Equity Research at Market Maker

Based on the most helpful WSO content, here’s what you need to know about equity research roles and career progression, especially in a market maker or prop trading firm:

1. Career Progression in Equity Research:

   • In equity research, career progression can be slower compared to other finance roles like investment banking. Promotions often depend on turnover, as senior analysts tend to stay in their roles for extended periods.
   • Gaining stock coverage is critical for career advancement. However, this can create friction with sector heads, as it involves taking on client relationships and potentially impacting their bonuses.
   • MiFID II has added structural challenges, reducing budgets and bonuses, which can make progression more competitive.

2. Compensation:

   • Compensation in equity research roles at smaller firms may not match the levels seen at top-tier market makers or hedge funds. Bonuses and salary increases are often tied to performance and the firm’s overall profitability.
   • The reward-to-effort ratio in equity research has been under pressure due to regulatory changes and shrinking trading commissions.

3. Path to Running Risk:

   • Equity research roles typically do not provide a direct path to running risk. These roles are more focused on analysis, modeling, and providing insights rather than taking active positions.
   • To transition into a role where you can run risk, such as a portfolio manager or trader, moving to an event-driven hedge fund or a similar buy-side role would likely be necessary. Hedge funds value the fundamental training and analytical skills gained in equity research, making it a viable stepping stone.

4. Exit Opportunities:

   • Equity research can be a good platform for moving to the buy-side, including hedge funds and asset management firms. It provides exposure to portfolio managers, fundamental analysis training, and opportunities to build a reputation in the industry.
   • However, transitioning to a role where you run risk will require demonstrating your ability to generate actionable investment ideas and manage positions effectively.

If your ultimate goal is to run risk, consider using the equity research role as a stepping stone to gain experience and build a network before transitioning to a hedge fund or a trading-focused role.

Sources: Career Ladder: Equity Research vs. Investment Banking - (A Definitive Guide, Part 3), https://www.wallstreetoasis.com/forum/equity-research/career-ladder-equity-research-vs-investment-banking-a-definitive-guide-part-3?customgpt=1, I work in event driven / arbitrage. Here are some career advice for you, A warning to those aiming for Sell Side Equity Research, Equity Research Coverage Analyst, Taking Questions