Q&A : 1st year associate sell-side credit research at BB in London

i think that depends a lot on the bank, but broadly speaking its quite similar as we interact a lot with the traders and the sales force to cover the newsflow and corporate events relevant to the credits we cover. a lot of our work (and perhaps the most important part) is to cover all the events that may be relevant for the companies in our coverage (and those that aren't if something important happens and it's traded by the desk) and flag it to the traders / sales force. so for instance that may be earnings / m&a rumours / corporate events etc but also sometimes things that are a bit less evident (conflict in a country, currency moves, commodities moves etc) where you need to know the company to evaluate the impact. sometimes we will also be asked to look at an issue we don't cover formally and flag the main things to give colour to the desk on where it could/should trade etc.

so basically a lot of our job is similar; desk analysts roles can vary a lot from bank to bank (even within the same bank product to product), but the main thing is that we are independent. ie. I don't know what's on the traders' books at any time and this has no impact on the research we publish and discuss with clients. we also have clear chinese walls with trading so that they don't know what/when we will publish and don't front run our research. so for instance the process for us will be that we work on a note, take a view, publish it and then discuss with our traders which may agree or not and we don't know if that helps to purposes or not.

a desk analyst sending out a note to clients (usually on distressed / special sits) will be done hand in hand with the desk and will be reflective of their's and the desks view in general. so say for instance you'll do the work on a situation where the bonds trade significantly below par, you find that there is value in the bonds, so you would work with the trader and if he agrees he may build a position, and then you send out a note to explain your view and help facilitate client business.

I think there are pros and cons for both roles, desk analysts are closer to the desk and oftentimes their time is better spent on things that are really interesting and may generate business for the bank, but the fact their not independent impacts how much clients may trust their opinion ( some clients won't really listen to a desk analyst if they think he's constantly talking his traders' book etc). also, while looking at special sits etc I think is one of the most interesting parts of my job, I find really getting to know a company inside out doing a thorough initiation note is quite interesting and rewarding and I feel you get less opportunities to do that as a desk analyst (but again that may vary depending on the bank).

in terms of exit opps it probably depends on the bank again, but essentially i think it's fairly similar. from the core skill-set you build I'd think a desk analyst role prepares you the best for a HF because of the trading mindset, whereas research may prepare you better for AM-type roles where you work on long-term positions, but in reality exits are very similar. Most people leaving my team have left for either buy-side research roles (both HFs and AM) or desk-analyst roles.

no idea about JPM AM, sorry. From what you wrote it looks like it's essentially a buy-side research role already so i'd think your chances to move to a HF are good but can't really speak from exp on that.

it's very relationship driven but very different from ER. basically what your desk / sales force think about you matters a lot more than what clients think, so you don't go around begging your clients to vote for you in II and in general I feel like there are more ego-maniacal characters in ER sending out emails to the world saying "we were right the steet is wrong etc..." but make no mistake, it's still very political.

hi,

good luck for the summer internship. unfortunately i've never worked in AM so I can only bring limited advice. for training and experience, I'd expect it to depend a lot on the firm / your senior analyst in ER, and the same applies for AM. I would say if you manage to be in a buy-side fundamental equity research role at a large reputable house (like JP AM) I would probably take that over ER, but you'd need to really do due diligence on what the role entails etc as I feel you could easily end-up in a role that is less research intensive on the AM side, where the experience you would gather is less valuable. ER on the other side, it depends a lot on your senior analyst but in general I expect you'd get solid experience in terms of modelling and research. Anyways I think you'll have a much better idea what the role entails and if you like the experience this summer.

In terms of whether I find my job gratifying, I think that's a pretty good question. it's sometimes a bit frustrating not being able to see if you're ideas are implemented or not. say for instance if you come out with a buy on a new credit, you can discuss it over with clients and your traders, and sometimes you'll hear that the traders or clients are buying on the back of your note, which is to some extent gratifying but still you don't know how long they will hold the trade, which size etc. and often times you'll put a decent amount of work in an initiation or note and you won't really get any feedback from clients or traders (note: that's for credit, I get the sense there is more interaction in ER). On the other hand, I am still pretty junior and I get to sometimes discuss ideas with really smart clients from the top HFs and sometimes, specially on the hy / stressed side, you get to have pretty in-depth conversations where you know you are both adding value and learning a tremendous amount from a more experienced investor. so all in all I find my job pretty gratifying and I don't think I'd take any other role at a bank as a junior as I think it's a great learning platform, we have a minimal amount of "menial" work and the work life balance is pretty great, however I am not entirely sure if I would still like it 10 years from now.

hi,

i'd rather not expand too much on my background as it's a very small industry as mentioned previously. In our group I'd say half only have a bachelor a the other half Msc (from various fields), no MBAs. some people joined straight after undergrad (post summer internship) but since there is a decent amount of turnover in the group the hiring often has to take place in the middle of the year so a lot of people have also lateraled from other areas of the bank (or outside the bank). I think if you're at a bank with a research department already the best way is to try to network with people within the group, show your interest and usually when a spot opens up you'll get a chance to interview. I think the CFA would help as well if you don't have a solid finance/accounting background. Also I'd make sure to have your bases covered in terms of knowing what the role entails, why you want to do it and having a couple of trade ideas ready before approaching people in research as you only get one chance at a first impression. So for instance someone approached me and others in my team at the end of his internship in IB saying he was interested in research etc. We organized interviews and when he mentioned why he was interested in research it became pretty clear that he didn't really realise what the role entailed exactly and although he seemed pretty smart etc we didn't actually contact him when spots became available in our team.

if you are not working at a bank then it depends what you are doing, it's hard to give too much advice but unless you're in something with a somewhat transferrable skill-set (IB, accounting/audit, credit risk etc) i think a Msc / MBA at a target school is an effective way to get a clean slate and interview for the roles you're interested in.

haha okay ill try to address all of those (briefly)

Maherj1:

Thanks for doing this!

Very interested to see a day-in-the-life (week would be even better!).

so an imaginary lambda day would be:

6.45-7.15am on the desk (earlier if there are lots of results), check headlines / anything that's worth highlighting at the morning meeting to traders and sales for the names we cover. breakfast on desk.

throughout day until market close: keep an eye on the newsflow, flag it to traders / sales if anything relevant comes out on a company (M&A rumour, company announcement, ratings change, etc...)

8am-9.30am: update a model on a company that reported that morning, see if there is anything interesting I didn't notice when looking at headline numbers

9.30am-12am: work on the assumptions for the model of a company we are initiating

12am-12.30: lunch (on desk most of the time)

12.30-13.30: keep working on the model

13.30-14.15: some M&A rumour on one of the companies we cover. I flag it to traders / sales and go quickly through the article, bonds' covenants, financials of both companies and will often put together a quick and dirty calculation to see roughly what the combination would look like, what the impact on the credit may be and flag to traders / sales.

14.15-15: keep working on model 15-16.00: conf call for a company that reported that morning, take notes, may ask a couple of questions

16:00-16.30: my senior analyst has a call with a client on a company, I dial in and listen to the convo. if my senior analyst is out or it's a company i know very well I will somtimes also have these type of calls myself.

16.30-19.00: keep working on model, answer some emails, check calendar for tom.

Are there any exit ops to industry?

Nothing preventing it but haven't seen any from our team

How does the culture differ to ER?

never worked in ER so hard to say, see above on how relationship-driven it is

You mention work-life balance - what is you typical work week like hours wise? How predictable is it and what are the highs and lows like?

i wanna say typically 60-70 hours. quite predictable (unless a company goes bust or something). depends a lot on your senior analyst though. max up to 80-90 hours if you're working on a big book or there is a deal (very rarely). low prob 55 hours.

You mention junior pay of £50k + 30%-70%. How does this progress?

typical pay ladder on base (so 50k is 1st year, more 2nd year then 3rd year analyst or 1st year assoc, etc all the way up to MD). im not a senior analyst so no idea but the v ballpark figure i've heard is around GBP400k median for senior analysts (keep in mind that's typically someone with 10 years+ of experience), can be less or more depending on seniority etc but I guess that's a good estimate for median. someone of similar seniority in a sales or trading position will most likely make more (sometimes much more if you're a star trader or BSD), but it's also much more volatile and you are much more likely to lose your job in a bad year.

Do you ever hire experienced guys from non credit/research backgrounds? e.g. M&A bankers?

yeah that and and lev fin are prob the best/most sought after backgrounds

Do you ever hire credit analysts from Moodys/S&P? In general how is this experience viewed? Is it valued?

seen it happen, prob more valuable on IG side but def valuable

How stressful/high pressure is the environment? Is your day go, go go non-stop or do find you have time to think about the work you are doing and really get into it?

it depends, sometimes it's quite busy but still way more relaxed than flow sales or trading where you constantly have to make markets / take orders and make sure not to fuck up. You basically almost always have the time to double-check what you do etc. also a lot of days are pretty quiet with minimal interactions with anyone outside of your team so you can focus on your work.

You mention you cannot see yourself doing this in 10 years. Why?

didn't say exactly that, but yeah I am not sure I would like to. other than having the opportunity to (staying 10 years relies on someone senior leaving an empty spot for you, not exactly a given), I guess it's a decision you have to make about your career. Right now I think it's a great place to learn but I think I may enjoy being on the buy-side more in the long run. it's hard to say really, it's a pretty cool job, you're paid decently well and it can get really cushy at the senior level but I just feel it's a transition I'd like to do some point. I feel no rush though, my team is pretty great, I am learning a lot and I feel like I have it a lot better than a lot of my friends in IB or sales etc in terms of job, hours, lifestlye, exit opps and even pay (per hour at least).

Sorry for the bombardment! Thanks.

That's a good question, I think if you're targeting research (both equity and credit) it's a relatively straight forward path and the ACA designation in the UK is definitely viewed favourably in ER (a lot of roles ask specifically for it) so I think if you apply to roles posted onlines / contact recruiters you should get a shot. For credit research specifically I haven't seen that many but it's also a much smaller pool on the sell-side, and I know that some buy-side shops have quite a few former big 4 (oaktree europe for instance if I remember correctly). My advice would be as usual to network, look actively for roles and prepare well by reading about what the role entails, read some research pieces (sell-side; distressed debt investing is quite good as well) and try to prepare a couple of trade ideas for credit (distressed debt investors club has some). Distressed debt analysis from moyer is also a pretty good read on credit analysis in general I find (although it's geared more towards distressed a lot of it is relevant for hy).

don't want to jinx it, let's find out tomorrow

takes me about 25mn door to door, reasonable for london I think.

I go back and forth a bit with regards to buying a flat. I'm quite cautious in general so I'd like to keep a nice cushion of savings (in case your laid off, want to change jobs or something etc) and buying a flat would make me cash-broke basically. Also at the moment I feel like even leveraging myself up I couldn't buy something I'd really like, I see some colleagues spending half a million quids on one beds in non-premium areas and it just doesn't feel right. On the other hand i'm spending quite a lot on rent so not sure it's a smarter move to wait... what are your thoughts on this?

For a credit research position , it depends a bit on the level of the position and the team. For intern or even 1st / 2nd year analyst to be honest it depends on your competition but I feel like you could get away with not knowing much about credit if you're smart and lucky. But generally speaking the way I've prepared my interviews were being solid on all the accounting stuff (like IBD), preparing a few trade ideas (stocks, I guess credit would be even better but tbh it's pretty though to come up with a good one if you're not in the industry, a really good stock trade idea is better than a credit one if you don't know what you're doing). Feel free to send me one btw if you're preparing one and I can make some comments, but you should be fine with a stock one. For some of my interviews I also had case studies, but I guess that depends on the teams. If you get assigned one before the interview then obviously work really hard on it. In terms of though questions, I've been asked some conceptual questions which seem easy now but could be difficult when you're new to credit (which company would be better under different scenarios, CDS vs. equity, seniority of of instruments within the cap structure, spread per turn, how do you compare spread per turn of leverage for companies in different industries etc), but tbhiIf you're solid on accounting (how you get to FCF etc), and some credit concepts (net leverage, equity cushion, YTW, Z-spread) as well as have some understanding on what sort of leverage a company can support depending on its industry etc (look at EV multiple in the industry, ratings etc), you should be way ahead of your competition for a junior role. A lot of people stumble on very basic stuff like FCF calculations in these type of itws surprisingly (guess some people don't approach it like an IBD or ER itw because credit research is less well known). I think senior analysts look for someone smart and with a ton of motivation, and also intelectually curious.

Hi, That's unfortunate, I know people in research at my bank which where sponsored for a Visa, but I think it also depends a bit on where you come from (ie. easier or harder depending on the country)? From what you wrote it looks like you have a pretty strong background so I'd have thought you'd have had a pretty good shot but I also know some very qualified people which didn't find a spot in London for the same reason. If you don't mind me asking, why are you looking to work in London vs. other cities where you might have a easier time (singapore, dubai, wherever you where working before, etc)? Also, why did you leave your job for a master? If you really want to work in London my advice would be to look more on the buyside as I think in credit you may have more spots, and also potentially be open to roles outside of research. I feel like with your level of experience a complication for research is that you'd almost have to start as a senior analyst, and also I find that most junior analyst spots are filled by summer interns, with some internal moves and very few outside hires (more frequent at senior analyst I think).

Credit analyst as in securities research? or Credit Analyst as in evaluating the credit worthiness of bank counter parties?

As in securities research

Anyone?

bump