layoffs, This being
said; the industry has changed a lot and the (r)
evolution is set to continue over the coming years.
In the following article I would like to give some
more background on what investment banking
is, and more specific Equity Capital Markets, and
what it could mean for you to start your career.
Investment banks advice companies, governments
and institutions on a variety of topics such as;
raising capital or debt, merger and acquisitions,
market making, trading, commodities, As the
scope is broad we will focus in this article on Equity
Capital Markets (ECM). As this is the division I
am currently working in; ECM is responsible for
raising equity for companies.
ECM`s main activities are IPOs (Initial Public
Offering, bringing a company to the market), right
issues (raising capital for a listed company) and
the sale of a large block of shares for institutional
investors. Basically, we are in constant dialogue
with the company on how to optimize the equityside of the balance sheet. Companies need to
raise equity to finance their day-to-day operations
or to execute a strategic decision, whether it is
an acquisition or large investment to be made.
We are massively depended on the stock market
and with the last 5 turbulent years passed, this
has not always been an easy ride. The markets
are again open for business since last year
with investors and companies looking for good
opportunities to invest or raise capital, meaning
our division is very active in 2013! We are the link
between companies and investors. We approach
companies with solutions on what we think is

the best way to go forward, and if mandated, to

ensure the transaction creates the most value as
possible for both investors and the company.
Why is it such a great environment for you to start
your career? You are at the heart of the action.
The learning curve is two-fold I believe. Firstly,
you directly learn how companies raise capital via
the different instruments that are available in the
market place. You will get involved in preparing
the presentation materials, gathering investor
feedback and negotiations on price setting.
Secondly (and most important), you will learn
indirectly from the people around you. Everyone
in the bank is ambitious, goal driven and open
minded which creates a place that is challenging,
every day. But this in a way that working together
is essential to achieve success, all the divisions
within the bank work together to get the deal
done.
The bank, whether it`s Goldman Sachs, Morgan
Stanley,, or J.P. Morgan; gives you an experience
which you will enjoy the rest of your career. The
banks basically all do the same, but they differ
in people and culture. Working hours are indeed
long, you can only adapt to these circumstances
if you are passionate about finance and the
company you work for. But the dedication comes
with rewards as well; you will challenge yourself
to a limit you never thought you could reach, you
learn how to deal with very stressful situations
and how people interact in these circumstances.
So you might be interested in pursuing a job in
investment banking? Basically, one tip has to be
given; never stop believing you can. It is not a
straightforward easy ticket to get in. But I believe
if you are passionate about it you will make it;
talk to people in the industry, read how the sector

evolves and work hard to achieve your goals.

Please feel free to contact me if you are interested
in the industry or have questions on how to get
in, I will try my best to give you more background
on the industry. Wouter and Laetitia are happy to
provide you my contact details.

But never forget to live your life and enjoy every

moment of it, which is much more important
than having the best CV. That is what I believe the
reason Capitant is a good place for you to be right
now... Let`s make things happen.

25

Matt Meeusen

LEVERAGED FINANCE
Repeatedly, I receive the same question: Youre
expert field is finance, so, where should I
invest in?. If I had the answer, I would be lying
somewhere on a beach in the Bahamas. Despite
the fact that none of us is a fortuneteller, you can
invest your capital in a rational way in function of
your risk profile, age, needs, etc. After spending
several years in our big, dusty manuals we all
know about the theory. However, inexperienced
practitioners often compose portfolios Mr.
Markowitz would turn in its grave from. Our
joint interest in finance and the lack of practical
experience within the university framework
triggered the foundation of Capitant. Capitant had
to bring the primordial, more practical side to the
students.
Capitant was an essential item which brought me
to my current position. Not the theoretical part, but
the entrepreneurial spirit turned out to be crucial
as opposed to my grades. The extracurricular
activities in which I truly believed made sure that
I had a strong case while searching for a job. I

dont mean to say that good grades are irrelevant,

but trust me, employers are not only looking at
good grades. Social, entrepreneurial and creative
skills are at least equally important. And this goes
for all sectors, not only for finance.
I started as an analyst corporate finance and was
active in this position for 1.5 years. Six months ago
I moved to the Leveraged Finance Department of
our bank. We serve the Private Equity players in
the market.
Private Equity players invest in companies were
they truly believe in. Each of these players has
its own set of goals, preferences and investment
strategies. The financing decision is structured
in equity and debt. The companies involved in
these transactions are typically mature and
generate stable operating cash flows. An optimal
debt package is determined based on these cash
flows. A higher proportion of debt financing can
lead to a higher Return on Equity (ROE)
An example will make this clear:
INITIAL INVESTMENT: 100 EURO
A

EQUITY

80

50

20

DEBT

20

50

80

VALUE AFTER 5 YEARS

200

200

200

INTEREST ON DEBT (6% X 5 YEAR)

-6

-15

-24

REPAYMENT OF DEBT

-20

-50

-80

INITIAL INVESTMENT (EQUITY)

-80

-50

-20

PROFIT

94

85

76

118%

170%

380%

ROE (PROFIT / EQUITY )

This example shows that the optimal debt package will have an impact on the return the private equity
player realizes. A higher debt package can lead to a higher ROE as debt is cheaper than equity.

Jonah Lemaire
General Management Trainee at ING Belgium

RETAIL PRIVATE BANKING

As an individual, we like to place our savings into
a savings account, especially in a large bank.
Such large institutions have the ability to supply
the services we need, and we can assume that
our money is safe where it is. After all, the state
guarantees our money, doesnt it? Although
Cyprus has brought recent instability to the
European financial warranty system, we can state
that European governments can guarantee our
savings up to 100.000 Euros. Relieved! But do we
want our hard- earned money in savings accounts
that provide barely 1% interest? Can I as an
individual not place my money more intelligently?
Looking at inflation that subsequently is making
me lose purchasing power, we know in Belgium it
fluctuated around 1,20 % this year. So compared
with the interest I earn on my savings, I am actually
losing money. This is what we call a negative real
return! It is logical we set ourselves looking for
other ways to place our money. Invest then? Its
not a big secret that all major banks like to push
their clients to the investment products they have
on offer.
Since the financial crisis, everyone looks
proactively with suspicion to such proposals.
The banker surely wants to fill his own
pockets? Let this be a misguided conception we
just formed here. Especially when considering
in todays context that investing can be suited to
fit every single customers profile, of course with
products adapted to his / her specific needs and
requirements. In the context of moving from
savings to investments , the big Belgian banks
offer different formulas created to enable a simple
way to activate and invest a piece of your savings
every month. Usually, this is already possible
from 25 allowing you to invest directly into a
fund chosen based on your risk profile. You could
also opt to spread 100 over four different funds
each month: stocks, bonds, foreign exchange,
emerging markets, industries, etc. All this to yet

make a higher return as possible on your savings

because remember that we are currently even
losing money on our super-safe savings. The
higher the return you strive, the more risk you
should take. That seems logical. How much risk
you want to take and how to best optimize your
investment to do so is a confidential discussion
you should have with your banker.
Managing savings belongs to the core business
of every major bank. In this context, one also
speaks of the retail side of the bank, serving
non-professional customers. Even customers
who have a great ability to be operated here, the
so-called private banking customers are served
within this side. Within the Private Banking
department services are created specifically to
meet the needs of wealthy clients, ranging from
portfolio management to wealth engineering
and inheritance. From when do you belong to the
category of wealthy clients? There are differences
between all institutions, but usually the limit is
set at 500,000 or 1,000,000 directly investable
assets. Private Bankers support the customers
with personal contact and advice and put the
appropriate services in operation. It is obviously
paramount for wealthy clients to manage their
capital, according to the appropriate risk profile,
and therefore, specialized portfolio managers
are made available. The customer may choose
to completely outsource the management of his
wealth and the portfolio manager will have the
freedom to invest the customers capital on a daily
basis as he wishes. Their investment strategy
is to continuously purchase and sale financial
products of the banks portfolio. Because here
as well, Private Banking will supply a team of
specialists, which follow the financial markets
and analyse them to provide subsequent advice.
Naturally there are also customized products
such as structured funds, engineered solely for
private banking clients. If they wish to settle an

27

inheritance or give away a part of their assets,

then again there are specialists ready to settle
this transaction in the most tax-friendly way.
Private customers get beside all these services
also the advantage of cheaper cost rates charged.
Indeed, the more money you have, the cheaper

life is. But whether you are a retail or private

client, investment is central to keep your assets
healthy. The random customer should only try to
be more proactive and initiate a form of wealth
management itself.

Stefan Van Bossuyt

Looking for a challenge

ASSET MANAGEMENT
Investment manager, money manager, fund
manager, gestionnaire dactifs. Terminology that
brings to mind images of cowboys and whiz kids
who manage hundreds of millions every day and
have the power to force governments to their
knees by one lucky guess in the forex market. But
the Asset Management industry is much larger
and more diverse than one would guess on first
sight. Thats why the estimation of size, utility and
opportunities within a sector is very important. Im
going to try to explain how to do this estimation in
just a two-pager, which is quite a challenge.
Asset Management in the broad sense makes
up for roughly estimated 120 trillion dollar in
management worldwide. Services differ from
specialized investment advisers on pension and
investment funds to alternative players like hedge
funds, Private Equity and Venture Capital. We will
focus on the mainstream segment, namely the
Mutual Funds, which create investment funds for
the ordinary people (you and me can follow these
funds daily in the news) and manage mandates
for big institutional players. Needless to say, the
majority of money/assets in management lies
with the massive institutions such as pension
funds and insurance companies, banks and
governments. Where does this money come from
and what is happening with it?
The relation between fund managers and the
ordinary citizens is more complex than one would
imagine. Of course you can buy shares of for
example an Indonesian High Yield bond fund at
your local bank or use fiscally interesting ETFs,
but whats happening to the money that you
transfer to your life insurance company or the
pension plan at your employer?
Contracts are established with these big players,
they determine their investment strategy and
decide what the manager can or cannot do with

the money and pay a nice commission. Indeed,

banking is equal to fee-based revenue models
and Asset Management is no exception to this.
You might wonder where the added value of the
industry lies. Originally, due to diversification
benefits by spreading risk, but even that is being
re-evaluated.
Once the amounts are available, they are assigned
to the fund managers, following the agreed
strategy. The universe of investment is enormous.
If you can imagine it, it probably exists. On one
side of the spectrum we find the Quants who
develop volatility funds based on mathematical
models, one the other we find flamboyant Stock
pickers who instinctively gamble on stocks.
Funds and mandates are being erected, money
has been allocated but then what? The manager
will try his absolute best month after month,
within the boundaries of the contract, to attain
the return targets. It is clear that a Tracker
has the sole purpose to copy a reference index
and an absolute return fund one looks at the
absolute profits of the day before. But what about
relative funds? Revenue targets everywhere,
but how does the client know he has made the
right decision? Number tell the tale and the
client wants to have proof of the success of the
manager. Aside from effective management,
a parallel discipline was created, which works
together with fund management. Performance
Measurement has the purpose to examine and
analyse the performance of funds. In order to
take measurements we need a reference, better
known as a reference index or benchmark.
Most common funds are relative funds. Their
performance is being measured by a benchmark
that is representative for that investment strategy.
The goal is to outperform the benchmark. By
following methodological conventions and

29

standards, the performance analyst is able to

analyse the performance of the fund and allocate
different stocks. The manager can for example
outperform his benchmark (positive result) by
allocating more or less funds to specific assets
(allocation effect) or by superior stock picking
skills. The analysis concludes a lot of ratios that
give an indication of the undertaken risk and
the attained revenue such as Jensens alpha,
information ratio, standard deviation...
Developments in the front office (fund managers)
go hand in hand with innovation in performance
analysis. The manager himself works closely
together with the performance analyst and a good
relation between the two is required because the
bonus of the fund manager is on the line.
ETFs are a hot topic at the moment. This new
product development allows for units to be
traded during market hours at any moment. We
call this the ideal hybrid between a share and
an investment fund. Assets under Management
(AuM) took a lot of hits post-crisis. An enormous
fund exodus and a flight to safer territory have set
in motion a round of rationalization, consolidation
and sanitation. This sector is hurting as much
as other sectors. Entire teams are being fired,
funds have been closed and even entire asset
management divisions have been sold. The
selling of divisions are primarily caused by the
lack of capital of banks after the crisis, which
caused profitable Asset Management divisions to
be sold as the ultimate solution.

30

The storm has almost passed. Jobs have always

been there but the much desired (junior) Portfolio
Manager/ Research Analyst is not easy to come
by. The comeback of this multibillion dollar
business will only succeed by product innovation,
operational streamlining and a better customer
service (read: lower/fairer fees). Fees consume
a lot of the revenue thats currently left, which
means that if you dont pay attention, you can get
seriously burned (financially).
Honest advice: do your homework and investigate
which investment strategies are best for you
personally. Experiment, try one yourself and build
a track record (track records are the life line of
a manager). This is possible without spending a
single Euro or if you really believe in it, you can
always use your own capital. This way you always
have a head start when applying for a job at an
Investment Firm.
Advice from the best:
If investing is entertaining, if youre having fun,
youre probably not making any money. Good
investing is boring. George Soros (1930),
Hungarian-born US financier, entrepreneur, and
philanthropist / Source: Quoted in The Winning
Investment Habits of Warren Buffett & George
Soros (Mark Tier, 2006)
Rule no. 1: Never lose money. Rule no. 2: Never
forget rule no. 1. Warren Buffett (1930), US
entrepreneur and financier / Source: Quoted in
Warren Buffett Speaks (Janet Lowe, 1997)

32