Breaking into buy-side equity research - my experience

This will be my very first post to this forum, which is admittedly dedicated more to banking and private equity rather than investment research. Given the dearth of content on buy-side equity research (understandable given the small size/low turnover of the industry), I have decided to share my experience breaking into buy-side research from the sell-side.

DISCLAIMER Although I am personally a devout member of the value camp, I will be talking about long-term oriented fundamental investing in general. So when I write "buy-side research", know that I will be referring to that instead of quarter-trading hedge funds (think the Citadel hedge fund family, Balyasny, etc) and the like.

Why would you want to work in buy-side equity research?

I can't speak for all shops, but in general, the work environment is very intellectually stimulating and the organization is very small and flat. Research teams in general number at most in the tens of people. Your work is about finding the truth the market doesn't see rather than trying to close the next deal. The market is the ultimate determinant of whether you are correct in the long-run, not whether or not you can trick the next idiot to buy your garbage (I'm very cynical about the sell-side). I will not be talking about life on the buy-side, because BlackHat wrote a very good post about it a while ago, and it still rings true today. I will note that his perspective is from that of a hedge fund, likely a fundamental shop (maybe a Tiger Cub), so there will be some differences between our comments.

If you like to think and analyze, to have a ton of autonomy, to have very reasonable work hours, to be very well compensated, and to work with a small team of smart, dedicated people, then buy-side research may be the right place for you (you results may vary).

What is my background?

I will be intentionally vague when it comes to personal information. I've recently started at a relatively small shop ($10B+ AUM, fewer than 10 people on the investment team) after having worked at a non-BB sell-side equity research shop on the east coast for less than 3 years after graduating from a non-target school. The entire recruiting process took around two years. This is because I was targeting a very specific niche within the already small buy-side equity research opportunity set: long-term value funds that outperform over full market cycles.

What was my experience like in sell-side research?

It's pretty miserable. You're basically marketing for stocks of your bank's IBD clients. Sell-side research makes money through the traders (commissions) and through offering corporate access. Most people don't really care about sell-side "insight." When we weren't running around like headless chickens during earnings season, we were scraping the bottom of the barrel on quarterly/monthly/weekly information with which we could spam up our clients' (buy-side research) inboxes and voicemails with our "differentiated research." I came in knowing that sell-side research is likely the best way to break into buy-side research, so I really just had to tough it out for a while.

Although the quality of research of our department wasn't all that great, it was pretty clear to me that most sell-side research in general just sucks, be it from bulge brackets or from boutiques. Many initiations are no more than a rehashing of investor relations presentations with little to no value added. The industry itself is dying right now due to the overhang of MiFID being rolled out in Europe, which will be separating payment for sell-side research and commission payments for trade execution quality (normally when a sell-side shop provides research a buy-side guy finds useful, it is expected trades will be directed to the S&T department of that sell-side shop to "reward" them for the research).

Luckily, your targets are the very clients your department deals with on a day-to-day basis: the buyside research professionals that you spam email or spam call. The downside is that the people who tend to take sell-side opinions seriously are generally really bad investors (likely quarter traders) and you probably don't want to work there anyways. However, there is normally some sort of exhaustive client database available where you can find the contact information of pretty much every single buy-side shop in the industry. This is where the real work begins: the networking.


Since the buy-side has such low turnover, especially for the good firms, how do you break in? In general, the larger shops tend to have established research associate (RA) programs for people with 0 – 4 (up to 6 or more) years of experience. However, at the end of the program, the RA is usually kicked out and is expected to go to either MBA, another shop, or leave the industry altogether. (Note that the hierarchy is associate, analyst, PM) This is because top level (analyst and PM) turnover is so low that there's simply not enough room for promotions. Some shops that do this include: Brandes, Dodge & Cox, Hotchkis Wiley, Fidelity, Wellington, Putnam, T Rowe Price.

How would you break in then? I've found there are a few opportunities to do so:

  • Right out of undergrad, either full-time hire or intern conversion (relatively difficult since the companies that do this normally recruit either with local schools or at "target" schools).
  • Breaking in as a research associate after 2-3 years of experience (most frequently from sell-side research, but I've also seen bankers doing this).
  • Analyst hire out of MBA as a career switch. This is very straightforward.


Like with any position in finance, networking is your best bet for breaking into this industry, I would say even more so than banking since by far the most important consideration on hiring you is cultural fit. When I say "cultural fit," I don't mean that bs buzzword that you bring up during your banking interviews, where every culture is just frat bro excel modeling. I'm talking about stuff like:

  • Is research done slow-paced or fast-paced? How long does it take to vet an idea?
  • Is the decision making based on a committee model or a star PM model?
  • Do people prefer consensus building or a meritocracy of ideas?
  • Is the quality of the ideas valued more than the rank of the person coming up with the idea?
  • Is there more focus on breadth or depth?
  • Are people siloed in their industry coverage or is there a generalist style sharing of ideas?
  • Is there a collegiate environment? Are colleagues approachable?
  • How do people react when they are proven wrong?
  • What is the philosophy on risk management? Is it a critical component of the thesis or an afterthought?
  • What is the orientation of the funds (absolute value, deep value, relative value, growth, GARP)?
  • How much emphasis do they place on the qualitative side like management teams versus the quantitative side like modeling?

Networking as a way to find openings:

Networking is not only important to determine cultural fit, it is also useful to find openings! What do I mean by that? The problem with hiring, especially at a lot of smaller shops, is that openings are sometimes not advertised anywhere, even on their own websites! In fact, for my own position, I was referred by a director of research at another very solid buy-side shop who knew my current shop was looking for a junior hire. My strategy has been: **building out the professional network and making a good impression so when an opening comes up, you would be the first to know.** Your strategy should be to never let any door unopened, because the opportunity set is so small you cannot afford to miss out.

How to network:

How do you go about networking? The progression is simple and should normally go like this: cold email asking for a call, networking call with hopefully a referral, apply to opportunity and reference your contact. I won't be going over cold emailing other than to say you definitely would want to personalize it for the company you are reaching out to. I've mostly been reaching out to RA's rather than analysts or PM's. Also, sometimes it could be helpful to reach out to someone not in research, especially if that person is an alum of your school. In fact, I've gotten interviews this way by asking them to refer me to the relevant HR person! You could also ask them to refer you to research personnel.

For the networking call, you should come up with very specific and targeted questions for your contact. Really get into the heart of their culture and the way they do things. Obviously you will get better at this and asking questions over time. You shouldn't be asking things that could be asked of any company like: "what are your hours?" "what is your favorite part of the job?" "what do you think of the current market?" You would be better off asking stuff like: "you guys are a value fund, but you own Netflix. What's the value thesis behind that?" "Although you guys have a star PM model, is there any leeway for questioning or challenging the star PM's ideas?"

Hopefully, at the end of the networking call you have made a positive impression on your contact, and you should ask about either open positions, potential open positions in the near future, or referrals. ALWAYS have an "ask" at the end of the call, since otherwise you'd just be wasting your time. In addition, the conversation should also have revealed to you whether or not you would fit in with their culture, e.g. if you are a slow, deliberate thinker, you wouldn't enjoy working at a fast-paced shop. Wash, rinse, repeat.
To attest to the power of networking, in my experience, I have been able to get at least a first round interview at 90% of the places I applied where I have at least 1 networking contact. And if you tailor your resume to buy-side investment research, you could even get a reasonable interview rate for places you don't have a single contact.


You almost never interview with HR in this industry since cultural fit is so important. In addition, you should never get asked stupid questions like "if you could be a fruit, what would it be?" at least at any shop that you would want to work for. You also never get asked irrelevant behavioral questions like "tell me about any leadership experience you've had." First round interviews are done over the phone by analysts. Then, if you make it to the next round, you would be interviewing onsite with many members of the team, including PM's.

There are actually two types of interviews:

1) "Investing" interviews where the interviewers are interested in your abilities as an investor more than your technical knowledge and excel modeling skills; generalist shops always conduct these while industry coverage shops sometimes conduct these
2) "Coverage" interviews where they don't really care about your investing skills since you're going to be their excel monkey; these are industry coverage positions where all they care about is how well you know the industry and if you can do the modeling work

Objective of the interviewer:

I will go over the types of questions they ask, but first, I will discuss the objective of the interviewers. Ultimately, interviewers are trying to determine if the candidate possess the three necessary qualities for a great analyst (in my opinion and in no particular order):

1. Intellectual integrity – this is not just being honest, but having a love of the truth. This means being willing to admit when you are wrong and relentlessly pursuing the truth (not falling for confirmation bias, the bane of investment analysts). This quality also includes an insatiable curiosity. If you lack this but possess the other two, you're a sell-side analyst, i.e. a sleazy salesman.
2. Analytical skill – having a love of the truth is not enough if you can't arrive at the truth. As an analyst, you need to be able to synthesis information and draw conclusions.
3. Passion for investing – possessing the above two would be sufficient for a scientist, but to be a great investor, you need to love investing. It's the passion that drives you to read boring filings and tread through massive datasets. It's also this passion that translates your conclusions into actionable insights to inform the next investment.
4. Culture – this isn't a quality, but this is something the interviewers want to know about to make sure you're a cultural fit

Interview questions:

Below, I will list questions that you will almost definitely encounter in your "investing" interviews. Note that these are all behavioral, as 95% of your questions will be behavioral, with 5% remaining being brain teasers to make sure you're not an idiot. I will number them 1 to 4 to correspond to the qualities listed above.

  • What got you into investing? (3)
  • What's your investing style? (4)
  • Tell me about a time when you were wrong. (1)
  • Tell me about a book you've read recently (3,4)
  • How do you approach valuation? (2)
  • What is the process you use for due diligence on a company? (2)
  • Tell me about something that's not on your resume/what do you do for fun? (4)
  • Why do you enjoy investing? What keeps you going when things get tough? (3)
  • (If you're in sell-side research) Do you disagree with your analyst on any names? (1)
  • (If you're in sell-side research) Are there any names you like outside your coverage? (1,3,4)
  • What is your greatest weakness? (1,4)
  • Why do you want to work here? (4)
  • Who's your favorite investor/which investors do you follow? (3,4)
  • What do you think about the holdings in our portfolio? (1,4); I've once bad-mouthed one of their holdings and it turns out my interviewer was the one who had pitched it (and he's the director of research)! I ended up moving on to the next round, so the intellectual integrity element is clearly valued!
  • What do you have in your own portfolio? (3,4) This question may be tough if you're in sell-side research, since there is very likely a substantial amount of trading restrictions on companies in your industry, which just so happens to be the area you're most familiar with. I would recommend having a few names to talk about here, unless for some reason ownership of all stocks is restricted by your current employer.
  • Pitch me a stock. (1,2,3,4)
  • Any stocks you don't like? (1,2,3,4)

The pitch

In addition to these interview questions, I highly recommend you have at least 1 fully developed pitch and corresponding report as a work sample. The pitch will be something to talk about during the interview and you will be referring to it many times to demonstrate and highlight your strengths. For instance, you can point to the model to emphasize your technical/analytical skills. You can also talk about how you've head to dive through thousand-page filings to find the information needed to create the pitch (showing your passion for investing). You can even talk about things you've learned during the due diligence process (displaying your intellectual integrity).

Customize the pitch:

Ideally, the pitch should be customized for the place you are applying to. I had two pitches at my disposal, 1 "buy" and 1 "short." These should be comprehensive and fully developed where you can speak confidently on any concerns or questions the interviewer may have on the name. Consider it a representative piece of work you would put out if you were hired as an analyst and needed to make an investment recommendation to the PM. Naturally, since I was recruiting exclusively for value funds, both my pitches were value oriented. These pitches took me two to three months to create each, since the only real time I could work on them is during downtime at work or during the weekends.

Don't be stumped on your own pitch:

Before you even interview, make sure the interviewer has a copy of your pitch so you could highlight your strengths during the interview. If you have ANY doubts as to whether or not your pitch would increase your chances of getting an offer or if you are afraid the interviewer could conceivably poke holes in your thesis, go back and DO MORE RESEARCH. You should NOT be stumped during the interview on your own pitch. Know the bear thesis if you're bullish. Know the risks to your thesis. Know the different angles of attack.

Your report should be however long it needs to fully develop your thesis. You can have an appendix if you want, but you should have all your hard hitting arguments in your report. I've heard some people argue that a 2-page report will suffice, and there's truth to that suggestion. In fact, most interviewers don't even read this report. However, you will know a shop is really worthwhile if they read your report and ask you targeted questions on it. Those are the shops that actually want to develop internal talent and are the ones that have an open-minded culture where the merit of the ideas matter more than the seniority of the person coming up with the idea.

You will likely be asked about any other stocks you like, so it may be good to prepare one or two additional pitches (no need for full report) where you know the general thesis and some risks. You will only be asked 1 question on these auxiliary ideas, in all likelihood.

Companies of note

Don't bother with bank owned asset managers like GSAM or JPMorgan's asset management arm. Also don't bother with BlackRock – they are trash. I've never heard a single good thing about them nor have I ever seen one of their ex-employees at a better shop. This is absolutely not an exhaustive list, just the funds that are decently sized and have been around for a while. There are quite a few very solid boutique value shops around the country I didn't bother listing since they hire by demand.

Fidelity – only hires out of intern conversion, out of undergrad (lots of Ivy Leaguers), and out of MBA. No chance of joining as an experienced hire if you're pre-MBA; All the Boston research associates know each other (I mean across firms. So you should expect the Fidelity guys to also know the Putnam or Wellington guys). Frankly the quality of their research team isn't that high. Although you get coverage immediately out of undergrad, there's no real unifying philosophy on their investing.

Putnam – same as Fidelity. Even the research structure and culture are extremely similar

MFS – not a great shop, but probably one of the oldest asset managers out there; I believe they do hire out of undergrad

Wellington – has an undergrad internship program for women and under-represented minorities. Hires out of undergrad and experienced hires and MBA interns and post-MBA. Their Launch Research Associate is the relevant program where you get placed into a group and rotate positions/coverage. They have quotas for both out of undergrad hires and experienced hires (pre-MBA). Their onsite portion gives you 1.5 hours to prep a pitch on two names they give you (pick one) and then you'll need to present in front of a committee. A nonsensical exercise.

T Rowe Price – Has undergrad/MBA internship, right out of undergrad, experienced hires, right out of MBA; no real culture, too big to succeed type. Their funds have so many holdings, they pretty much just do closet indexing

Clearbridge – Mostly growth strats, no real way in out of undergrad or at the associate level. Does do MBA interns and hires out of MBA. Has connections to Columbia

Fred Alger – Aggressive growth shop. Hires a lot of Yale people out of undergrad research associate program. Also experienced hire pre-MBA

First Eagle – well known shop, I don't think there's any way in pre-MBA

Ruane Cuniff Goldfarb – Sequoia Fund took a big hit after their Valeant debacle. Still a well-known name and highly respected value shop. Buffett recommends them. Don't think there's any way in out of undergrad; they rarely hire

Neuberger Berman – employees bought this group from Lehman Brothers during the crisis. Has many products including private equity. They have an "internal sell-side" structure, which is exactly as it sounds. Hiring at the pre-MBA level is by demand. No real upward mobility, and they are definitely a "coverage" interviewer. Expect the RA job to be very similar to sell-side RA in that you support your analyst with very little input.

Royce – famous small-cap value shop with strategies that run independently from each other. Almost never hires.

Tweedy Browne – old school international value. They very rarely hire and only at the post-MBA level

Davis Funds – founded by the son of the famous insurance investor Shelby Davis, now run by Shelby Davis Sr's grandchildren, I believe. They do all industries not just insurance. They very occasionally hire post-MBA

Pzena – publicly traded investment manager. No way in pre-MBA.

Harris Associates – a top tier asset manager in Chicago, generalist structure, famed for their "devil's advocate" procedure, with star PM Bill Nygren. Definitely a guy you should follow if you're into value investing. They have domestic and international sides that run almost entirely independent from each other. EXTREMELY competitive to get a spot here. They recruit sophomore interns who have a chance to become junior interns who has a chance to become a research assistant (basically just does the modeling/support work). The research assistants work and compete with each other for a few years before one of them is promoted to research associate, where he would pick up a couple names as coverage. Now, the firm intends to develop and promote this associate hopefully to an analyst one day. Harris Associates also hires people out of MBA and post-MBA, though rare.

Diamond Hill Capital – a very fast growing value fund in Columbus. Has a relatively large team but also develops/promotes talent internally. Sometimes hire out of undergrad and pre-MBA experienced hires. Also sometimes take people out of MBA. Industry coverage groups.

Dodge & Cox – Takes junior interns and also hires people out of undergrad and experienced pre-MBA hires. Very occasionally takes MBA interns since they have extremely low turnover. Very old value shop using relative valuation. Committee decision making structure, though management can be very traditional and have a lot of biases. RA's are kicked out within 4 years, though many people leave before then. Excellent placement into top MBA programs; you can be almost guaranteed to be placed into HBS, Stanford, Wharton, or Booth.

Hotchkis Wiley – Hires out of undergrad and pre-MBA experienced hires. Not sure about MBA hires. People generally stay around 4 years. This is a value shop with industry coverage.

Causeway Capital – Their differentiating factor is that they combine fundamental research with quantitative analysis. They do international value in industry coverage teams. They make experienced pre-MBA hires from time to time, currently building out their China coverage team. They do take MBA interns.

Brandes – International value shop run by Charles Brandes who retired 1Q18. They have a sizeable RA population that they hire out of undergrad and pre-MBA experienced hires. They run industry coverage groups. Also takes a good number of people for their MBA internship. Hires people normally starting in August as the school year starts – for both pre-MBA experienced and undergrad hires. If you're a pre-MBA experienced hire, you would start in January whereas the undergrad hires would start in July. If you're reading this post when I posted it, they should be starting their recruiting very shortly!

Capital Group – extremely hard to get in and very good reputation. They do make pre-MBA experienced hires but it is a buyer's market for them since so many people apply there. Also their MBA intern program is extremely competitive and I hear they give maybe 1 full-time offer per year to MBA interns.

TCW – do take people out of undergrad and experienced hires. Don't know much about them, but quality of research is likely low given I've never encountered any of their ex-employees at top shops.

Hope all of that help! Feel free to message me with any questions or post replies here. No guarantees I'll resp

Comments (89)

Jul 29, 2018 - 5:25am
Budussy capital, what's your opinion? Comment below:

Nice summary - is it possible to track performance of your recommendations? I'm at a start up value fund with $110 m and hoping we can raise aum but mindful I will most likely move if we can't. I'm concerned the lack of prestige factor from not being at a larger shop but wondering if this can be overcome. B

Jul 29, 2018 - 8:26am
Subutai Baghatur, what's your opinion? Comment below:

I'm assuming you're at the analyst level so you wouldn't have control of what goes in the portfolio. I'm not sure if there's a way to give a numerical value for your performance other than talking about how frequently you're correct. I've heard from many great investors that solid analysts are right 54% of the time and absolutely phenomenal analysts are right 58% of the time (not sure how they define being "right).

I want to ask you, are you more interested in becoming a great investor or making money & prestige? When I say great investor, I mean people with long track records of long-term outperformance. I will tell you that great investors do not care about prestige or your background in general. As long as you can get a conversation going with them (i.e. make it past the resume screens. you can skip that by networking, obviously) and you show them you have the track record and the qualities of a great investor (see my original post), they would be happy to consider you. These people tend to be very humble and very open minded individuals.

However, if you just care more about prestige & money, I don't really have any advice for you. I cannot comment with any certainty about the analyst compensation at those top-tier investment shops, but I can say that the big guys like T Rowe or Cap Group pay extremely well at the analyst level.

Jul 30, 2018 - 4:15am
Budussy capital, what's your opinion? Comment below:

Hi Subutai , Being a great investor is far more important to me than prestige, I was more referring to breaking into a larger shop if my current small start up firm cannot raise more AUM. From what you're saying breaking into a larger shop if we can't raise assets is more about networking / interview performance which is good to know.

Jul 29, 2018 - 8:13am
Subutai Baghatur, what's your opinion? Comment below:

Here are some fund(s) I forgot to mention:

First Pacific Advisors (FPA) - Very solid value shop. hires by demand but does occasionally hire both pre-MBA experienced hires and MBA/post-MBA. Has the famous Crescent fund, which is a go-anywhere absolute value fund. They buy stocks, bonds, short stocks, derivatives, and other fixed income securities. I really like reading Steve Romick's commentary.

Loomis Sayles - decent growth shop focused primarily on fixed income products, building out equities products; research structure is grouped by portfolio (so research personnel report to solely their own PM). Has occasional demand for experienced hires pre-MBA and post MBA (and MBA interns). Hires by need.

Jul 29, 2018 - 4:26pm
Subutai Baghatur, what's your opinion? Comment below:

Oops, yes you're right, I should have mentioned the CFA. It slipped my mind since it was something I took for granted (almost like a good GPA being needed to break into banking). I have passed CFA level 2 exam and expect to take level 3 next year.

CFA is a weird thing. Everyone whom I respect as an investor considers the certification to be a scam, though something that is unfortunately necessary for marketing purposes (it's better for clients if everyone on the research team has a CFA). In fact, the CFA program frequently teaches pseudoscience and blatant misinformation, since exam materials are written by professors who've never done a fundamental report in their lives.

Think of the CFA like this: it is a badge of commitment to the investment research profession. Although you will never use anything learned from the CFA in any real capacity as a long-term oriented value investor, having the designation or having made progress on it shows people that you are committed to this career, since it takes a decent amount of time to study for the exams. If you're trying to break into buy-side from an industry that isn't sell-side research, you better have made progress on the CFA to show you're serious about investment research as a career. If you're in sell-side research, you should be making progress on it as part of your current job anyways.

Jul 31, 2018 - 12:44pm
joey joe joe shabadoo, what's your opinion? Comment below:
Subutai Baghatur:
In fact, the CFA program frequently teaches pseudoscience and blatant misinformation, since exam materials are written by professors who've never done a fundamental report in their lives.

The CFA exams while not perfect, are not written by just professors, but also include very experienced and senior professionals. I know someone personally who helped write exam questions for over 10 years and is very respected in their current line of work (asset management).

"Give me a fucking beer", Anonymous Genius
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Jul 29, 2018 - 6:17pm
i_short_tsla, what's your opinion? Comment below:

Not sure if I should start another thread, but curious to hear more of your opinion on Fred Alger. Do you consider them as a good shop? How are their analysts / research team perceived by the street/buy side community? Also just want to say thanks a ton for the valuable info that you provided here. Cheers.

Jul 29, 2018 - 8:05pm
Subutai Baghatur, what's your opinion? Comment below:

I'm afraid I can't comment much on them since I'm a value investor, and I simply never bothered to learn much about them. I had one contact there, but dropped it and decided against applying after I realized they were on the complete opposite side of the spectrum. I do know they primarily do OCR at Yale, Harvard, Stanford, UPenn. They operate in industry cover teams, and obviously since they're aggressive growth, the tech team is the largest, then healthcare.

They have a decently sized RA program (started only 4 years ago) but promotion to senior analyst is unlikely. Use the tips I outlined above to reach out and hear it from their RA's.

Jul 30, 2018 - 9:42am
Secyh62, what's your opinion? Comment below:

+1 Excellent post, I have accumulated a similar target list to your companies of note section with similar opinions on them. The interview questions section you posted is especially helpful as well.

Questions I have: -Comp level/structure? Progression if they've laid it out for you? -Had you not been able to secure this position or a position out of the sell-side role, were you planning on going the MBA route? Has this changed now that you've landed your new role? I am of the opinion that for myself to land at one of the shops on your list, a top MBA would present the best opportunity, although I am planning on reaching out to some places post level 3 results. -Did you ever work with recruiters? If so, any recruiters that you think are of better quality?

Appreciate the post, hope that I can reach out to you in the future when/if I start looking to lateral as a Pre-MBA experienced RA type candidate when I have more specific questions.

Jul 30, 2018 - 11:14am
Subutai Baghatur, what's your opinion? Comment below:

Thanks for your reply.

  • I work at a very small shop, so there's very little structure on an "expected" path of upward mobility. They've indicated an intent to promote me to an analyst position after I complete the CFA program and I would then be coming up with ideas on my own and working largely independently. This is because I need time to acclimate to their culture and they way they do things (evidence of how damn important culture is!) My comp is extremely generous. Total comp assuming target bonus (assuming I perform in-line with expectations) is easily on-par with an equivalent IB position and a massive raise from my sell-side equity research position (which pays market rate). I would NOT assume this to be the norm for a buy-side transition since this is a buyer's market! In fact, it would not be unreasonable to expect your total comp to be similar or even might be slightly lower than sell-side research. Also do not assume a better shop would pay more at the associate level. They have so much buyer's power they can afford to pay you less.

  • Oof, I'd very much rather not think about what would have happened if I failed to move to the buy-side pre-MBA. I was very much determined to succeed; giving up was not an option. Call me a wimp if you want, but sell-side was so miserable it was a combination of the pull of my passion for value investing and the push of my hatred of sell-side research that drove me to to go as far as I did. This is why I emphasize leaving no stone unturned as the optimal strategy. I am dead serious when I say that if you can think of an action that would conceivably improve your chances of a successful transition at relatively minor cost in time or effort or money, DO IT ASAP. Set aside your anxiety, your fear of rejection, your fear of failure. I have failed so many times, it has become an art. You don't even want to know how many times I've fallen 5 feet from the finish line. I've even gone as far as flying myself out to meet a team that was unsure if they wanted to interview me in person (so I basically preempted their interview process) only to be rejected. (I probably don't recommend doing that unless you really know what you're doing). As of right now, I have no intention of doing an MBA. I've always viewed MBA as a means to an end (of becoming an analyst) if I were to go start out at a buy-side shop that would kick me out after a few years as an RA, and obviously if my current shop promotes me, I would no longer need an MBA. If you're comfortable with making that move after MBA, just remember to keep up your networking game right now and through your time in school. Don't wait to network, DO IT NOW (or when earnings season finishes, haha). Also, don't wait to recruit, DO IT NOW. Worst case scenario you try again during your MBA. Just remember not to make a bad impression anywhere, since this is a super tiny world...

  • I've had some exposure to headhunters. However, the vast majority of them either send you crappy opps (like bs fund of funds) or filthy quarter trading hedge fund opps. There are definitely some headhunters out there that specialize for long-only's, but I've never used or met them. If you're willing to use them, by all means see if your peers have access to good headhunters. They're always out on the prowl for new "inventory."

And feel free to reach out anytime. All I ask is that you pay it forward and mentor others who have a passion for fundamental investment research.

Jul 30, 2018 - 1:25pm
chimp_g, what's your opinion? Comment below:

Interesting thoughts on pay given it is a buyers market. Just curious if your bonus is larger percentage of total comp on the buy side or sell side? Also how does base salary progression differ?

From reading your post it sounds like you didn't enjoy the sell side much. But would you have been willing to take a substantial pay cut from the sell side to get your foot in the door on the buy side?

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Aug 1, 2018 - 12:18pm
Anonymous Monkey, what's your opinion? Comment below:

Thank you @Subutai Baghatur" ! This is incredibly helpful as someone in sell-side ER hoping to break in post-MBA.

Not totally related to the topic, but do you have any favorite resources you've found that have helped develop your investing approach? Any blogs, podcasts, even things like twitter accounts? Books obviously helpful as well, but I think these have been covered pretty extensively on here.

Aug 1, 2018 - 3:36pm
Subutai Baghatur, what's your opinion? Comment below:

Glad I could help. Why would you want to suffer through more sell-side than necessary? Why not start recruiting now? At least start networking immediately; no time like the present.

Honestly, there was nothing better for developing my investment philosophy (which I believe is somewhat unique; maybe I'll make a separate post for that in the future) than practice. This is also why creating a fully developed pitch for recruiting purposes is so helpful: it also serves the secondary purpose of giving you experience where you can start to develop your own methods and principles.

I highly recommend the book The Outsiders by Thorndike. Completely changed my opinion on capital allocation. You should also read quarterly letters and annual letters from great investors. Bill Nygren, Tweedy Browne letters, Buffett, Steve Romick, Howard Marks, Sequoia Fund letters, You can pretty much go to the websites of any of the solid value funds I've listed above and read their commentary. Also, some funds like Tweedy Browne do provide sample investment research reports if you ask for them.

Aug 1, 2018 - 10:10pm
sl55amg, what's your opinion? Comment below:

Nice post.

I had sort of wondered how this transition was done, it's obviously a lot less of a trekked path than the one into SS ER/IBD. Were you ever concerned that your MD or people at your bank would find out about you cold emailing buy siders/potential clients?

Also, obnoxious questions by me because I know you're obscuring your background, but can $10B across 10 investment professional really be described as small?

Aug 2, 2018 - 1:29pm
Subutai Baghatur, what's your opinion? Comment below:

Naturally, I always emailed them using my personal email account (our work email monitoring would make the Chinese Communist Party green with envy). Luckily, most shops I interviewed/networked with were not our clients. In addition, since I networked primarily at the associate level, they don't exactly speak with sell-side firms regularly. When I interview, however, my interviewers are well aware of whom my analyst is and can pull up our coverage at will. As long as none of them blab to our salesman or something, I would be fine. I never worried about it since there was no reason for them to destroy goodwill with a prospective candidate. Maybe it would be a different story if you were interviewing at the analyst level.

Size is relative, I would say. Compared to hedge funds, $10B in AUM would be fairly large. However, if you compare this to medium funds like Brandes, Diamond Hill, Causeway, Hotchkis Wiley, etc with >$20B but $100B. Finally you have behemoth $1T+ funds like Fidelity, Wellington, T Rowe (slightly below $1T), Invesco (also just shy of $1T), Black Rock, PIMCO.

So in that context, $10B is pretty small.

Aug 1, 2018 - 11:44pm
charlie the unicorn, what's your opinion? Comment below:

Thanks for this! Just a couple of questions.

  1. Any tips on how a sell-side analyst with no coverage can network with the buy-side? Hesitant to reach out to our clients as I have nothing of value to offer them yet. Also worried that they might let my bosses know that I've made contact (obviously for job hunting purposes, if ever).

  2. Where would you exit if not the buy-side? Worried about MIFID and job cuts and honestly just want a job with similar pay.

Aug 2, 2018 - 2:14pm
Subutai Baghatur, what's your opinion? Comment below:

I did not know it was possible for a sell-side analyst to not have coverage. If you were promoted to the analyst position, you are almost guaranteed to have transitioned from an RA role, where you gradually pick up coverage. There's only 1 shop I know of that would risk hiring analysts without prior coverage...are you at Sidoti, by any chance?

I suppose in this instance, you would not want the buy-side clients to know immediately that you're actively recruiting for buy-side research, since the expectations for a sell-side analyst is much higher than a sell-side RA. You will be thoroughly judged on the research you put out, so I suggest making your investment style/philosophy shine through your research rather than going the typical route of a "successful" analyst by pumping out trash reports and being simply a corporate access conduit. So to answer your question, I wouldn't "network" with buy-side clients outside of what you would normally do as part of your job as a sell-side analyst, i.e. contacting them about notes, new ideas, news, etc. You would have to let your work do the talking for you, if you know what I mean. Actions speak louder than words. Also, I would suggest becoming good friends with the salesmen, as they're the ones with direct and constant client access.

The most common exits for sell-side research personnel is to corporate finance/corporate development or investor relations at one of your coverage companies. These should be relatively easy moves, since you're in touch with those management teams all the time as part of corporate access. If you're really good at shilling for companies in your coverage, they might just bring you onboard as their full-time shill! No offense to IR people, just a joke.

Aug 2, 2018 - 7:52pm
charlie the unicorn, what's your opinion? Comment below:

Whoops! We use the word analyst pretty liberally here (a bit weird cause I'm at a BB). Am actually in an RA position right now and look to gain coverage in 1-2 more years. Hope that clears things up.

Thanks for the thorough answer. That makes more sense - build my cred through my eventual coverage and get their attention through that.

Aug 2, 2018 - 9:15pm
NeverOutOfTheFight, what's your opinion? Comment below:

Thanks for the post. What is your experience with non-traditional ways of breaking in. I come from a non-target with a low GPA but I know I got the intelligence and dedication for it. How do people in the buy-side look at past under performance. I am working on my CFA and grad school to make up for my past mistakes, but I know that the red flag will always be there. Also, would you say the best way to get to the buy side is through sell side research, or would you recommend any other path? Thanks for the input.

Aug 2, 2018 - 10:20pm
Subutai Baghatur, what's your opinion? Comment below:

I unfortunately can't say a whole lot about non-sell-side research transitions, since almost everyone in buy-side research either started in buy-side research or jumped the fence from the sell-side. I have, on occasion, encountered people who did not break in from sell-side research, but there's no pattern. There's no clearly defined second best way in. You could always work in maybe corporate finance or something that gets you the background knowledge to do equity research (perhaps accounting related, even) then go MBA then transition. The only shop I've seen that takes people fairly consistently from outside of sell-side research pre-MBA is Brandes. That may be your best bet for a transition pre-MBA. Pretty much every other shop requires either prior buy-side research experience or sell-side research/banking experience. Also, I've seen some instances where people switched from back office support roles into front office research, so there's also that method.

Aug 2, 2018 - 10:53pm
traderlife, what's your opinion? Comment below:

Can any of these firms still perform at their size?

Truth is factor investing and quant firms (aqr etc) have vacuumed up a lot of their edges. I think a small go anywhere fund like what bill Miller is doing has at their size some edges they can target. I think you really need to target idiosyncratic risks to do much today or have time scales that differ.

Not sure on the hate of quarter trading funds. I might not believe in that short. But I do think there is a time frame where it becomes impossible to predict. ie for apple years ago you had to know that consumers would pay 900 a phone for a apple product when you could buy a Samsung product that does 99% same functionality for $200. Likely the first hardware company to never face margin compression. The only reason I own apple products is to text a girl and have it show up blue over green. Makes me look not poor. I guess that is worth a trillion. Point is every company has faced a crisis or risks that I don't think an investor could have predicted in advance.

Any thoughts on AIG? I still own it from when the government sold out of it and have a ton of capital gains even at this price. Super cheap but they can't underwrite correctly.

Aug 3, 2018 - 8:48am
Subutai Baghatur, what's your opinion? Comment below:

I would point to the long-term track records of the great value investing firms, like Harris, FPA, Tweedy, Ruane, Royce, etc. These funds generally deviate greatly from their respective benchmarks (high active share) and can capture that idiosyncratic risk. The Sequoia Fund in particular has a very concentrated portfolio (about 30 holdings, last I checked).

Quarter-trading hedge funds simply do not outperform in the long-run, which is why I like to hate on them; they are out to enrich themselves first and foremost, clients be damned. I have actually interviewed with one of them a year or so ago when a headhunter reached out. They were looking for someone with my industry coverage to join their pod. Our conversation revealed to me exactly how they make money:

The pod manager used to be a trader and he's supported by two analyst, looking to bring on 1 more. His pod manages $1B, including leverage, which is decided at the higher up level of management. Now let us suppose he uses 100% leverage, meaning that $1B is $500M client assets and $500M in leverage. If he delivers a 20% return in a year, that's 40% return on client assets. Assuming a 2/20 fee structure, his pod alone gets $10M in base fees plus $40M in incentive fees. That's $50M in revenues for his 3 - 4 man pod! Leverage only benefits the manager since it inflates their incentive fees when times are good. Even if a hedge fund manager outperforms, that outperformance needs to more than offset the exorbitant fees charged...the house always wins.

As to fundamental investing, it's all about being right more often than you're not an in places where it matters. Like I mentioned in another comment, a good analyst is right 54% of the time and a fantastic analyst is right 58% of the time. As a value investor, I believe it is not important for me to pick all the biggest winners but rather more so to avoid the biggest pitfalls and permanent destruction of shareholder capital (AIG, VRX, etc). My job is to find strong companies with shareholder friendly management and hold those for the long run. This topic can be expanded on and has been discussed extensively elsewhere, so I'll just leave it at that.

AIG sucks. I have not done extensive due diligence on them, but I know a number of value guys have taken up positions in it, including Harris. Like you said, they're horrendous underwriters, that much is obvious if you look at their consistent reserve charges year after year. My friend told me that they tend to give away the power of the pen too readily to brokers, who are compensated on sales rather than underwriting results. There was a headline that Berkshire's National Indemnity had to take a multi-billion dollar charge on the reserve book of prior business reinsured from AIG.

Aug 3, 2018 - 9:45am
traderlife, what's your opinion? Comment below:

You are using the wrong metrics to judge the pods. It's all about risks management. The reason they get away with charging such high fees is because they are not a pure equity product but a trading vehicle. The secret sauce is risks management and pulling alpha. If a firm can string together 100 pods. Get the risks management right so they never "lose money" as a whole then the product no longer has the risks characteristics of an equity product. Which then allows them to charge a ton of fees because they've created a zero beta product. If you can create that kind of product why would the manager give the returns to the investor when the product has investors willing to take a much lower return since there's no risks to them. I think you also underestimated the fees the pod gets 20% but the multistrat firm charges 20% on top of that.

I like value it's why I own aig and yes valeant. Though aig has turned into disaster. Tough to dump something so cheap and pay significant taxes. Valeant I own from $11 and looks good long term now. At this point it just looks like a public lbo with most of the garbage from the prior administration gone. Though the short thesis was never correct they got lucky but that's a long story.

Those long-term track records are dubious now. As I said they were built before things like factor investing existed. I think it can still work on a smaller fund that is quite creative smart and concentrated. But the larger funds I don't think can find enough edge to exist in the new world. Not enough ideas.

Aug 2, 2018 - 11:18pm
traderlife, what's your opinion? Comment below:

Can any of these firms still perform at their size?

Truth is factor investing and quant firms (aqr etc) have vacuumed up a lot of their edges. I think a small go anywhere fund like what bill Miller is doing has at their size some edges they can target. I think you really need to target idiosyncratic risks to do much today or have time scales that differ.

Not sure on the hate of quarter trading funds. I might not believe in that short. But I do think there is a time frame where it becomes impossible to predict. ie for apple years ago you had to know that consumers would pay 900 a phone for a apple product when you could buy a Samsung product that does 99% same functionality for $200. Likely the first hardware company to never face margin compression. The only reason I own apple products is to text a girl and have it show up blue over green. Makes me look not poor. I guess that is worth a trillion. Point is every company has faced a crisis or risks that I don't think an investor could have predicted in advance.

Any thoughts on AIG? I still own it from when the government sold out of it and have a ton of capital gains even at this price. Super cheap but they can't underwrite correctly.

Aug 3, 2018 - 10:10am
BrianHunter, what's your opinion? Comment below:

Amazing post, thanks for sharing!

I would like to ask your thoughts about research in value hedge funds/funds nowadays, considering the AI/machine learning era. I would really like to break into the buy-side research, though I am more oriented to value research as well as fundamental analysis

Thanks a lot

Aug 3, 2018 - 12:27pm
Subutai Baghatur, what's your opinion? Comment below:

Thanks for your reply.

There's really not much to comment on in terms of value oriented investment research - its principles have remained the same after decades, and I doubt it will change going forward. However, the actual processes and methods have changed and evolved over time: even Buffett himself has since started investing in companies he wouldn't dare touch a few decades ago. If you look at the great value investors (many of them are listed in my original post), you will find among them big differences in processes and holdings, despite all of them sharing the same underlying philosophy of value investing: the idea of having a margin of safety and disciplined buying/selling.

At the end of the day, this is a people business. A lot of the value creation at the company level comes from the decisions of management. Certainly, you would prefer to invest in a company that even an idiot could run, but you would be underestimating the ability of an idiot to make big, stupid mistakes that results in permanent impairment of investor capital. Computers have their uses, but they can't evaluate a management team qualitatively. They can't engage in "soft activism" (this is where a large shareholder gives suggestions to management/board without engaging in a public activist campaign - you'd be surprised how frequently this is used by value managers behind the scenes). They can't carefully weight the more ambiguous and nuanced side of finance like human judgment can.

Aug 3, 2018 - 12:35pm
BrianHunter, what's your opinion? Comment below:

A great reply mate, do appreciate it. Though, I finished my SB so cannot give you a +1 :)

Anyway, I echo what you said about value investors' holdings but likewise, I believe that we can apply this for the "contrarians" and "trend followers" as well. We saw a clear example with Druckenmiller during the dot com bubble

Aug 3, 2018 - 2:09pm
Secyh62, what's your opinion? Comment below:

I commented above that I found your interview questions section particularly helpful. Building off that, are there any questions that you liked to ask either in the interview or while networking that you found particularly useful, or that you found effective in uncovering important information?

Aug 4, 2018 - 3:04pm
Subutai Baghatur, what's your opinion? Comment below:

A lot of your questions should focus on their culture and processes. You should do some due diligence on their funds and ask them about peculiarities (for example their holdings). For questions related to culture, I've given a big list of questions about culture in the original post, in the networking section. Simply reword/rephrase those into questions you could ask your interviewer.

Aug 3, 2018 - 2:34pm
blackjack21, what's your opinion? Comment below:

What are some of the challenges in value investing today and how has that affected your company? Sort of referring to the outflows from active value funds because of underperformance, client sensitivity to fees, and this general shift away from active and into passive, and how has that affected your firm's decision-making, comp, etc...Seems like even though certain value active managers are outperforming today after a really tough cycle, there's still a ton of outflows, which must be putting pressure on value shops, maybe not all but definitely some

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Aug 4, 2018 - 3:18pm
Subutai Baghatur, what's your opinion? Comment below:

Yes, you're absolutely correct: value managers are taking a hit on asset outflows and performance, particularly in light of the frothy market valuation today. Value picks are few and far in between, and many funds that do not have a mandate for being fully invested are holding big chunks of cash, also in preparation for when valuations become more reasonable.

But this isn't exactly a new phenomenon: value investors have always been unduly punished by client withdrawals when things start to look like a bubble; just ask any long-term value manager and they will tell you the same story of clients being annoyed that he isn't buying the latest fad. I've always found it funny that even though clients pay for a money manager's expertise and discipline but then end up tossing all that aside to pursue their own attempts at market timing... Regardless, so long as the value shop has a diverse client base and long-term track record, I wouldn't worry too much about it.

Aug 3, 2018 - 7:16pm
treeman, what's your opinion? Comment below:

Excellent post. You provided helpful information about Brandes, but do you have any thoughts on the quality of their investing/culture/etc.? I know they had a tough time with financials in their portfolio during the credit crisis and had an f ton of redemptions at the same time. How large of a negative do you think Brandes himself leaving is? Everyone I've talked to there seems really sharp.

Aug 4, 2018 - 3:26pm
Subutai Baghatur, what's your opinion? Comment below:

I've done some networking with a few guys at Brandes, but nothing extensive. I gave a reply to another guy asking about Brandes in another thread a few days ago, and that's pretty much all I know about them. Their culture and investment research are both held in high regard, from what I've heard, so you've definitely got a solid foundation for your investing career if you were to work there as a junior associate.

I'm not sure what the arrangement was for Charles Brandes before his departure, but I wouldn't be surprised if they get some outflows from that announcement. Considering they have a committee-based decision making approach, realistically and practically, his departure shouldn't make much difference from a research quality perspective, just more from a marketing perspective.

Aug 4, 2018 - 8:56pm
wso_macc, what's your opinion? Comment below:

Hi! I loved your post. Thank you for posting it. I was recently looking for material to know more about buy side equity research. I want to apologize for making my questions long. I tried, but could not resist to ask them all.

I am an economics undergrad in my final year from Asia and I want to break in equity research. I want to do it in the USA or Canada. I am avoiding Europe because you mentioned Mifid and I just looked it up and I understood, to some extent, the negative impact on equity research career. I will need to study at schools in the USA or Canada to get in Research Associate programs. I am thinking of targeting graduate programs like Ms Finance/ Master of Management/ Master of Accountancy. RA programs are mainly targeted at undergrads and people with few years of experience as you mentioned in the post. Do you think it would be a stupid idea to do these masters programs just to get my foot in recruiting events, networking and getting a better school name? I passed my CFA Level 1 exam in December last year. Do you think it would be helpful to get in those Research Associate programs? I am also investing my own savings in Asian markets particularly in Chinese and Indian equities. Do you think this is a good way to showcase my interest and compete with undergrads for landing up in a RA position? I am targeting Canada because they have huge pension funds like CPPIB and OTPP, which have recruitment programs for students. I would like to know how you view these pension funds as a way of getting in buyside equity research.

Do you think Barron's rankings of fund families give somewhat accurate view of which firms are good to work for to hone one's investing skills and learn from senior analysts and portfolio managers?

My last question, sometimes I buy a stock based on my gut feeling after I am done with analysis. There are times when income statement seems pretty good but I feel like management of that company is not using its capital as efficiently as it can or not targeting markets where it can out grow its competitors so I avoid investing in it. There are also times when a company is doing pretty good financially and is quite cheap, but trading volumes are quite low. My gut says to buy it, but I also fear that low trading volumes will continue for years and I can get stuck with it if market never realizes the company's real value. Do analysts and portfolio managers encounter such situations and use their gut when making some buying decisions or it is me who does not know how to invest smartly yet?

Aug 5, 2018 - 11:50am
Subutai Baghatur, what's your opinion? Comment below:

No problem, thanks for your questions.

  • In my opinion, doing through a masters program is not a bad idea, since it is the best option you currently have. Obviously I wouldn't recommend it if you're already in the US. It will be a good tool to show potential employers that you're familiar with American finance/economics/accounting and English (since you're an international applicant; will be difficult to get past resume screen otherwise). Like you said yourself, during your masters program, you can also take time to network during your studies as opposed to applying blind, as you are now (with only an undergrad). Think through the perspective of an employer: why would they take a risk hiring an international candidate out of undergrad when there are so many eager candidates domestically? Unless they're trying to hire specifically an Asia coverage guy, I suppose. Also keep in mind that your employer would have to sponsor your work visa, I believe. You will likely need to go through the lottery system to determine if you can stay. Not sure about Canada.

  • Having the CFA level 1 under your belt is definitely a good thing; it shows commitment. Talking about stocks you own will also be helpful, as usual. But it may also be good to know a couple of US names too. No clue on Canadian pensions or how the Canadians hire. You should check out the LinkedIn profiles of their employees to see if anyone else made a similar move as you are attempting to make.

  • I've never used fund ratings for recruiting purposes, but I suppose they could help you make informed decisions on where to target. Obviously, you shouldn't try to restrict your targets too much. You should be taking every shot you can. Worst case scenario, you use the interview processes of the crappier funds as practice for future interviews.

  • Portfolio decision-making processes vary greatly across firms, so it depends. There are some funds (like at Royce) that play a numbers game with investments (one of their funds have 250 smallcap/microcap holdings). Obviously for them, they don't need to be as perfectly comfortable with a name before investing since each individual stock has so little influence on overall portfolio performance. However, if you manage highly concentrated portfolios, you would want to have total conviction when making the final decision to buy.

Aug 7, 2018 - 3:35pm
terraincognito1492, what's your opinion? Comment below:

Strong article! Interesting take on BlackRock though... I don't think your opinion on that firm is commonly held throughout the industry. What is your basis for such a negative comment? Simply because you personally have "never heard a single good thing about them" or "seen one of their ex-employees at a better shop"?

Aug 7, 2018 - 5:28pm
Subutai Baghatur, what's your opinion? Comment below:

Because BlackRock is losing assets from their active strategies to index funds, at least in regards to equities. In fact, last I heard, they laid off a bunch of people from their fundamental strategies and replaced them with computers. They are simply an asset aggregator, not a place where you can expect to improve your skills as an investor. No comment on their fixed income side, since fixed income indices cannot be replicated easily and is thus not subject to the same competitive pressures as equities.

Aug 7, 2018 - 7:29pm
terraincognito1492, what's your opinion? Comment below:

Thanks. This makes more sense, however I would also point out that this is a trend exhibited by most large institutional asset managers (including Fidelity, the first firm you mentioned... their recent Zero fee retail funds have completed the "race to Zero," which is a very dangerous precedent for the overall industry).

I personally love active equities and have had a lot of fun on large cap value desks in the past. However, I have not found confidence in post crisis industry trends out of active and into passive. Please note the referenced Bank of International Settlements paper below. Chart 1 shows that passive inflows have been met with nearly perfect active outflows.

My follow up question is then, given this trend of active outflows against mounting pressure from index funds, where do you find confidence in the longer term career prospects of smaller boutique firms like those you mentioned?

(My opinion is that the strong pay and stability these firms have historically enjoyed will diminish significantly over the next decades... if nothing else underperforming boutiques now face immense pressure from low fee beta index platforms that will increase the volatility of their earnings and stability.)

Aug 9, 2018 - 7:31am
masterg, what's your opinion? Comment below:

I have a few thoughts on LAM. 1) ~90% of AUM is institutional - therefore highly sticky money. Average investors invests for 5+ years with LAM. 2) LAM has average performance across the funds. Not exceptional, but not terrible. 3) LAM has been quite successful at attracting positive inflows over the past few years driven by the firm's distribution model, willingness to incubate new strategies/poach teams, etc. Good luck - great shop overall!

Aug 9, 2018 - 9:29pm
wso_macc, what's your opinion? Comment below:

Thank you for answering my questions. I looked over again at the career programs offered by different funds and only a handful of them offer career programs focused on students and even less on students with Master's education except for an MBA. Do you see working for big4 accountancy firms and develop skills in financial statement analysis and gain a good understanding of a particular industry as a more viable path to end up in equity research?

Aug 10, 2018 - 7:43pm
Tha Game, what's your opinion? Comment below:

Interesting and insightful article. What is your advice on European boutique value shops & asset management companies? How do they differ in terms of recruiting from their US counterparts? Is there a possibility to break in from a more non-traditional role (think Investment Analyst / Data Analyst / Business Analyst) from a traditional Investment Bank? What would you suggest to a professional passionate about buy-side equity research on how to best prepare and get interviews at good companies? Appreciate your honesty and insight and thank you for this interesting discussion and article, I really enjoyed it.

You're walking around blind without a cane, pal. A fool and his money are lucky enough to get together in the first place. Gordon Gekko
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Aug 11, 2018 - 11:07pm
Subutai Baghatur, what's your opinion? Comment below:

Sorry, I've got no information on non-US asset management shops. I wonder, do they even have staunch adherents of value investing over there? I've certainly never heard of any famous non-US value investors. Try networking and reaching out to people in the field using the strategy I've outlined. After all, that's how I got all my information.

Either way, the requirements for a job in fundamental research should conceivably be very similar to the US. I can't think of any reason they would be substantially different. I've given all the interview advice I could think of in my original post. Not sure what other advice you're looking for.

Aug 16, 2018 - 10:17pm
DDD010, what's your opinion? Comment below:

Thank you for a very insightful post. It seems that you spent a lot of time thinking about important ideas. I would like to learn what your investment philosophy looks like, and how you think about the investment process. Who are some investors whose approaches you incorporated in yours based on your strengths and weaknesses? What are some books that you would recommend to study for aspiring value investors?

Thank you in advance.

Aug 17, 2018 - 12:05pm
Subutai Baghatur, what's your opinion? Comment below:

Investment philosophies differ even across various value shops, though they are unified by an overarching belief in value investing. Mine is based on the concept of absolute value - which is cash flow based (think DCF). I also like to think in terms of capital efficiency (like ROIC). The whole point of value investing is about finding areas where the risk/reward dynamics are in your favor - that there exists opportunities where you are taking lower risk for higher returns (a slap to the face of EMH). I believe that to deliver high quality outperformance, an investor must avoid what I call "false positives" at all costs. These are the Valeants and AIGs of the value universe. The due diligence must be extensive and thorough. One must make sure the management team is shareholder friendly.

I enjoy reading thoughts from FPA and Tweedy Browne, which resonate greatly with me. I recommend The Outsiders by Thorndike, margin of safety, Ben Graham's books.

Aug 20, 2018 - 9:18am
Natenberg, what's your opinion? Comment below:

Coming from someone who does not currently work in research how would you recommend younger entrants into the space sharpen their modeling skills. I've done a few research reports on the side and through school, however I really enjoy the work and want to showcase my passion for it. The only issue is its not part of my current position. How much modeling experience is required in getting a sell side position? I see that connection to the buy side as you've said earlier in this thread. Just curious as a young post grad because so much of industry is skills based, and when you're not gaining experience in a current role I feel like you are falling behind.

Also what are some buy side firms to recommend. Trying to compile a list. Thanks.

Aug 20, 2018 - 12:43pm
Subutai Baghatur, what's your opinion? Comment below:

Modeling skills can only be improved through practice. If you are working through a pitch for recruiting purposes, this would be a natural component of the process. It would also help to have a "model" model to know what a good model should look like. You can always ask one of your sell-side research networking contacts to forward you one of their old models. Modeling should not be a major consideration if you're trying to break into long-term fundamental investing - these skills will be mainly learned on the job. On sell-side research requirements vary by position, seniority, and bank. Having prior experience with it (even if it's for a club) will reflect favorably on your candidacy.

I have a list of buy-side funds at the bottom of my original post...

Aug 23, 2018 - 12:18am
ccc101, what's your opinion? Comment below:

Thank you for your post! I have an interview with Capital Group in a few days (straight out of undergrad) and don't have time to make a full on stock pitch nor do I have much investment management knowledge/experience. Not very optimistic about this interview but just wondering if you have much last minute cram tips.

Also wondering why you mentioned to stay away from bank owned asset managers (GSAM, JPIM, etc.). Thank you!

Aug 23, 2018 - 9:33am
Subutai Baghatur, what's your opinion? Comment below:

Are you interviewing for IGIR position? I've never interviewed with Cap Group, but I've only spoken with a recruiter there before. In all likelihood, you don't have much of a chance if you don't have at least one pitch to talk about - the process is extremely competitive. My best advice would be to do some last minute reading of investor letters from great investors (like at some of the shops I've listed above).

From my experience in sell-side research, the bank-owned asset managers are quarter-trading asset aggregators. Not to the extent of the highly levered quarter trading hedge funds, but still short-term focused. Their research personnel have never struck me as particularly good investors from my conversations. If you are looking at GS special situations group, then that's a totally different story.

Aug 24, 2018 - 9:15am
researchguy1234, what's your opinion? Comment below:

I have a few questions on pitches for interviews.

  • What are your thoughts on pitching stocks that you cover on the sell-side in buyside interviews? Would this be considered an easy way out and not be taken seriously, even if you have strong conviction?

  • Did you pitch companies within the same industry you covered on the sell side or did you go in a completely different direction?

  • Lastly, what are your thoughts on providing sell side research as a work product sample (a good note you're proud of or something like that), even if you pitch something different in the interview? Do you think a work sample should be something done on your own time?

Aug 24, 2018 - 10:29pm
Subutai Baghatur, what's your opinion? Comment below:
  • Perfectly fine to pitch stocks that you cover, even better if your call is different than your analyst's rating, since this shows your ability to think independently. There's nothing inherently wrong about pitching a stock you cover, but be ready to talk about it on a long-term perspective instead of emphasizing quarterly catalysts as sell-side analysts usually do.

  • I pitched stocks that I think are good investments. I tried to find something in my industry, but nothing was compelling enough, so my primary pitch was on a company outside my industry.

  • I have never written a sell-side report that I was proud of, so I never did that personally. But if you think a report that you've written/published can help demonstrate your ability to think like a long-term oriented investor, then by all means use it as a work sample. You should be the one who came up with that differentiated idea and have done the bulk of the legwork on it.

Aug 25, 2018 - 1:43pm
researchguy1234, what's your opinion? Comment below:

Thanks for the insight! This thread is super helpful.

One more question - It seems that networking is the most important thing when it comes to getting interviews and finding open positions, but I'm curious to hear if you had any luck with pure resume drops (like LinkedIn/CFA job board etc)? Did you land any phone calls/first rounds that way, or all through your network?

If so, what was your experience with those interviews?

Aug 25, 2018 - 6:53pm
Esuric, what's your opinion? Comment below:

Completely disagree with the notion of ER providing little market value. I've come to rely on ER reports quite heavily when doing my DD on BD opportunities. MS, as an example, provides high quality and very insightful research. Sure, there's garbage out there, but you can say that about anything.

“Elections are a futures market for stolen property”
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Sep 2, 2018 - 1:15pm
dapperduck, what's your opinion? Comment below:

Thanks so much for the great post! I'm personally interested in ESG/socially-responsible investing, and I was wondering what your thoughts are on the space and funds within it (e.g. Parnassus)?

Sep 3, 2018 - 2:53am
jankynoname, what's your opinion? Comment below:

Solid thread, thanks OP. I've probably interviewed or had substantive conversations with half of the firms you listed and generally agree with most of your insights. I do disagree on a few of them; e.g. T.Rowe is a very serious shop and their analysts are often top 2-3 nationally in terms of how well they know their coverage (no, I don't work there). I did enjoy the pod shop bashing, and generally agree with you on Fidelity, CapRe, Harris, Causeway and Brandes.

Anyways, thanks again. Always good to get some signs of life in the AM channel here ;)

Mar 23, 2019 - 2:08pm
TheGetaway16, what's your opinion? Comment below:

Bumping this thread, this is an incredible post, thank you for taking the time to write this OP.

I was wondering what your take is on large AM firms vs small boutiques vs HF and what the differences can mean for someone early in their career.

Also, what is the idea generation process like at your shop?

Again, great post. Really enjoyed reading it and as someone relatively new to the AM industry I believe it gives a very good perspective on what is out there.

Most Helpful
Mar 27, 2019 - 3:21pm
Subutai Baghatur, what's your opinion? Comment below:

My opinion on large vs small boutiques isn't that different from my opinion for example between Fidelity and say FPA. One is "too big to succeed" closet indexer while the other one has a more compelling/clearly defined philosophy. I'm not saying every team at Fidelity is like that but it would be a fair generalization. Naturally there are some exceptions for large firms (Cap Group would be one). Also I'm not trying to imply all small boutiques are great - you should be selective about their culture and performance. Working at boutiques very often means a broader coverage universe and thus greater perspective on various industries, so at Fidelity you might be an associate covering video games but at a boutique you might be covering all media or whatever the superset industry is (or even a generalist). Normally, it could also mean you get a better shot at actually pitching your own ideas instead of exclusively working on your analysts', but Fidelity and Putnam are actually exceptions to this - their associates immediately have coverage. From my conversations with my contacts, it would appear that for most larger funds, associates rarely get to pitch.

A hedge fund is probably more similar to boutique asset managers, even at larger funds like Citadel. This is because these pod shops, as the name suggests, work in very small pods of maybe 5 people give or take. I've never really networked much with hedge funds so I can't comment too much on it. As you know, there's much more upside on pay and stability is lower relative to an asset manager. Because hedge funds are such a diverse group, it is hard to generalize much about processes beyond this, sorry.

At my company, idea generation is very fluid - there's no set way of screens or whatever (though we do run screens from time to time). Very often, a PM would come across a name that they've always held in high esteem but never bought because the price until only recently had been too high - we would catch up on the name as a potential new idea. There could be trigger events like change in management, spin-off, sudden increase in insider buying, drop in stock price due to a potentially transient issue, etc. that would initiate a due diligence process. I haven't been doing much idea generation myself since I'm still quite new here, but if I come across something that really shines, I have no doubt the PM's would encourage me to pursue it at my own pace.

Apr 14, 2019 - 11:02am
excelsior, what's your opinion? Comment below:

Thanks for posting this. Great thread.

Can you go into more detail on your cold emailing process/template that you used?

Apr 22, 2019 - 2:39pm
Subutai Baghatur, what's your opinion? Comment below:

It's really simpler than you would expect - you want to be brief and to the point. Cold emails should not be any more than a couple of sentences and should take less than 30 seconds to read. Introduce yourself, say how you found them, throw in a tidbit about what's interesting about their fund as a reason why you want to talk or maybe something unique about their work experience, express interest in buy-side research, ask for a short call.

Subject can be something like "aspiring research associate reaching out" or if the recipient is an alum, "_____ alum reaching out"

Dec 24, 2019 - 8:47am
A-Non-Target-Monkey, what's your opinion? Comment below:

How do each of these funds fare in terms of MBA placement. I know you mentioned Dodge and Cox, are there any other shops that have great BSchool opps? Also, from the perspective of adcoms, where does AM fare in contrast to HF/PE/IB/Consulting? What % of applicants would you say get into H/S? M7?

Dec 25, 2019 - 10:22pm
Rags to Hermes, what's your opinion? Comment below:

I just want to add two things to his post which is overall spot-on.

  1. Make sure you target your pitch to fit the investment philosophy of the fund you are interviewing for. It may seem like common sense but having a pitch projecting Peloton double digit growth rates into perpetuity at a deep value shop is a death sentence to the process.

  2. Have 1-2 report samples ready to go and date them. So if your report was written 6 months ago, whoever you sent it to will see that your call worked out. I had multiple final rounds where they will have you dig into a name in their portfolio or of their choice and present it to the investment team. So having these 1-2 reports ready to send on top of the report you are preparing will only show them that this is a repeatable process for you.

-Recently made transition after going through 3 processes where went to final round with various buy-side funds and manyother processes that didn't go as far..

Oct 27, 2020 - 5:51pm
iercurenc, what's your opinion? Comment below:

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Nov 12, 2020 - 11:15am
Jakhan, what's your opinion? Comment below:

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Nov 13, 2020 - 8:53am
Natenberg, what's your opinion? Comment below:

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Apr 13, 2021 - 11:17pm

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