Equity Research analyst pay formula

I heard that many equity funds compensate analysts with a formula to gauge their contribution to fund performance. My questions:

  1. How is the formula structured? By attribution or something else? Any numerical examples?

  2. Does the size of the sector you cover matter? Say you cover a sector that is 3% of your benchmark, how does that affect you vs. a 10% sector?

  3. Is their a clear boundary for coverage? What if you spot a great opportunity but it’s in a sector out of your circle? You could not buy it yourself both it’s on restricted list and your personal money does not have that scale, also risk tolerance

  4. Say you covered energy in 2014, what happened to you on the way down? Would you be doing fine since your recommendations did better than energy index? What if your PM eliminated energy for the whole year of 2015? You had zero bonus that year?

  5. For a long only fund, if the core positions will be held over several years, does the analyst who initiated the buy constantly rewarded for that stock? If the weight is high, is that like take an effortless ride?

  6. Long only fund...... wouldn’t you recommend to buy most of the names? That is the only way you get bonus?

Many thanks!

 

Hey CapitalOcean, I swear if I had a silver banana for every lonely thread I posted too I'd be richer than @compbanker ...

  • UBS FX or GS Eq. analyst s&t position from target school, have the choice between UBS fx derivatives and ... goldman equity derivatives. need advice on which to choose. pro goldman is obvious, it's the best BB. ... great in FX, and on top of that from what i have heard, equities is generally compensated substantially ...
  • BB summer analyst role in eq derivatives trading Hi WSO, am looking to gain an understanding of what a summer analyst will be doing at equity ... -trading-salary-vs-investment-banking-salary">S&T Bonus</a></li><li><a href="https://www.wallstreetoasis.com/forums/how ...
  • EQ Research internship, want switch to IBD background etc) for an EQ Research intern to find a full time IBD offer (at preferably a BB). I think my goal ... I am doing a research internship at a BB in HK. However, I am more interested in IBD (I dont mind ... /investment-banking-analyst-a-true-day-in-the-life">IB Analyst Job</a></li><li><a ...
  • ER vs M&A for L/S Eq Megafund after how many years of experience do ER sell side analysts usually move to HFs? (e.g. in IBD it's ... by end of 2nd year, what about ER?) Many thanks in advance. ER M&A MA equity megafund l/s ... If you had a choice between: middle-ranked BB ER industry team (think #5 or 6 in the top 10 II ...
  • Switching from Institutional Eq. Sales at an MM to FI/Eq. Deriv. trading at a BB? Hi, I just signed an offer with an MM in institutional equity sales and I was wondering if it was ... the pay is relatively low). If not possible, do you think I have a shot at switching over to a BB in ... a sales role rather than a trading role? Also, when do analysts generally lateral over? Thanks all MM to ...
  • Equity Research Bonuses- 2013 a sense where the other researchers are at given how much comp ranges for ER based on your analyst ... Associate (1.5 years exp) Base: 100k (bumped from 80k) Bonus: 40k equity research bonus 2013 2014 ...
  • How Are Traders Paid? traders make most of their money: WegmansTuna- Equity Research Analyst: Each trader is paid a base salary ... their performances. User @WegmansTuna, an equity research analyst, makes a good point on how prop ... to the value of the seat they own. They are often paid a base salary and a smaller bonus based on ...
  • Career Ladder: Equity Research vs. Investment Banking- (A Definitive Guide, Part 3) Hey everyone...sorry to take so long for part 3 of equity research vs. investment banking. For ... those who missed the first two parts, see the links below: Work/Life Balance: Equity Research Vs. ... Investment Banking- (A Definitive Guide, Part 1) Exit-Ops: Equity Research Vs. Investment Banking- (A ...
  • More suggestions...

Maybe one of our professional members will share their wisdom: k089786 Leon-Hunter-Rowe BudFox2

I hope those threads give you a bit more insight.

I'm an AI bot trained on the most helpful WSO content across 17+ years.
 

My fund is long only equities and we do things pretty simplistically, but the bulk of the bonus is based on total strategy results. For the individual piece, it’s kind of an excercise in judgement using attribution.

We have to stay fully invested, so recommendations are really what we think will outperform... even if the market tanks, we get paid as long as we tank less.

Part of the reason we focus more on strategy returns is BECAUSE PM’s can do what they want and ignore you.

 

Thanks for your reply.

I understand as long as you outperform your benchmark your fund is fine. But what makes bonuses different among analysts? Arbitrary by PM or senior management?

 

My firm bases it heavily on total fund performance, so we would all receive similar bonuses (as a % of base, of course). Senior management has the ability to increase or decrease the % slightly based on individual stock/sector performance, but it’s kind of a guess. Other firms have much better specific stock selection tracking, which probably factors into it more.

 

Facere nisi alias aut nihil porro autem. Sed sit ex exercitationem optio exercitationem porro. Molestias mollitia commodi quis qui repudiandae odio sed facere. Similique molestias nostrum itaque.

Harum ipsa qui ad distinctio delectus saepe. Vero inventore libero corporis dicta qui et. Officiis quaerat laudantium officiis et minima ratione. Est eius autem harum earum ex sint nam.

Iure est neque itaque distinctio reiciendis perferendis excepturi tenetur. Perferendis iste itaque est libero ea accusantium cum. Reiciendis maiores voluptatem quia.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
kanon's picture
kanon
98.9
6
DrApeman's picture
DrApeman
98.9
7
dosk17's picture
dosk17
98.9
8
CompBanker's picture
CompBanker
98.9
9
GameTheory's picture
GameTheory
98.9
10
numi's picture
numi
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”