Definition
Co-Managers are financial institutions that rank after the lead managers in the hierarchy of marketing and distributing new securities issues, particularly in the context of Eurobonds and other similar financial instruments. Though not in the spotlight like the lead managers, co-managers play a pivotal role in the success of a securities offering. These banks are typically selected based on their robust distribution networks and their proven ability to place a substantial portion of the issue directly with their clients.
Roles and Importance
The key responsibility of co-managers in an issuance process includes the distribution and sale of securities to investors. This is a crucial step, as their network and client relationships can significantly broaden the investor base, potentially stabilizing and expanding the market for the new issue. Their involvement also adds credibility to the issuance, given that multiple reputable managers are willing to back the security.
Co-managers often tailor their approach to fit specific segments of the market that may be less accessible to the lead managers, thereby complementing the overall marketing strategy with their niche expertise and regional influence.
Benefits of Being a Co-Manager
- Market Penetration: Through their involvement in various issues, co-managers can enhance their market visibility and reputation in the investment banking sector.
- Relationship Building: Working alongside lead managers and issuers provides co-managers the opportunity to forge and strengthen relationships within the industry.
- Revenue Opportunities: Although less prominent than the lead managers, co-managers benefit from their participation through fees and commissions derived from the sale of the securities.
Challenges Faced by Co-Managers
Co-managers often face the challenge of being overshadowed by lead managers, which can impact their negotiation leverage and the visibility of their role. Additionally, ensuring the sale of their portion of the securities often requires significant efforts, particularly in a competitive market scenario where investor interest may be fluctuating.
Related Terms
- Lead Managers: Primary firms responsible for managing the issuance of new securities.
- Eurobond: A type of bond issued in a currency other than the home currency of the country or market in which it is issued.
- Underwriting: The process of raising money by selling stocks or bonds to investors on behalf of corporations or other entities.
Suggested Reading
- “The Business of Investment Banking” by K. Thomas Liaw - Provides an insightful look into the roles of various types of managers in security issuance.
- “Global Banking” by Roy C. Smith - Offers an elaborate discussion on international finance including roles and functions in Eurobond markets.
In summary, while they may not always be in the financial spotlight, the strategic significance of co-managers in ensuring the widespread distribution and success of securities issues cannot be overstated. Just like in a well-orchestrated symphony, every player, whether front stage or back, plays an indispensable part in the harmony and success of the collective endeavor.
