What would you like to know about Equity Sales / Research?
Hi Guys -
I'm working on a blog (or maybe ebook) to give junior staff and interns an idea of what it's REALLY like to work in the equities sell-side business at a BB.
For starters, I'm at a top 3 BB based in Asia contributing in an equity sales front office function. Since I joined in Nov. 2008 during the crisis, I have a unique view what has happened since then and how the industry has transformed. I've done work for virtually every buy-side you can name of, from the top sovereign wealth funds (GIC, Norges, ADIA), to every mutual fund you can name, pension funds, teachers retirement funds, and every hedge fund that has invests in Asia. Internally, I work with our sales/research team across London, New York, Hong Kong, Singapore, Shanghai, and Tokyo on a daily basis. I've interacted with over 20+ Managing Directors (including our global business heads), 30+ Executive Directors, and dozens of junior staff.
Here are some topics that I wanted to cover, but if there's anything you guys would like to know that I missed, please reply here and I'll get it added.
Understanding the Equities Business
- Restaurant or Circus analogy?
- How the sell-side makes money
What is an Equity Salesperson
- Core job functions and their value add to buy-side
- Key qualities of good salespeople
- Relationship with Research
What is an Equity Research Analyst
- It's an information business, really
- Equity Research and what they do (and differences between US vs Asia ER)
- Difference between a star analyst (that moves markets) and an average analyst
- Reading between the lines - beyond Buy/Sell/Hold ratings
- Why Equity Research hates IBD, and why IBD hates research
- Around the world in three weeks, the analyst roadshow
Sales vs. Research
- Why each person wants the other's job
- Who gets the shaft during downsizing?
- Does Sales or Research provide more value-add?
- Which path is more suitable for you?
- Do you enjoy storytelling?
- How is staff performance managed in sales and research?
- Why analysts go on marketing trips
- Corporates
- Relationships with corporate investor relations teams
- Why Investment Banks do roadshows for corporates
- Stories from cool companies to cover (Playboy mansion, living on an aircraft carrier)
- Shared relationships with IBD/Research/Sales and corporates
Union of sell-side and buy-side
- What is the real value-add of the sell-side?
- How the Buy-side fits in and importance of client mindshare
- How the Buy-side pays sell-side for services and research
- Importance of external surveys that outsiders don't realize (ex: Institutional Investor)
Long-Term Success in Equities
- Modeling skills and financial analysis will only get you so far and why
- People Skills and the 3C Theory (Clients, Competitors, Colleagues)
- Intangible qualities that make you stand out
- Importance of differentiation, responsiveness, flexibility, idea generation, and creativity
- How your reputation supercedes you constantly
- Types of people you will encounter in this business and how to deal with them
For Junior Staff, Interns, and Aspiring Candidates
- Top 4 misconceptions outsiders have of the equities business
- 7 common mistakes junior staff and interns make
- Types of mindless tasks you will be assigned to do because nobody else wants to do it
- 5 things senior staff appreciate when it comes to junior staff and interns
- Case study of an intern that got a full-time offer and what she did right on the job
- Case study of an intern that failed to even be considered for a full-time interview and what he did wrong
- Networking Hacks - quarterly corporate results, industry trade shows, and corporate websites
Let me know if there's anything else I should add. I purposely avoided pay/bonus since it varies so much between different firms that nobody really has a "right" answer. Tks!
- T
This looks great man. I am
This looks great man. I am going to be an intern at a top BB in equities and am trying to learn more about the business. I come from an FI background but want to learn more about the Eq side of the business before the summer.
One other topic I would be interested to see:
-are FiCC people really so much smarter than equities people? Where does this this old stereotype come from and how 'real' is it today?
Hi Dmackorth - Thanks for the
Hi Dmackorth - Thanks for the feedback. Unfortunately, I don't interact much with FICC so it's out of my realm. Funny thing is one of our MDs on the trading floor admitted to me the same thing a few months ago.
Truth is, the day-to-day tasks don't really overlap between Equities and nobody has time to just go over and chit-chat. But there are jokes floating around on how brainless it is to be a FX trader, so who knows?
Shorttermbuy wrote: But there
But there are jokes floating around on how brainless it is to be a FX trader, so who knows?
I can assure you that is patently false. Perhaps a spot trader who just has to watch screens and mash buttons as he witnesses the market unfold, but the derivatives traders are some of the most freakishly brainy people I've ever known.
A lot of people do certain things to add days to their life. I do things to add life to my days.
This is unreal! Can you
This is unreal!
Can you please PM me once your blog or e-book is finally launched? I've been looking for a guide like this forever!
Sounds like a cool idea,
Sounds like a cool idea, would be interested once it is launched
Good is the enemy of Great
We don't hate IBD. I just
We don't hate IBD. I just find it amazing that they always find a way to notify us that we have to vet, model and market a little $500m mkt cap IPO 2 weeks before earnings when we get 0 of the upside potential anymore and then forced to cover the stock for the next 2 years.
Can you comment in your items
Can you comment in your items 2, 3, and 4. (What is an Equity Salesperson, What is a Research Analyst, and Sales vs Research)
Kind of interested to hear your perspective working in Asia. Thanks
Will try to be brief here but
Will try to be brief here but in a nutshell:
Equity Sales - Essentially a stockbroker and account manager for a buy-side fund/client. For example, if I was assigned to cover SAC Capital, I would need to make sure their PMs and Analysts are getting the right resources in making investment decisions/actions from my firm (mapping). This could range from research analyst 1:1 access, broking research ideas (or their own views), corporate access, offering a unique market view, making sure there are no trading issues, good rates for stock lending, bookbuilding process, and a bunch of other stuff. The end goal is to capture more client mindshare so eventually SAC (or XYZ firm assigned to each salesperson) does more trading through us (or ranks us higher in broker reviews) so my firm gets paid more, and thus everyone is happy.
Equity Research - In a nutshell sell-side research analysts are a walking wikipedia of their company and sector, offering investment advice or market insight for buy-side analysts/portfolio managers. These are the guys that give buy/sell/neutral ratings you hear about. Economists/Strategists are also grouped into research but it's not really focused in the spotlight compared to analysts. For an Apple analyst (as an example) - besides having a model and forecast, they will need to know their phones and industry inside out, from component makers like the camera, keypad, processor, casing, and touch panel. Gathering all this information from either industry contacts, companies within the supply chain, or various sources they piece it together to get a fundamental view of how the company should look in the next twelve months (or a shorter time window) and take an investment view from there. The end goal is to become the "go-to" person regarding a company (or sector) to buy-side PM/analysts.
Occasionally they help IBD with their IPO deals, but how often usually depends on how good your bankers are at getting that business.
There are also salestraders on the sell-side that cover buy-side traders, but it's not my field of expertise. I'm probably missing some other info if anyone else wants to chime in.
Sales vs Research
In a way, you can think of it as a shotgun (sales) vs sniper (research) approach to stockbroking. Research is a laser focus understanding on a company/sector, and sales is a generalist focus within a geographical market. A salesperson can broke healthcare, tech, autos, or any ideas they like to portfolio managers/analysts, while research can only focus on their coverage universe or sector. There is no way to say which job is better, as it really depends on your personality and what interests you.
Generally speaking, a sales can enjoy the flexibility of having multiple topics to broke about, but they will never understand a company as well as the analyst or have the industry contacts to provide differentiated insights. But for an analyst, a salesperson is helpful in getting your research "broadcasted" out to the investment community (only so many phone calls an analyst can make within a 24-hr day) and help raise your profile/franchise to get more trading commissions/higher broker reviews for the firm.
Management often says that a good analyst is a good salesperson, and a good salesperson is a good analyst. Research needs to have the qualities of a salesperson to get their ideas out there and capture the client mindshare, and a salesperson needs to understand fundamental research so they can broke stock ideas more effectively (instead of being just a copy/paster).
Equities in Asia:
There are a ton of countries within the Asia market, but the business units are generally divided geographically across firms as follows:
Japan - It's in it's own world since it was the first to take off in this region decades ago
ASEAN - Southeast Asia (Thailand, Malaysia, Indonesia, Philippines, Singapore, +/- 1 or 2 others)
Greater China - Hong Kong / China (H-Share) / Macau, Taiwan
China - A-Share market
Korea - Self-explanatory
India - Also in its own world
Frontier Markets - Cambodia, Vietnam, etc (nobody really covers them yet)
Asia is quite exciting as there are so many stories happening at the same time, and as a regional salesperson its just a buffet of ideas for you to broke. If you want to talk about Apple/tech, you can focus your day's work on Korea/Taiwan (panels, camera modules, and chips are made here), and if you want to talk about casinos or Chinese tourism, focus on Macau and Singapore. China consumer of course is a big story that I don't need to go into.
As an analyst in Asia, you will most likely be based in a country covering a specific sector. There is usually a sector team head that coordinates the sector view/strategy. For example, a regional banking head will take input from the Korea, China, Taiwan, Singapore, ASEAN, and HK banks analysts to come up with a strategy piece and sector view. Junior analysts tend to rise the ranks faster in Asia since the business model is slightly different from the US and there is more growth/opportunity/turnover in the region.
As a salesperson, you will either be a country or regional sales. Country sales focus broking ideas from one country, ie: Korea Tech, Korea Banks, Korea Consumer, and regional sales can pick anything they want in the region cross-country or cross-sector. There are benefits/drawbacks of being both, but that is for another post or my blog/ebook haha...
Hi, I am just about to start
Hi, I am just about to start a graduate job in equity (research) sales for a major bb in London. I have some questions about the job that I haven't been able to find the answer to anywhere so would be extremely grateful if you had any insight...
Firstly, how does the sell-side make money? I understand that these days sales people no longer take orders directly which are then relayed to sales-traders or traders etc. Instead clients have to distribute trades fairly to different banks. If I understand correctly this means that clients also 'rank' sales and research teams, which is another way for them to give the banks money.
How does this work out in practice, particularly in terms of a sales persons' commission? Is this now more based on a desk's performance rather than an individual's performance, given that it is harder to ascertain when a salesperson successfully convinces a client to trade etc. I know that in some desks in fixed income, a sales person or trader might be 'entitled' to a certain % of money generated, but I would assume this is harder to gauge in equity sales..?
Does this make it a less profitable position? Does it also mean that a salesperon's performance is harder to manage/evaluate?
Any info here would be hugely appreciated..
Thanks a lot.
Amazing, obviously inetersted
Amazing, obviously inetersted as I'm lookign forward to move into ER soon.
You can add a section of where you think the industry is going moving forward. Getting bigger/smaller? more macro or company focused?
Check out my Blog
theman1980 also sent me this
theman1980 also sent me this via PM, so thought I'd post my answer here too so it adds value to some readers:
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Q: Firstly, how does the sell-side make money? I understand that these days sales people no longer take orders directly which are then relayed to sales-traders or traders etc. Instead clients have to distribute trades fairly to different banks. If I understand correctly this means that clients also 'rank' sales and research teams, which is another way for them to give the banks money.
A: Yes you are correct, orders by buy-side are executed through salestraders, although equity sales can certainly take orders and just pass it along. The exact commission is never really set, as sell-side can lower it if the volume is high enough, and depends on how important that client is. Usually buy-side have their own traders that communicate with sell side traders on orders as they are in charge of the execution strategy instead of the portfolio manager - ex: $100mil executed through 10 different sell-sides so its diversified (its better that less people know what you are up to, esp if you are a really large fund that can really move the price in a low-trading volume stock, for example).
Some sell-side may have better rates on borrowing for shorts, derivs, etc so its critical for clients to have a diversified broker base. It's also important that sales be kept in the loop, so when they speak to the portfolio manager they know whats up and don't look like an idiot! (edit: this is pretty big task in the business, keeping everyone on the same page for one client - especially if the client runs an emerging markets fund where you have multiple countries/markets across different times zones/locations)
The other way sell-side gets paid is through the ranking system aka broker review. Every half year or quarter, the buy-side has a bonus pool that they allocate out to the sell side. It is given out based on the ranking/votes that a sell-side firm gets. The higher your tier, the bigger cut your company gets. As a salesperson you are the account manager, so its your goal to rank as high as possible for the firm. What happens is the salesperson in charge will go to these meetings and meet with the CIO, head of trading, head of EM funds, etc. and just basically ask them "how are we helping you, anything we can improve, how is our trading, etc etc" like a service tune-up, and then they blast out the notes tweak it internally with different teams in the sell-side that the client had problems with the end goal to improve service and get a higher ranking, so everyone gets a bigger bonus (hopefully).
Q: How does this work out in practice, particularly in terms of a sales persons' commission? Is this now more based on a desk's performance rather than an individual's performance, given that it is harder to ascertain when a salesperson successfully convinces a client to trade etc. I know that in some desks in fixed income, a sales person or trader might be 'entitled' to a certain % of money generated, but I would assume this is harder to gauge in equity sales..?
A: Salespeople are generally measured by the amount of trading commissions made off their account and the final broker review votes and ranking their firm is at. If there is a consistent progress in ranking up, or getting new votes from very big portfolio managers or penetrating new accounts/relationships, that's when the salesperson gets rewarded. (Edit: But sometime when the market is bad, going by absolute trading commissions can be misleading, so broker reviews usually have more weight since it has a more long-term relationship focus that pays off bigger for the firm)
The way to think about it is 'how can I capture the client mindshare' - how many multinational companies are there in the world that make hamburgers?
How many sell-side firms cover Apple, Nokia, NVIDIA, or any other large-cap company?
When you compare it, equity sales/research a very commoditized business which makes it even more important to stand out from competitors on the street.
The final thing is the sell-side firm's market share of trading. For the top five brokers trading most of the volume in a market, they are making much more money compared to the rest. The bottom few with 2% or less market share really don't get a revenue base to pay out big, unless their IBD or other businesses are good to offset it.
Furthermore, the higher your market share is, the more clients see your firm as an authority in market color, view, and know generally whats going on vs some firm that has 0.5% market share. Its sort of a catch-22, so that's why a lot of boutiques and smaller sell-side firms are just really struggling here in Asia. As a sales, this will make your job extremely difficult because clients will be nearly impossible to penetrate for votes or trades.
The counter to this would be if you had 10+ years experience, and every client on the street knows who you are so naturally trusts you and your personal brand, not the company's. A lot of senior people did this in 2010-2011 as they were promised more cash and have the personal franchise to do that, but its getting increasingly risky as movement has been very limited this year.
To be honest bonus calculations differ across firms, so its hard to say. I'd say the important thing is add value to your clients, be different from the competition and that's the way to go. You will see many sales that just broke stocks verbatim on what the analysts say. DONT BE THIS GUY!! Make sure to have your own view and thoughts, even if they are different or possibly wrong - nobody is right all the time in this business other wise we'd go to Vegas and retire.
As a junior sales, you will probably be assisting the senior sales with some basic reports, data requests, or servicing to clients (very boring stuff but absorb what you can). Most junior sales that I've seen don't get to broke stocks for the first year but it depends on your progress. As for clients, junior sales are usually given really small hedge fund (AUM <$1.5bil) or family office clients, and never the really big long-funds or hedge funds like GIC, GSAM, Schroders, SAC, etc. The senior guys have the relationships with those guys (they also generate the lion's share of revenue) and would be hard-pressed to give it up (difficult to penetrate anyways as a junior guy), but eventually every sell-side firm does have a co-coverage system as a backup. But as the industry ages, the old retire and young become old so there is a natural progression of everything. Can;t expect the senior people to be there forever.
Just remember this is a people business and a "3C policy" one of my mentors taught me:
Don't be an asshole because its a 3C industry - anyone can be your client, competitor, or colleague someday. You never know when you may need help with a new job, or a colleague you treated badly suddenly becomes a big client, or a client becomes your boss one day, etc. Word spreads quick in this industry and your reputation is paramount!
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Grammar is kind of bad since i literally just brain-dumped it on him, but hope you get the idea!
Q: You can add a section of
Q: You can add a section of where you think the industry is going moving forward. Getting bigger/smaller? more macro or company focused?
There will always be a need for ER because its impossible for buy-side firms to cover the hundreds of stocks they cover, while also looking for new investment ideas on the horizon. There will always be a time for top-down (macro) and bottom up (fundamental) analysis, so its hard to say if one is becoming more important than the other. Both are just different tools (like a hammer vs a drill) to use in an investment strategy. Generally though, being a star analyst that covers the biggest companies is more impactful than a macro-economist (unless you can get decently famous on TV, write your own books, etc..)
For the industry, it is certainly not the good old says of pre-2008 or even earlier, where hedge fund bonuses were spent in vegas gambling in $5,000US increments, or macro analysts being flown on private jets last minute to meet clients if commercial flights were full. With the increased regulation and all the bad press its hard to say it's a growth industry, especially in the US/EU markets. They are still very large businesses for each bank, but Asia (Hong Kong / Singapore) are the real jewels that will shine in the next decade. (China is a different subject as they operate within their own world of A-share as of now. But I won't get into this unless someone wants to hear about it)
Overall, you still do get paid more than the average corporate job but if you're expecting blowout bonuses every year that make your mouth drop to the floor like pre-2008, you will be in for a surprise. But, I could be wrong since this business is very cyclical and it can get crazy in bull markets - although highly doubtful given the increase scrutiny and regulation. But every year everybody complains about their bonus- its like an industry standard. (who wouldn't want more right?)
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Alright, any other Qs?
I specialize in placing
I specialize in placing investment professionals like PMs and analysts in hedge funds, mutual funds, FOFs, and endowments groups - as well as sell side analysts (not so much these days). So I'm not as au courant with regard to the sales landscape - and we're beginning to develop that vertical.
This question asks about institutional equity sales' books of business. I'm wondering what average books of business #s are for Associates, Vice Presidents, Directors, Managing Directors, and even department heads if they're still quarterbacking the largest deals.
Do you have some general numbers to throw at me for each career stage? When I ask a sales candidate what their book of business is, I want to be able to know sort of what the average book size is at each stratosphere, so I can have a general idea if someone is particularly successful or not.
Responses are welcome from other folks as well.
My thanks. And nice work btw.
Hey Headhunter71 - Sorry I
Hey Headhunter71 - Sorry I don't have an answer for you, but I do have a general idea of the global AUM of the clients they cover:
MD: $50-100B+
ED: $30-$100B+
D: $2B-$30B
AD: $0.5-$2B
My guess is the ED space is hardest for you to determine, as the gap between the most experienced ED and one that was recently promoted can be quite big. We have a few EDs with close to 20 years experience who want nothing to do with management so they are happy where they are, and a few that were just promoted with about ~10 years in this business.
How do you only have one SB
How do you only have one SB for this thread? Great stuff +1
SB'ed
is your blog up btw?
Good read - thanks for
"Whenever you feel like criticizing any one...just remember that all the people in this world haven't had the advantages that you've had."
'The Great Gatsby' - F. Scott Fitzgerald
Equities in Asia or equities
Great thread. 1. Can you give
Equities in Asia - a lot of
Appreciate the effort towards
-Brasky Out
Great insight. I'm curious
Also one more thing, you
@ Bill Brasky - Word. 100%
Thanks again for this post -
"Whenever you feel like criticizing any one...just remember that all the people in this world haven't had the advantages that you've had."
'The Great Gatsby' - F. Scott Fitzgerald
Shorttermbuy: @ Bill Brasky -
@ Heavy Bag: I don't know
Thanks a lot for your message
"Whenever you feel like criticizing any one...just remember that all the people in this world haven't had the advantages that you've had."
'The Great Gatsby' - F. Scott Fitzgerald
Thanks a lot for your message
"Whenever you feel like criticizing any one...just remember that all the people in this world haven't had the advantages that you've had."
'The Great Gatsby' - F. Scott Fitzgerald
Hi all - With market volumes
bookmarking!
Is this ebook finished?
Awesome content and
Bookmarked. Also interested