why equities vs credit
I'm curious why people chose one vs the other or what makes one more interesting than the other
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I'm in credit but would like to be in equities. I think equities are more interesting because in my opinion it's more of a "pure play". It's all about expectations of future profits and future growth, and I think valuing companies in that sense is very interesting work opposed to just looking at a companies ability to pay off its debt in the future.
Its a personality thing. Credit guys are pessimistic and always looking for downside. Equity guys are excited and optimistic about the future and looking for upside.
This is a big factor. The most important part is, your returns are more limited on the credit side. Think about the basic fundamentals, equity yields higher expected returns based on its higher risk.
What if you work for Kynikos?
If you work for kynikos, youre a bsd and beyond my ability to judge. However, Chanos actually describes the psych of shorting in this video. The way I perceive it is as being very similar to the psychology/perspective needed for credit analysis, in terms of psychological makeup.
Credit ftw
My opinion is you should go to a shop that lets you do both (in addition to derivatives, commodities, etc). I'm painting with a broad brush here, but there's nothing worse than going to committee and pitching HY bonds trading north of call price as some of them are dicey credits that could gap 10 points on a sell-off. Similarly, it's tough to generate alpha in a non-stockpicker's market when correlation and beta make equities more about macro and risk sentiment than fundamentals. Investing is all about expressing your personal view on a market, sector, or company - handcuffing yourself to one asset class is not doing anyone any favors. Again, my two cents.
I'd say trading is more about expressing your views on the market and investing is more about allocating capital efficiently. Not that both don't over lap, just the mind set. For example, investing in FI and holding to maturity.
Equity is more fluffy, ie most people have no idea what the hell is going on, so there is more upside and more downside. Credit involves contractual cash flows and indentures/agreements which govern those contractual cash flows, so you can at least do some hard analysis as opposed to just relying on making up some growth rates and guesstimating some multiples and calling it a day, although you'll still get to have the fun of doing that as well.
Credit (at least everywhere I've worked) also involves a lot of legal work in one form or another-reading credit agreements, indentures, and bankruptcy dockets etc. Some people love it some people would rather die.
I know this is off subject, but what if you want to switch over to a l/s equity hedge fund, but don't have strong modelling experience, but you do have corporate access coming from a sell-side firm. Can you still transition to a hedge fund analyst role?
You have corporate access? As in connections with management teams? No-that is worthless at a l/s equity fund because we pay people like your former self to connect us with management teams already.
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