Bulge Bracket

Bulge bracket firms refer to the world's largest and most profitable investment banks with a large clientele. These top-tier firms provide diverse financial services to institutional investors, large corporations, etc. Examples of bulge bracket firms include Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Barclays.

The term generally indicates firms involved in underwriting syndicates and major investment banks. A firm with the tag bulge bracket generally is a multinational bank offering a broad category of services and products, including trading securities, M&A advisory, debt syndication, research activities, underwriting, and the sale of financial products such as equities, commodities, and other derivatives.

Key Takeaways                                                               

• The bulge bracket refers to the largest and most profitable investment banks with a broad range of services and products.
• These banks have a large client base, including institutional investors and large corporations, and are known for their high profitability and global reach.
• Bulge bracket firms typically offer services such as trading securities, M&A advisory, debt syndication, research activities, underwriting, and the sale of financial products such as equities, commodities, and other derivatives.
• Some examples of bulge bracket banks include Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Barclays.

Bulge bracket banks are one of the three types of investment banks. The other two are middle-market banks and boutique banks. This classification is based on their size, scope, and specialization. 

Bulge-bracket investment banks are the most well-known investment banking institutions. Thus, they are reputed, well-established, have a global customer base, and serve large corporates and institutional investors. They also make high profits and have assets worth trillions under management. The term points to the top tier of investment banks, but the exact definition of what makes a bank a bulge bracket bank can vary depending on the source and context.

There is a history behind its origin. Investment banking tombstones are a historical tradition of advertising the investment banks that issue securities of a particular company. The position of the banks in the tombstone does not necessarily indicate the number of securities they have sold but rather reflects their role in the transaction. For example, the bank listed first may be the lead underwriter or the syndicate manager. Hence, they are printed in a larger font and in bold. Hence, the size and boldness of the font used to represent each bank in a tombstone may reflect their status and importance in the transaction. Still, it does not necessarily mean they are top investment banking institutions.

Since there is a lot of competition between these banks to stay at the top of the industry, they usually spend billions of dollars in perfecting many aspects of the firm. As a result, they employ the best talents from the world, attract capital, and stay ahead of the others in terms of newer technology. For instance, under their CEO Jamie Dimon, JPMorgan Chase has decided to spend at least $12 billion yearly on technology.

Let’s discuss some examples of bulge bracket investment banks:

Example #1

Goldman Sachs is one of the prominent banks in the fintech industry. According to press reports, Goldman Sachs participated in funding rounds totaling $95.5 million for the bitcoin startup circle, the payment cycle management company Billtrust, and the high-frequency trading network company Perseus in 2015. Additionally, the bank advised Funding Circle on its $150 million equity financing round in April 2015.

Example #2

Another example of a bulge bracket investment bank is JPMorgan Chase. It is considered one of the world's largest and most reputable investment banks, with a significant global presence in the banking industry. The bank has a significant market share in investment banking, capital markets, wealth management, and trading. Its size, reputation, and comprehensive range of financial services have made it one of the world's most well-known and influential banks, earning it a place in the bulge bracket of the investment banking industry.

Boutique banks are those investment banks that specialize in any one aspect or category of financial services. For example, their expertise and experience in bond markets might even outplay those of top investment banks. But they might not show satisfactory results in equities, funds, etc. These banks are often considered the opposite of bulge-bracket investment banks. Let's distinguish the two in brief.