They are pretty different fields...you are working with public info in ER, private info in IB...you make less money in ER in the long-run but for an analyst program I think its about the same...

In terms of switching to buyside, IB analysts join event driven funds/PE, while ER has more limited options such as long/short.

This doesn't mean you can't go above and beyond your standard job and learn more stuff than is expected of you in either field.

 

There's no definitive answer to your question about which one is better. They are different, and based on your interests and skills, you might be better suited for one than the other.

In both you'll build financial models, analyze financial statements, build comp tables, value companies, create presentations, but there are many things that are different.

IB is more transactional, more hierarchical, and more team-oriented. ER is generally not-transactional, very flat, more independent. If you're really good at analyzing info, drawing conclusions, and persuasive communication (oral and written), you should take a good look at ER.

I was an MD in ER and I can tell you that compensation can be higher than IB. I wouldn't make any generalizations about one being better. In ER the jump is from the entry level Associate to Analyst. There aren't layers in between so if you're good, you can become the senior person quickly and your comp could dwarf your peers on the banking side.

Here are a few pieces of advice you should take a look at

How to become an Equity Research Associate - http://bit.ly/bMC0N Equity Research - http://bit.ly/19K7oM A Day in the Life of an Investment Banking Intern - http://bit.ly/1niDMY

Hope that's helpful.

Gotta Mentor www.GottaMentor.com Connect to the Advice & People You Need to Achieve Your Career Goals

Gotta Mentor Connect to the Advice & People You Need to Achieve Your Career Goals
 
formerMD:
I was an MD in ER and I can tell you that compensation can be higher than IB.

Just curious, were you an MD in the 90s when ER was the best job on the street or are you saying that you can still make more in ER today?

Obviously if you are good and very lucky then you can become a senior analyst in 5-7 years and make more than a banker with 5-7 years of experience, but 1. that is very unlikely to happen and 2. An MD or sometimes even VP will still make more than a senior analyst in ER.

 

A related question: Is ER easier to get into? I'm a newb, but I can't help but notice the large number of asset management firms in all kinds of geographic locations that have portfolios managers who presumably hire people to help with ER. In other words, are there generally more job openings at the entry level in ER?

 

econ, ER is not easier to get into. Far fewer firms recruit at colleges/MBA programs and they generally do not hire classes of people. Positions are generally filled on an as-needed basis.

As far as comp goes, whether IB or ER folks make more money will vary based on what's happening in your sector, how much of a hot commodity you are, etc. If you're reasonably successful you can make more money than most of your parents will believe possible without legal consequences.

Gotta Mentor www.GottaMentor.com Connect to the Advice & People You Need to Achieve Your Career Goals

Gotta Mentor Connect to the Advice & People You Need to Achieve Your Career Goals
 

[quote=formerMD]econ, ER is not easier to get into. Far fewer firms recruit at colleges/MBA programs and they generally do not hire classes of people. Positions are generally filled on an as-needed basis.

As far as comp goes, whether IB or ER folks make more money will vary based on what's happening in your sector, how much of a hot commodity you are, etc. If you're reasonably successful you can make more money than most of your parents will believe possible without legal consequences.

How does comp work in equity research? It seems like most if not all banking MD's at BB's make at least $1million-2million, is this case with ER? Also, what is the upside to being senior in ER, what is going to be the benchmark for a higher pay?

 

I considered equity research before I decided to do ibanking...

Equity research at the junior level is crap. You aren't doing any serious modeling because you don't have a CFA and you lack industry expertise to make a meaningful contribution to your team when you are talking about the "industry sector/big picture."

That said, equity research at the more senior level is more intersting in my opinion. But at the junior level the job is less pay, less prestige but also less hours.

 

Old saying that ER (buy side) has greater depth of knowledge while banking has greater breadth of knowledge. ER is where one uses their brain a bit more in deciding where to invest once the bankers have run off with their commissions.

Metals & Mining I-Banker
 

What I think he means is that equity research requires great depth of knowledge about your sector. At the junior level, it is hard to have that knowledge because you haven't worked in the industry or covered the industry long enough to understand its intricacies.

In essence, junior level people are (essentially) incapable of providing great value to the team because they don't have the years of experience. This is my opinion, at least.

 

does anyone have solid salary info about the field? looking at a few junior associate positions at sell-side research shops (not BBs).

i'm hearing a variety of things, all the way from 40k base/10k bonus up to 85k base/60k bonus. does the comp really vary this much in research?

 
WizardofOz:
85k base/60k bonus.

Know a few people in the field, and they are about 55k base with 10-30k bonus.

i've heard BBs start off at 85k base and go from 30-60k for the bonus.

your figure sounds reasonable for a research shop.

 

One could easily argue that research is more flexible in terms of exits opps, quantitatively speaking. From Research one can go to the buy-side (HF, MF, PF), corporate development/strategy, or into PE (though this is not as common).

Determining which one is a better experience depends on what you want to do with your life.

Smokey, this is not 'Nam, this is bowling. There are rules.
 
roar19:
One could easily argue that research is more flexible in terms of exits opps, quantitatively speaking. From Research one can go to the buy-side (HF, MF, PF), corporate development/strategy, or into PE (though this is not as common).

Determining which one is a better experience depends on what you want to do with your life.

I completely disagree. I never post but you were about to royally screw this poor kid so I felt the need to put the cape on and speak the truth.

Headhunters value bankers more than sell-side research analysts and will specifically pitch them with more vigor to their clients for the very jobs you just mentioned. Yes - even for buy-side. Yes - even if the kid with a sell-side research background has been doing the job of a buyside analyst for two years (writing industry memos, valuing equities, pitching ideas to trading desk/investment committees, DEFENDING his ideas [very unique and important in AM]) - the core skillset of a pre-mba sell-side research analyst vs. investment banking analyst is thought of as second-rate. I'll leave it here without discussing merits/why unless anyone feels like extending this convo... happy to participate.

My background: started out of undergrad in buyside Asset Management (not AM arm of global bank, but at large fund complex in Boston) as an investment analyst, have a lot of close friends in sellside research (e.g. @ investment bank) and M&A bankers. I know first hand that as the 2 year stints came up, my buddies in sell-side research were often treated as second rate properties.

HR Placement: Be very careful. Many in HR/Undergrad Recruiting @ large banks will sell you the research stint as either 1) equivalent to banking, and/or 2) not as equivalent but "given this is a large bank with many opps. lateraling out of rsrch will be totally easy." Don't believe them. 1) not equivalent as demonstrated by weaker headhunter reception 2) lateraling is doable but never easy, don't freely accept uncertainty in your career. Never believe HR on anything when you are just starting out, they don't have your interests in mind and want to fill quotas. Just remember to maneuver in a politically intelligent way.

Pay: maybe investment banking makes a little more but I've heard of sell-side research 1st / 2nd year analysts making anywhere from 130k to 200k (Associate promo bonus excluded) all-in, @ top-tier BB. Senior Equity Research Analysts easily make 1MM to 2MM, usually this is accompanied by generic tenure, house-hold relationships with S&T/banking, and of course, top-tier institutional investor rankings, TV appearances, and most importantly a great political relationship with senior management @ the bank and at covered companies (so you can effect event planning). Search Anthony Noto at GS (ex NFL CFO).

Skillset: ibanking modeling is thought of by buyside / headhunters (and is) much more rigorous. Research modeling is primarily focused on essentials allowing you to change your EPS estimate on your research note before popping it out to 1000+ buyside accounts - utility/speed is much more of a focus. Sure there maybe is that one lone warrior sitting at his research desk cranking out 20 tab models but more often than not, from what I hear in equity research you will do a nice revenue build, then keep margins flat or do a cost volume margin sensitivity using op leverage from historicals, until you get to EPS (maybe FCF if you are in cap intensive industry). That's it. From what I hear in banking the model is much more comprehensive. Perhaps too much. But the model has to be legit if you are sending to CFO of a division looking to be spunoff, or sponsor, etc. One thing to note: in sell-side research (and buyside where I'm @), you completely OWN the model at the jr level. In banking, it is a product that changes hands, with versions getting as high as v56, many cooks in the kitchen etc. The model in banking is also project based, and you leave it alone if you are not asked for deliverables, while in sell-side/buyside research you keep the model on the company, and update as earnings come out, while you manage the position/coverage universe/portfolio. Valuation def. more comprehensive in banking, some eq. research analysts don't even use DCF or M&A comps - Most of what i see is: future EPS forecast multiplied by some "appropriate" P/E multiple. Not earth shattering.

 
roar19:
One could easily argue that research is more flexible in terms of exits opps, quantitatively speaking. From Research one can go to the buy-side (HF, MF, PF), corporate development/strategy, or into PE (though this is not as common).

Determining which one is a better experience depends on what you want to do with your life.

i had to answer this lol this is so wrong its not even funny...pls dnt share advice to aspiring monkeys if you dont knw what you're talking about. thanks.

I don't throw darts at a board. I bet on sure things. Read Sun-tzu, The Art of War. Every battle is won before it is ever fought- GG
 

I've spoken to a good amount of people @ HFs in terms of networking.........If you can work for a top rated ER analyst, don't listen to the poster above unless you have top M&A offers. That is, if your goal is HFs. PE, I can agree.

Note: I have only spoken to people in L/S funds, not merger arb.

 
terrence:
I've spoken to a good amount of people @ HFs in terms of networking.........If you can work for a top rated ER analyst, don't listen to the poster above unless you have top M&A offers. That is, if your goal is HFs. PE, I can agree.

Note: I have only spoken to people in L/S funds, not merger arb.

9 out 10 headhunters recruiting for event-driven, distressed, activist, and often L/S funds will prefer and specifically recruit ibanking analysts vs. equity research. This is at the request of said HF PMs who feel the ibanking screening @ the BB level is more rigorous and analytical skillset more comprehensive than ER. For fundamental / value-based strategies, an ER analyst is not as in-demand.

I am part of the buyside / demand side looking for these candidates... Poster - I am giving you the real deal. You can learn the markets later, or as a sideproject as you manage your own p.a. -- what TOP HFs at the jr level want is someone who can crank - I am 100% serious do not introduce the unnecessary uncertainty into your career and think about this choice long and hard.

 
Best Response

I have Buyside and sellside BB research experience so I've seen most situations. Smart people are able to get where they want to be either way. If you don't think you are that smart compared to your peers from an ability to generate ideas point of view (not from a college GPA / GMAT point of view) you will be better served going into investment banking. Don't take this lightly. A relatively dumb person in banking will end up making more money than a dumb person in equity research. If you can't picture yourself generating investment ideas (buyside) or selling someone your idea (banking at VP level and above) then you should do banking as you can comfortably get an industry job later on where you will make 100-200k and crunch numbers. If you have the ability to truly make an impact in Asset Management or banking then I think there are pros and cons to think about.

Without a doubt you will be better at modeling if you do banking. Now the question becomes, "Does this matter?". Bankers may think this is ridiculous but modeling is important only at the junior level, equities and fixed income prices are not driven by models they are driven by company performance, strategy, leverage and macro events from a sector, country, world view. Unless you've been on the buyside this is difficult to comprehend. If you do banking for two years and then go to a PE shop you are still the junior person whose existence depends on modeling. If you want to do PE go into banking, without a doubt. If you want to go for a hedge fund or asset management there are two types of jobs for junior level guys. Some shops want to hire you for a couple of years to crunch numbers other shops are only going to hire you to generate ideas. There are very successful funds that don't really use models, they update sellside models if they are looking for new ideas but many don't even keep models on current positions. A fund like that doesn't need someone to build models they need someone to generate ideas. If you do banking a fund of that nature will take the equity research guy over the banker 90/100 times, if it is a shop where they just use junior people to build and maintain models then they will take the banker 90/100 times. The question is what do you want to do? If you want to be an idea generator then go to equity research and in two years get a cool buyside job at a HF or AM shop. From a BB this should be no problem what so ever, the above poster mentioned using headhunters but for HF jobs if you are in equity research you can usually land a gig just from the contacts you develop over the two years, a banker needs a headhunter more because their networks are limited due to a lack of broad client contact. If you doubt your ability to generate ideas then go to banking because your career at a hedge fund will be short lived.

I have no doubt that the above poster is correct when he said research people were treated like second class people by headhunters, those headhunters are recruiting bankers for number crunching jobs at PE shops or hedge funds so the banker is valued more. You'll see a lot less headhunters involved when shops are looking for idea generators. It is usually more word of mouth or contacting sellside people they've been impressed with.

Hope that helps.

 
lotsofquestions:
I have Buyside and sellside BB research experience so I've seen most situations. Smart people are able to get where they want to be either way. If you don't think you are that smart compared to your peers from an ability to generate ideas point of view (not from a college GPA / GMAT point of view) you will be better served going into investment banking. Don't take this lightly. A relatively dumb person in banking will end up making more money than a dumb person in equity research. If you can't picture yourself generating investment ideas (buyside) or selling someone your idea (banking at VP level and above) then you should do banking as you can comfortably get an industry job later on where you will make 100-200k and crunch numbers. If you have the ability to truly make an impact in asset management or banking then I think there are pros and cons to think about.

Without a doubt you will be better at modeling if you do banking. Now the question becomes, "Does this matter?". Bankers may think this is ridiculous but modeling is important only at the junior level, equities and fixed income prices are not driven by models they are driven by company performance, strategy, leverage and macro events from a sector, country, world view. Unless you've been on the buyside this is difficult to comprehend. If you do banking for two years and then go to a PE shop you are still the junior person whose existence depends on modeling. If you want to do PE go into banking, without a doubt. If you want to go for a hedge fund or asset management there are two types of jobs for junior level guys. Some shops want to hire you for a couple of years to crunch numbers other shops are only going to hire you to generate ideas. There are very successful funds that don't really use models, they update sellside models if they are looking for new ideas but many don't even keep models on current positions. A fund like that doesn't need someone to build models they need someone to generate ideas. If you do banking a fund of that nature will take the equity research guy over the banker 90/100 times, if it is a shop where they just use junior people to build and maintain models then they will take the banker 90/100 times. The question is what do you want to do? If you want to be an idea generator then go to equity research and in two years get a cool buyside job at a HF or AM shop. From a BB this should be no problem what so ever, the above poster mentioned using headhunters but for HF jobs if you are in equity research you can usually land a gig just from the contacts you develop over the two years, a banker needs a headhunter more because their networks are limited due to a lack of broad client contact. If you doubt your ability to generate ideas then go to banking because your career at a hedge fund will be short lived.

I have no doubt that the above poster is correct when he said research people were treated like second class people by headhunters, those headhunters are recruiting bankers for number crunching jobs at PE shops or hedge funds so the banker is valued more. You'll see a lot less headhunters involved when shops are looking for idea generators. It is usually more word of mouth or contacting sellside people they've been impressed with.

Hope that helps.

I am undoubtedly talking about top HFs who value both banking / ER skillsets for a fundamental / value based strategy (not Quant), per the original poster's question, but think of banking as a more comprehensive skillset for investment evaluation.

I don't think people appreciate how uncommon the 2nd year ER analyst -> buyside PM is. Of course, startup HFs, another story, but I am specifically talking about TOP multi $B AUM funds, where the only relevant high paying position with exit opps for 2nd yr analysts is the one of Investment Associate/ Investment Analyst where you will mostly crank / model new investments and help manage the portfolio by analyzing companies, ... obv this is still a relatively. jr position, can often be a pre-mba position or a stepping stone to being closer to the capital deployment roles.

Poster: Before you make a decision a discussion with headhunters/recruiters working for top HFs (notice I don't want to name names to avoid being crass). That's if you want to go into HFs post 2yr stint. Clearly all your PE exit opps are materially enhanced from banking for obvious reasons, goes without saying... Please also visualize exactly the kind of work you would like to do, then sketch a path.

FYI: I am a buyside investment analyst and clearly realize that ER is much closer functionally to my role, but that's not the point.

 
lotsofquestions:
We aren't disagreeing, if you want to go to a hedge fund to be the guy who spends 100% time modeling go do investment banking, if you want a position where you are responsible for idea generation I would do equity research.

Please list for the poster specific Top HFs who will recruit a 2nd yr sell-side research analyst to generate and execute ideas.

Thanks

We all need to just demystify this stuff.

 

One thing people forget is that ER rarely hires people from undergrad. They love MBAs and will oftentimes hire people from IBD who want to do an ER stint, but IMO you can't really compare these positions.

From what I've seen, IBD will give you shoe-in chance for PE and a good chance for L/S HF. ER will give you (after some years of experience, of course, mostly by the time you're in your late 20s) a terrific shot at investment management and L/S hedge funds.

One thing you should definitely be careful about is the kind of experience you get at IBD. If you're in M&A and crank out M&A models all day, sure, your experience is great for anything. However, if you're in industry coverage and do a lot of equity pitches and memos, then you lose out on the technicals - AND you still don't know your industry as well as a person from ER who actually COVERS a friggin industry. So it varies depending on your experience.

 
midnight_oil:
One thing people forget is that ER rarely hires people from undergrad. They love MBAs and will oftentimes hire people from IBD who want to do an ER stint, but IMO you can't really compare these positions.

From what I've seen, IBD will give you shoe-in chance for PE and a good chance for L/S HF. ER will give you (after some years of experience, of course, mostly by the time you're in your late 20s) a terrific shot at investment management and L/S hedge funds.

One thing you should definitely be careful about is the kind of experience you get at IBD. If you're in M&A and crank out M&A models all day, sure, your experience is great for anything. However, if you're in industry coverage and do a lot of equity pitches and memos, then you lose out on the technicals - AND you still don't know your industry as well as a person from ER who actually COVERS a friggin industry. So it varies depending on your experience.

True, but headhunters don't know this and sr. HF guys aren't going to get all in weeds about industry

 
midnight_oil:
One thing people forget is that ER rarely hires people from undergrad. They love MBAs and will oftentimes hire people from IBD who want to do an ER stint, but IMO you can't really compare these positions.

From what I've seen, IBD will give you shoe-in chance for PE and a good chance for L/S HF. ER will give you (after some years of experience, of course, mostly by the time you're in your late 20s) a terrific shot at investment management and L/S hedge funds.

One thing you should definitely be careful about is the kind of experience you get at IBD. If you're in M&A and crank out M&A models all day, sure, your experience is great for anything. However, if you're in industry coverage and do a lot of equity pitches and memos, then you lose out on the technicals - AND you still don't know your industry as well as a person from ER who actually COVERS a friggin industry. So it varies depending on your experience.

That's not true, sell-side ER desks hire analysts out of undergrad. MBAs are def. hired but i don't think in a disproportionate manner. I think it's very easy to compare these positions right?

Agree with 2nd paragraph (after some time, but not a 2yr stint exit opp, therefore not relevant to original poster)

 

I've been meaning to ask this for awhile. In a separate thread about DCF, some of the people mentioned bankers don't really use this as it is so hard to project accurately, and they just include the tab in their model because it's relatively quick.

SO, are the hedgefunds that are modeling intensive use similar models to bankers? I mean, I'd think they focus on value- asides from working capital you don't really need balance sheet items, etc...

Don't bash me, I'm actually just curious.

 
terrence:
I've been meaning to ask this for awhile. In a separate thread about DCF, some of the people mentioned bankers don't really use this as it is so hard to project accurately, and they just include the tab in their model because it's relatively quick.

SO, are the hedgefunds that are modeling intensive use similar models to bankers? I mean, I'd think they focus on value- asides from working capital you don't really need balance sheet items, etc...

Don't bash me, I'm actually just curious.

There's only so many ways to value a stock.

Also, modeling methods are not profession specific.

 

personally i wouldn't care which skill-set headhunters value more/are in higher demand from the buy-side. if i'm interested in financial markets (e.g. research) i would want to work in financial markets, not be an excel monkey.

if your good your good and you will have a shot. DurbanDiMangus seems like a typical ultra-risk-adverse banker type.

 
LLcoolJ:
personally i wouldn't care which skill-set headhunters value more/are in higher demand from the buy-side. if i'm interested in financial markets (e.g. research) i would want to work in financial markets, not be an excel monkey.

if your good your good and you will have a shot. DurbanDiMangus seems like a typical ultra-risk-adverse banker type.

Actually as I said before my background is buyside AM out of undergrad (not in a bank, but in a big Boston fund complex) - I was 100% interested in value investing. Moved on to event-driven HF later...I have very good, talented sell-side ER friends who I could not help in the past 3 years (even though I had the same exact post-undegrad experience pretty much) in terms of placement. You want to talk about risk aversion? How about this: top HFs hiring top tier m&a bankers with no investing experience vs. ER analysts with arguably some investing experience and has genuine interest...

 

neither a 2nd year research analyst nor a 2nd year banking analyst would ever get hired by a large hedge fund for anything close to a PM role. I have seen people from both roles hired where i work but they are hired as very very (did i mention very) junior analysts. Their job is to do whatever PMs or more senior analysts ask them to do and its not to have anything to do with choosing investments/trades or managing positions. Ie "Hey former sell-side research guy, get me a chart of the inventory contribution to GDP in every country in the G20 over the last 3 years"....or something like that. Most of the time the analyst knows nothing about the actual trades at that level...he is just processing requests from those above him and is judged by whether his work is accurate and produced quickly. I guess that isnt 100% on the original topic, but an above poster mentioned analysts on the sell-side getting PM-like jobs and that just dosent happen (at least not in the macro-World).

 
Bondarb:
neither a 2nd year research analyst nor a 2nd year banking analyst would ever get hired by a large hedge fund for anything close to a PM role. I have seen people from both roles hired where i work but they are hired as very very (did i mention very) junior analysts. Their job is to do whatever PMs or more senior analysts ask them to do and its not to have anything to do with choosing investments/trades or managing positions. Ie "Hey former sell-side research guy, get me a chart of the inventory contribution to GDP in every country in the G20 over the last 3 years"....or something like that. Most of the time the analyst knows nothing about the actual trades at that level...he is just processing requests from those above him and is judged by whether his work is accurate and produced quickly. I guess that isnt 100% on the original topic, but an above poster mentioned analysts on the sell-side getting PM-like jobs and that just dosent happen (at least not in the macro-World).

100% correct. Applies to fundamental event-driven equity & distressed, and more and more traditional L/S

 

This is the single most informative discussion I've ever read on this site. Thank you all for contributing, inviting more people to get credits so I can SB this.

I am permanently behind on PMs, it's not personal.
 

having been on both sides of the fence, I can assure you, recommending a trade to your desk on the sellside does not count as investing experience even if that is better than banking from a buyside point of view. If you are wrong your sellside trading desk doesnt blame you, in fact you probably wont even know they put on the position. On the buyside it is your only job to make recommendations and when you are wrong you get fired or at least your entire team knows you were the one who made the bad recommendation. Very different scenarios. While scenario one might be good practice the final call is not up to them. Also, as someone else said, until you personally have to factor in liquidity and volatility you aren't playing on the same court. That separates the men from the boys. It's like a sellside guy putting a sell recommendation on an illiquid stock, while sometimes obvious the reality is building a position may be impossible therefore the recommendation is useless for everyone but the tiniest hedge fund (~$10 Million AUM).

 
lotsofquestions:
having been on both sides of the fence, I can assure you, recommending a trade to your desk on the sellside does not count as investing experience even if that is better than banking from a buyside point of view. If you are wrong your sellside trading desk doesnt blame you, in fact you probably wont even know they put on the position. On the buyside it is your only job to make recommendations and when you are wrong you get fired or at least your entire team knows you were the one who made the bad recommendation. Very different scenarios. While scenario one might be good practice the final call is not up to them. Also, as someone else said, until you personally have to factor in liquidity and volatility you aren't playing on the same court. That separates the men from the boys. It's like a sellside guy putting a sell recommendation on an illiquid stock, while sometimes obvious the reality is building a position may be impossible therefore the recommendation is useless for everyone but the tiniest hedge fund (~$10 Million AUM).

Non-accountability on the sell-side is fiction, I've seen guys get blown out with their entire desks for wrong calls.

It's overwhelmingly unclear what you mean when you say a sell-side trading desk doesn't blame analysts - who do they blame then haha. Please don't take offense to this but - Where did you work? Was capital free?

Wrong calls add up and this will be reflected in ii as well, I will ding a guy when I vote (although corporate access is more important than sell-side stock picks - yes I'm super cliche` I know).

So as a buyside analyst, I have no investing experience because I am not the foremost expert on "factorING in liquidity and volatility"? Investment analysts are clearly not oblivious to position management. Clarify that for me and others.

 
DurbanDiMangus:
bondarb - when you reply to my comment also tell me if ur on buyside/sellside what you do

I am a portfolio manager at a large macro hedge fund. I listen to ideas from sell-side analysts all the time. And let me reiterate, they have no investing experience. Even when they are giving real ideas and not just pitching crap that their desk wants to sell, the trade idea is only one part of a much larger picture. The analyst has no idea about how to size a position, how to take a loss or add to a winner, how to position a trade within a portfolio, etc. Ideas are a dime a dozen, someone who understands how to manage risk and trade is very very rare. At the end of the day, the trade belongs to the PM and the PM alone, regardless of whether the idea was generated by a sell-side analyst. You may disagree, but that's how everyone on the buyside sees it and the compensation structure at a normal hedge fund reflects that.

 

I'm at a BB, I've never seen a sellside analyst get fired because of a call he made and his trading desk put on the trade. Who gets blamed? The trader who put on the position gets blamed. If you know of an example please cite it. I think you said you've never been on the sellside, trust me, it works this way. I'm sure you've seen a trading desk and an analyst get fired at the same time, if the franchise isn't making money it isn't uncommon to have them all go at once. I've been at two BB's and i can assure you there is a lack of accountability. Your giving votes for successful recommendations is different than being an investor. It sounds like you should be in a position to make the final recommendation to your PM(s). If so, I assume you consider liquidity and volatility before making a suggestion for the portfolio, if not I don't understand how your fund is operated, please share. A sellside guy doesn't have to take any of this into account while a buyside analyst or PM needs to. Relax bro, your posts always come off as angry.

 

it seems like getting a buy-side research job is much better than a sell-side research job (don't have to argue fine points...just general)

but that you still prefer you were at an ibank? durban? no question that ibanking gets you the most practical experience. but do you see a viable path from buy-side research to HFs?

slash what does the "event driven" hf you are at mean?

 

I can offer a few cents worth I went into buy side out of grad school in one of the more known HFs and have been thinking about moving.

1) Pay should not be a consideration , if not you will not last beyond your 1st year in either role

2) For exit opps, presumable IBD is more for roles which require more in depth modelling such as PE or distressed etc where you need sensitivities and scenarios, capacities to tweak the model and have various levels of inputs such as various debts or perhaps the changes in taxes, pensions or options accounting. Its in a way more operational to put it cos everything is more micro. For Sell side ER, its more like filling models, update quarterlys, data crunch and churn for presentations and support the lead analyst's call. On a lower level,both roles are similar until A3 or associate when things start to change. And in senior levels, true that deal making> modelling (for juniors). Same for Sell side, seniors dont really use models unless to do sanity checks and they leave it to juniors to build and tweak the models. So if you are looking at statistically, the industry is like a pyramid right, few seniors at top and many juniors below. So if you are looking for exit opps in terms of safety in numbers, then IBD will be better since HFs hire mostly seniors. However like what Bondarb said, there will be a few prodigal go-getters such as myself who wish to understand the world better and take a path riskier and less trodden but yet has more satisfaction and ownership in their thesis and calls, then you would take up ER or buy side role even if it means less exit opps, a risk of not fitting in well in a small team and obviously no such things as progression cos theres only the PM and analyst.

3) Durban is right in that headhunters value IBD more since they are proven workers and easier to sell cos in most analyst roles, you are just a peon (honestly). Note its "most" not "all". To note, many of the long short funds hire people with MBAs and beyond. So IB analysts are typically hired into PE firms or a fund which needs data crunchers like a start up etc.

4) Bondarb is also right in that if you are good, you will be fine. You may be given more responsibilities over time or meet some one who will lead you elsewhere etc.

5) On accountability and ownership of position, sell side will never be near buy side. Bondarb is right on that for one thing only worries sell side, which is when clients do not chalk enough trades, secondary is when clients lose money on their trades. For buy side, its a direct impact, you make a trade/investment, lose money, everything is principal. You wont be able to eat well, sleep well or perhaps slapping yourself for perhaps making a mistake on the idea. So its very very different.

6) Having said that, some firms have reputedly given their young guys a lot of freedom to make decisions, such as the one I am in. But of cos, with great powers comes great responsibilities. You have a fair share of hair pulling when things go wrong.

Overall the whole finance industry in order to be efficient is highly compartmentalized in functions. And when you serve different clients and roles, obviously exit opportunities will be different. The key is know what you want, what you are good at and pursue that field.

However, also noted is that dynamics in West and Asia is also very different. Personally I feel the industry especially in Asia does not value young talents enough especially people with just decent GPAs but are street smart, able to think and analyze well with a passion for the markets. Institutions tend to hire Ivys, some of whom cannot speak local languages, hav a wide range of interests except for the markets but have stratospheric GPAs. So if you are in Asia, probably IB might be a better choice purely bcos statistically, there are fewer funds and markets are in a way more closed and skewed away from public markets, making it harder for a talent to express her/himself in institutions. The attitude of entrepreneurial risk taking is also not as evident as those in the west.

 

You're right, I don't know what I'm talking about. I've only worked in equity research at two different firms over four years where I saw many analysts and associates transition into different positions. One associate I worked with is now in corporate finance at a large telecom firm, one analyst started his own hedge fund, etc. The skills you learn in equity research are easily transferable to other positions because you are actually critical thinking as opposed to updating pitch books.

Keep in mind, not everyone's career is as cookie cutter as this website would suggest.

Smokey, this is not 'Nam, this is bowling. There are rules.
 

Obviously an internship in ER will give you a great shot a other ER positions for FT recruiting. What it boils down to is where will you be doing the ER internship, and what kind of experience you expect to get out of this.

If you are at a good shop and expect to do some modeling work, you could definitely transition that into an FT job in banking.

 

...Fido, Putnam, etc. actually practice value investing. You listed buyside firms; those companies all actually make investments, and all of them have value teams. If you are passionate about investing, I would take the buyside offer.

If you mean value-oriented HFs, then it depends. I would still probably give the edge to the buyside firm (I have seen several make the transition from AM to HF), but it will depend on the PM. Some PMs like bankers, others traders, and others researchers.

 

Buyside ER places very well at bschools. While it varies between candidates, it is probably second only to MBB consulting. There are so few buyside ER jobs that schools are really happy to take those candidates.

IBD (without subsequent buyside experience) isn't that great for business school. BSchools have been cutting the "finance" part of their classes. You will be competing against your fellow bankers for those slots - target undergrad, high GPA, leadership experience, similar work exp. It is hard to differentiate yourself enough for HBS/GSB in IB, especially since you are working ~100 hours per week.

 
West Coast rainmaker:
Buyside ER places very well at bschools. While it varies between candidates, it is probably second only to MBB consulting. There are so few buyside ER jobs that schools are really happy to take those candidates.

IBD (without subsequent buyside experience) isn't that great for business school. BSchools have been cutting the "finance" part of their classes. You will be competing against your fellow bankers for those slots - target undergrad, high GPA, leadership experience, similar work exp. It is hard to differentiate yourself enough for HBS/GSB in IB, especially since you are working ~100 hours per week.

I dont think this is necessarily true, I think IBD places pretty well across the top 20. And If I were taking a bet on who has a better resume etc. its the IBD kid. 9 times out of 10.

 

Go for equity research. I'm in IB now and hate it. I worked for a local asset manager (~$100MM AUM) a few years back and that was a lot more "fun." But one thing I have to stress, if it's a smaller shop, is that your experience will be significantly better if you actually agree with the investing style of the PM. Mine was into distressed investing and I like small-cap, profitable companies. It was hard to like his ideas and it was hard for him to like my ideas. If you can agree, then there is so much more to offer.

Now, that was for an RIA with under 10 employees. If you're working for a BB bank, you're going to have a lot of reports to write, etc., so it won't be as laid back. As for IB, I work at a boutique and the work is come and go. I can be busy as hell some weeks and the next I'll have days where I sit around and maybe have 30 minutes throughout the day of actual work. One of my biggest pet peeves is sitting around. I don't want to waste their money and I don't want them wasting my time.

 

ER is probably more exciting early in your career. You get your first coverage after a few years and you have a lot of analytical/intellectual work (You use PowerPoint maybe once a month to give a reference to ibd). However I can imagine that after 10 years you can get bored covering the same companies while in ibd your role will change constantly and give you new challenges.

 

Excitement is a very relative term. You need to find what you would like to do on the street. Before coming on this site asking for questions, go look around and read whether it's on this site or others. I made the same mistake as you and it made me look like an idiot. People like to see you taking the initiative and making a discussion possible rather than a question/answer approach.

And to answer your question, I do not have the experience to answer nor do I wish to make an ass out of myself to bullshit you.

//Signed// MLang
 

You're going to get a much better answer using the search function.

I won't speak heavy on the subject but equity research is not as volatile as IB. Hours are more standard due to the nature of the work. I can confirm in IB hours get shitty because executive clients are busy and much of the work comes at or around 5pm.

 

Bankers primarily work on structuring, proposing, and executing deals that impact companies' capital structure. For example, Company may have $10mm in debt outstanding. A banking team that thoroughly analyzes the capital structure may identify a potential transaction (such as issuing equity) that would be beneficial to the company and improve current cash flow by reducing the debt. The bankers then "pitch" the idea to the management/board at Company A. If it is accepted then the deal is put in motion to be executed by the legal, compliance, and sales teams from the investment bank. The day to day life in investment banking for the first 1-2 years is not fun. Expect LONG hours (80 + per week), LOTS of tedious work with Excel, and demanding deadlines that will put a serious cramp in your social life. If one makes it through the first couple of years (the vast majority do not), then the hours and grunt work start to improve. By years 3 & 4 the money starts to become very lucrative as you transition from the Analyst role and move up the chain. Comp is made up of a base salary + annual bonus. The bonus is paid based on profitability of the dept. and how much you contributed to particular deals. The bonus is what most bankers are working for as it typically is 50% to 300% of the base salary.

Research analysts are tasked with covering various companies in a specific sector or "vertical", such as technology, transportation, energy, etc. Research personnel are tasked with accumulating very specific knowledge of the companies and industries that they cover. The day to day activities are participating in all conference calls with management, meticulously monitoring public filings, product/press releases, and gaining as much access to executives within the organization as possible. All of these activities support the ability of the lead analyst to publish research reports on the companies that are covered. These reports are used to generate trading activity for the firms clients. Analysts are typically paid base salary + bonus. The hours are not typically as bad as entry level investment bankers, but can be substantial, particularly around earnings season. One issue that is a persistent problem for companies is determining how much revenue a particular analyst brings to the firm. This is difficult because it is not a direct relationship like that of a banker & client. Subsequently, when companies are struggling, research is often one the first areas that gets reduced.

 

IBD has more applicants because they have the standard 2 year program where they churn and burn analysts. You are expected to leave after two yeras creating a high turnover rate. ER has fewer spots because it is more of a career move opposed a stepping stone to PE or an MBA. If you are serious about ER it is almost expected to try and sit for the CFA. I believe the CFA is a double edged sword.

The CFA is a fantastic designation to have and everyone I meet I admire for being able to study that much, but I also feel if you spent as much time studying for the exam as you did networking/creating your story you'd be in just as good a position as if you were sitting for it. That is my 2 cents. I will note that most of my friends on the buy side have either passed lvl 1 or are studying for it now.

 

From your OP I wanted to clear up a potential misconception. You said you are searching for ER jobs and looking at 'analyst' level. I don't want to assume too much about your background, but entry level positions for ER are 'associate'. After being an associate for a number of years, you can get promoted to analyst. This is opposite of IBD, where the entry level positions are Analyst and you get promoted to Associate.

And yes, for the more senior role of 'analyst' a CFA is required. It is not required for the entry level position of 'associate', although if you are serious about a career in ER it is a necessity.

Additionally, there are a number of FINRA licensing exams you need for equity research if you would like your name to be published on the reports. My bank allows associates to have their names on reports, provided they have passed the Series 86 and 87. These two exams make up the Research Analyst certifications according to FINRA. Part 1, Series 86, is about fundamental analysts and security valuation. Part 2, Series 87, is over federal and industry rules and regulations. Another benefit of taking the CFA is that if you pass Level II it exempts you from taking Part 1 of the Research Analyst certifications (Series 86).

 

Thanks MFFL,

I would most certainly be applying at the associate level - I was only referencing the CFA at the analyst level to show that it really is a designation that is necessary in the field, and would be favorably viewed when applying to associate positions. I also assume it is common practice for an incoming associate to be sponsored by the firm if they do not already have their series 7.

So does anyone know numbers of total equity research employees vs investment banking?;

 

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