Which option has better exit opportunities?
Am considering the following opportunities and not sure which is better from an exit opportunities perspective. Goal is to move in buy-side / sell-side credit or equity research or corporate banking.
1. Credit Research Analyst at CreditSights (Credit Research firm that was recently acquired by Fitch)
2. Credit Rating Analyst at Fitch / Moody's / S&P
Thanks!
Do you know what group each would be in?
Corporates
Clearly no right answer but imho I’d say credit research. They go more in depth. Credit rating is really associating KPIs to numbers and produce a rating… not a fundamental analysis of businesses at all.
Thanks for sharing! I understand that typically credit research is the better job; however, I'm not sure how well known creditsights is within the credit research world as it is a small brand compared to the major rating agencies and am not sure whether it could open up future opportunities down the road for buyside / sellside research roles at banks / AMs. What are your thoughts on this?
Thanks so much!
Having done both, I can say with confidence that the research is similar. If anything, rating agency dives in much deeper but only publish 10% of the information due to NDAs. Analysts cover 10 names at a CRA vs 50 on the buy side so there's a lot of time to get deep with the coverage. That said, credit sights is a much better shop than any rating agency at a junior level.
Could you elaborate why on your last point please
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CreditSights no doubt, that’s actual credit research as opposed to ratings work so it will be much closer to what you do on the buy side and will definitely have better chances of an exit to it. Perhaps will not be as easy as BB credit research, which sends a good amount of people to the buy side, but they do have some good analysts and worst case could serve as a stepping stone to a bigger brand. Ratings could still get you there but you’ll be competing against more juniors who are looking to do the same with less chance of differentiation and would probably have to lateral to something first before moving to the buy side.
I agree and would pick CreditSights, where you will have to learn to analyze relative value for credits (unlike rating agencies) in addition to fundamental analysis
Was wondering if you could elaborate more on the differences between credit ratings and credit research work. I understand that credit research has more emphasis on relative value analysis / analyzing for investment opportunities; however, wouldn't the credit ratings work be similar in that you are also conducting fundamental analysis of various credits / issuers and forming opinions on their securities, etc?
Could I PM for a quick question?
Sure
Thanks for sharing! That's helpful! Was wondering how well known is CreditSights within sell-side / buyside research circles? Obviously, it's not as known as the major rating agencies but just want to get a gauge of how well-known / respected they are in the research space. Thanks!
Work on buyside - they're quite good and I rate them well above rating agencies, and if including BB credit research (which there isn't a lot of tbh), I would place them as an upper quartile shop. Senior guys v knowledgeable. Few of the juniors have went to buyside firms like Fido as well. I think they're slightly behind in RV assessment, especially if you're in trading oriented shop, but for fundamental research they're more than decent.
Credit rating agencies will give you insights into the inner workings of the gatekeepers of who gets market access and at what price. On the other hand CreditSights is the bottom bucket of sell side research. CreditSights also got acquired by Fitch, the worst agency of the three. Finally, pay is better at the rating agency as it's a profitable business unlike research.
I started as credit analyst at one of the 3 rating agencies and then moved to the buy-side. Some other people mentioned CRAs don't do any fundamental analysis which is totally not true. It is the complete opposite. You get to learn a lot about an industry; learn how to do a proper fundamental analysis analyzing both business and financial risks plus the intangibles such as management team.
The industry knowledge you learn can be applied to both credit and equity research; just the cap structure you look at would be different. I cover energy infrastructure sector and the buy side firm hired me exactly for my knowledge in this area. With CRA, you get access to management team; you can pickup the phone and call their treasurer group and ask them questions about the business and financial risks and they will organize meetings to walk over that with you; the best way to learn about an industry. There's no other role that i'm aware of that allows you to do that.
Pay of CRA is not as high as buyside. Base salary is similar; the difference is in the bonus. CRA bonus is about 20-30% of your salary whereas buyside is close to 80-100%.
So.. if you want to get to buy-side; CRA is definitely one route and I've seen many people take this route. CRAs is known to be the training ground for buy-side credit.
Am also considering possibly moving to a big 3 CRA (S&P / Moody's / Fitch) and was wondering which of the 3 CRAs has the best exit opportunities or are they all basically the same? Also, what are the most common types of exits you seen people from CRAs move into?
Thanks!
I think either of 3 is good. S&P and Moodys have more coverage in terms of companies but Fitch is catching up in the past few years. It also depends on the industries that you cover as well. For energy infrastructure (midstream, power and utilities), I think all 3 rating agencies have decent coverage.
So, most people I know leave the big 3 CRAs when they are at the associate or associate director level and you get to buyside starting as a credit or senior credit analyst. From there, you can move into the portfolio manager path if you want or just stay as a credit analyst. I've also seen other people going back to CRA after a few years of buyside experience and they would be offered a director or senior director position at the rating agencies. Also, exit strategy from the buyside can include hedge funds as well. You can also move into corporate banking or DCM from the CRAs. The most difficult would be to get into the buyside as you'll probably need to network with people in that industry. So there are many exit paths. The KEY I find is to pick a couple of sectors and know them inside out; become an expert in those sectors.
What group at a CRA is the most ideal? Corporates? Can you clarify the best to worst for corporates, structured finance, financial institutions, public fin? Have seen many mixed opinions on their pros and cons, would be very helpful!
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