Equity Research: Future Outlook.

The questions here are more about the future and existence of the industry itself and how the current experts see it growing/dying.

(Context: I am a 22-year old Indian guy with a graduation in business administration and zero experience in finance. In a recent discussion, I posted these questions to an ER veteran in one of those Q&A sessions; while he may or may not respond, I thought I should ask these questions straight away to the larger audience.)

  1. What's your take on the theory that in the very forthcoming years ER as an entire function will turn obsolete because of increasing Quantitative Research prowess on both the buy-side and the sell-side?
  2. Even if ER, in its traditional sense being conducted by humans, remains on the sell-side, do you see any worthwhile exit opportunities available for people in ER since the hedge funds are increasingly turning towards greater quantitative skills?
  3. Citadel founder Ken Griffin recently said in an interview that his firm still makes most of its money from good old stock picking. Do you believe this guy?
  4. A blanket question: 5 specific skills (not in the lines of 'communication' or 'team management', rather more specific/hard core ones like maybe programming, financial modeling etcetera) one needs to master in order to become a distinctly known ER guy, at least in one's home market/industry.

Comments (3)

Nov 24, 2018

DisGuyDucks, hey, look at the bright side, at least you didn't get a ton of monkey shit thrown at you...here is my best guess on threads that might be helpful:

  • Hedge Fund Careers: Getting a Hedge Fund Job Out of Undergrad and Beyond equity research. If you want to be in a systematic hedge fund / CTA fund, you'll need to do some ... become a hedge fund analyst without experience? While working in equity research or in investment banking ... you'll ever need to land the most coveted jobs on the buyside. HF Interview Course Here hedge
  • Industry Outlook: Crypto Hedge Funds crptofundresearch.com for trends on all cryptocurrency funds (hedge funds, venture capital, and private equity trends ... Hello, The purpose of this thread is to serve as an overview of the Crypto Hedge Fund industry. ... Other common names for this space include Cryptocurrency Hedge Funds, Blockchain Hedge Funds, and ...
  • AMA- risk analyst at hedge fund with 5 years of experience. Ask me anything Worked there for two years, got bored and transitioned to a 10B AUM multi-strategy hedge fund in ... years at hedge fund- I was hired as an analyst in the risk group, run by a risk manager in his early 30s ... equity/rates/FX hedging. In addition, I am expected to know understand to varying level of strategies/books the ...
  • IB vs Equity Research for Fundamental Hedge Fund Strategies- Advantages of IB HF, what are the advantages of IB? Any of the BB 's have good ER too, while not all of them give ... Given that ER has better lifestyle, hours, and maybe like 15% less pay, if your eventual goal is ... you great modeling experience in IB... Love to hear thoughts IB ER ...
  • Sell side equity research----> Hedge fund If you worked as an ER associate and transitioned to a buy side/specifically L/S hedge fund job, ... apply/find your HF job? Any and all info would be greatly appreciated. hedge fund buy side ... can you please detail your path? What was your education, how long did you work in ER, how did you ...
  • Comparing Investment Banks, Hedge Funds and Private Equity this detailed thread on WSO. Private Equity vs VC vs. Hedge Fund Private equity is similar to VC as ... working on idea generation and research. Hedge fund work is typically very meritocratic while PE remains ... Break into the Hedge Fund World? Want to land at an elite hedge fund use our HF
  • Mutual Funds (GAMCO/PIMCO/BlackRock) vs. Hedge Funds BlackRock stack up against hedge funds? In general hedge funds>>>>mutual funds but I feel as ... prestigious? 2) I am interested in being an investor. Activist hedge fund could be really cool. I am a junior ... Analyst at BlackRock, Equity Research Summer Analyst at Gabelli (maybe working somewhat close to ...
  • Top Hedge Funds: Analyst Compensation AUM is more directly related to their future earnings. Conversely, hedge funds must reach certain ... Hedge Fund Research. Therefore, the following funds are not only large but also accomplished. For more ... rankings. Looking to Break into the Hedge Fund World? Want to land at an elite hedge fund use our
  • More suggestions...

I hope those threads give you a bit more insight.

Most Helpful
Nov 27, 2018
  1. No. Correction, almost definitely but it would be the height of foolishness to think that fundamental research will become completely obsolete. Quants are good for what they do and fundamental guys are good for what they do. While there's a lot of overlap (i.e. trying to generate alpha), as someone who is fundamentally trained but has worked closely with quants, both sides can add value if they act like adults and work together. Having said that, there are way too many fundamental guys who add no value which will lead to a lot of heads rolling.
  2. See question 1. There will be room for fundamental guys, but the bar will be raised substantially by the quants (as it should be). You'll probably need to be fluent in quant speak even if you can't do it yourself. Though sellside (and buyside) pay is going to take a massive step down as fees are continually squeezed out of the system.
  3. No. I knew quants who worked there and while I don't know the split, they're not an inconsequential group.
  4. Critical thinking (this is hand wavy, but a lot of ER guys take mgmt commentary at face value. if you can sniff out bullshit better than your competitors you will make a name for yourself);

Data analysis (not excel, i mean REAL data analysis of potentially millions of data points);

Network (as quants take more share you need to have deep industry contacts that can't be automated away);

Communication (i'm just fucking with you now, but no seriously, you need to be able to synthesize complex information into very easily digested bite sizes. nobody cares about your data or critical thinking if you can't convey it within a 2 minute span - all your clients have ADD / ADHD)

And I can't actually think of a fifth one. Those are the main things you need to succeed as the industry continues to shrink. Also FYI, nobody cares about your financial model - no client ever votes for you because of your awesome financial modeling skills. Just keep it simple, accurate, and easy to understand and that'll be good enough.

Nov 28, 2018