Credit rating vs equity research
I have an offer from a credit rating firm, and am waiting on a position in equity research. I'm aiming for Asset Management in the long term (~6-10 years). Which position is likely to give me more relevant experience and better chances of moving into asset management?
Thank you in advance!
Either one will give you a direct exit to an AM. Chew on this:
Equity Research: You'll learn how to model properly and you'll get solid corporate finance skills, including valuation. These skills are readily transferable to banking roles as well as AM. You'll also be paid well. On the flip side, if you have a terrible Analyst, you won't learn as much as you'd like. Nevertheless, it's an impressive bullet on the resume.
Credit Rating: You'll learn credit analysis in a way that other firms don't teach since it's your main role. You'll gain corporate finance skills, EX the valuation/equity side of the equation which will ding you for investment banking (but not Corporate Banking, and potentially not for Lev Fin). On the AM side, you'll have access to credit roles only. You can also exit to Equity Research. You won't learn robust modeling, but the likelihood of getting a bad analyst is lower (at least as far as supporting your growth goes). You'll be paid like a back-office bank employee if you start at a Credit Rating Agency right out of college, but you'll also end your role around 5-6pm, leaving plenty of time to study for the CFA.
I see a CRA as more of an exit for people who got a BO role out of college that need to transition and gain skills to make the next logical move. If you're in the running for an ER role, you're already ahead of that curve. If you strike out and take a BO role and feel stuck, the CRA is a reset button.
That said, if you know you like Credit (you probably don't know this yet), go with a CRA. If you're unsure of where you want to be, go with ER.
Within 2 years, it's probably more likely you'll get a junior AM role after Equity Research than a CRA role. ER Associates are just favored for modeling skills.
Hi nsjkd! Thank you very much for your insightful post. I actually read your other post as well on perpetualgrowth's thread which was immensely helpful.
In your opinion, do you think that the skills learnt at a CRA would be worth a 2-3 year investment instead of heading for ER right from the start? I'm under the impression that a CRA may help me learn to handle financial firms (as they take on lots of debt instruments that may give a pure ER person trouble) and turnaround situations.
Once again, thank you very much for your help and advice.
For financial firms, it's a different story. I do think a background in credit analysis helps to demystify that piece.
That said, working under a solid ER analyst should get you familiar with the elements that you need to know (sorry, being vague here because I'm not a FIG guy). I still lean towards ER as the safer play for your career -- there's more to gain from it in terms of branding/marketing yourself. If you find that credit research is a skill you're sorely lacking, you can always make the leap over at a junior level. The technical skills, research habits, and strong understanding of corporate finance you get from ER is valuable to both sides.
Also, given you're a 2015 grad, you may want to reconsider FIG. It's a pigeonholing experience if you're not sure that it's where you want to be. Understanding general corporates is a more transferable skill and leaves you open to decide your career path down the line. If the choice is between FIG ER or Corporate Credit at a CRA, I would go for Corporate and make the leap to ER (or wherever you want) after.
Hey - Ill weigh in a little bit since I have some personal experience with the question you are asking.
I made the jump from a junior position at a CRA to a credit research role an Asset Management firm. I knew I always wanted to make the jump to credit so this was a really good role to help prepare me for the buyside. You get a lot of exposure to different products (i.e. term loans, HY bonds, IG etc.) and it will certainly provide you with the exit opps you are looking for if that's the route you want to go. For reference, I also interviewed for an equity position at a buyside shop and got an offer there too - you can get there too if you would like, you just need to make a bit more of an effort learning on your own, as you wouldn't be dealing with it on a day to day basis.
Overall @"nsjkd" has given you some great advice. If you are unsure about what you think you would like to do after this, you should give ER a very strong consideration. At risk of giving myself away, I'll stop here.. Feel free to PM me with any additional questions you have.
My 2 cents would be for the equity research position (understanding you have not received an offer yet). While the CRA role would prepare you for Asset Management, it is a position on the outside looking in while an entry-level equity research job is more of a lateral move. A transition from CRA to asset management is certainly possible but it requires some luck and usually a bullish job market to be successful. Lastly, working at a credit rating agency can lead to many different sectors - corporate, munis, structured products - so the skills and experience gained may not be entirely transferable to all types of Asset Management. Good luck.
Thanks again for all the great advice, guys! I really appreciate all your insights!
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