ER to HF

Hi, I work in sell side research covering energy in Canada. Recently completed the Level III CFA exam (waiting on 2 more years of experience to gain the title) and I am trying to move to the buy side, aiming for HF in the US.

I had contacted about 30 recruiters in the US (NYC, MA, West Coast), however no results so far. Additionally, I tried contacting some energy PM at big multi manager shops, however, no avail, no one ever picks up...

Love to get some tips and pointers on what else I can do or if I should switch up my strategy.

Thanks,

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Comments (89)

Dec 31, 1969 - 7:03pm

Relatively common from both. You just see less ER to HF transitions simply because you have fewer ER professionals vs. IBD guys.I assume somewhere in the OP you missed the word IBD as otherwise your question does not make sense - surely you can work within ER at a BB.

On another note - it's not common for anyone to go to Soros, it's like saying how common it is to go to Eclectica Asset Management.

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Dec 31, 1969 - 7:07pm

I was just wondering if Equity Research is still a good training ground for Hedge Funds. The more I read, the more I see how bankers are preferred at value funds. You start to read things about headhunters preferring bankers and not even considering ER. Is this because there are less people in ER than banking? Is it very common for people in ER to move into Hedge Funds? Also on a side note, can ER transition to macro funds?

Dec 31, 1969 - 7:13pm

General ER Questions and is ER => HF Possible? (Originally Posted: 10/17/2010)

Hi,

So I was wondering how important quant skills (when I say quant, I mean really advanced skills...like beyond calculus and stat) versus accounting/finance skills in equity research? Would you say that equities research is more about being able to understand financial statements and make decisions based on business strategies and growth? For someone like me, who enjoys using fundamental analysis, macroeconomic forecasts, dividend growth, etc. to make investing decisions versus advanced algorithms and whatnot and will major in accounting, is there room for me in ER, or would I need to pray I can find a non-quant trading desk?

Furthermore, do ER people get placed into hedge funds if they're good? If so, what kind of hedge funds (in terms of strategy) do they typically get into?

Thanks!

Dec 31, 1969 - 7:14pm

Your second guess was correct. More about understanding financial statements and making decisions based on dividend growth. You are listening in on earnings calls, talking to management, etc. I couldn't imagine why you would ned any advanced math, computer programming skills, etc. even in the most complex ER groups. Thorough excel and maybe some VBA is all you need.

Also ER==>HF is possible and common. ER==>PE... not so much. As an ER associate/analyst, you are in daily contact with money managers so it is a natural transition if a spot were to open up at one of your client's shops.

Dec 31, 1969 - 7:16pm

So I've done more homework on equity research and it sounds like a pretty awesome job. Correct me if I'm wrong, but basically, these guys just become industry experts and give ratings about whether people should buy, hold, sell, etc. stocks, right? That sounds like something that's even more interesting and better suited for my personality than trading and possibly hedge funds and I think I might want to pursue something like that long-term. I have some questions though:

  1. Is finance or accounting generally more valuable for this type of work? I really don't like a lot of the accounting I'll be forced to learn as an accounting major (i.e. "auditing" or any tax class), and while I'm taking a bit of intermediate so that I know more than average, will not having an in-depth experience hurt me? Would you say its OK to just major in finance, or should I just suck it up for 2 years, do accounting and then get a job in ER?

  2. I go to a non-target, so how difficult is ER to break into if you don't have a solid network already? Are there boutique ER shops like there are for banking? Also, when should I start keeping an eye out for internship postings?

Thanks

Dec 31, 1969 - 7:17pm
  1. A solid understanding of basic financial accounting and related valuation methods are more than enough. No need to take Tax Accounting or whatever. When you are placed in ER, group placement is VERY specific. Ex) You won't be placed in Financial Institutions Research... you will be placed in Non-Life insurance research... Thus accounting is so specific for each group it will be a waste of time to get too in depth for accounting.

  2. Yes you really should try to network effectively and early. ER is a much smaller program than IB or S&T. 5-10 interns. You can make it happen though.

Dec 31, 1969 - 7:18pm

^^ Agreed. I actually only took minimal accounting as electives in undergrad (was econ major), and have been fine in ER. Internships and personal interest & investing has helped fill in the finance. Then again, there are different levels of research associate, and every analyst is different. Some positions are pre-mba, some are post.

Not much quant needed. All pretty basic math. All about the financial statements, and your gut. You have to have a good gut, or at least be pretty opinionated to get interest from clients. You have to be able to sell to sales and their accounts on your marketing trips.

Industry knowledge is mostly cumulative - you're job is to become the guru, and know your companies better than anyone else. You've got to facilitate making your clients money, and make your analyst's life easier. You're the proxy for the analyst.

ER is a great place to start if you want to move to the buy side down the road, whether hedge fund or any other fund. Seen it and heard of it many times.

You've gotta network or else extremely tough like any job on the st.

best of luck.

Dec 31, 1969 - 7:19pm

Accounting is really easy to learn. Most L/S guys don't have accounting degrees or audit experience.

Personally, I don't think major is very important. Funds need smart people with an ability to dig deep and be analytical. I would say there are a ton of econ majors and #2 is probably engineering.

Dec 31, 1969 - 7:21pm

You should try to double major in finance and accounting, if you can. If you're serious about ER, you will eventually want to go for the CFA charter, which entails quite a bit of detailed accounting.

If you can't double major, then major in finance, and take accounting courses like intermediate, advanced financial accounting, and financial statement analysis. You need to know GAAP, and how to read financial statements. Those courses would get you there.

Ever see a guy say good-bye to a shoe?
  • 1
Dec 31, 1969 - 7:22pm

Well, here's the thing: my school WON'T allow double majors in ACTG and FIN unfortunately. Plus, as I said, I HATE accounting. I can learn it on my own, but the way its taught in school is not fun at all. I don't mind learning a bit extra so that I can understand 10-Ks better, but I'd rather self-study intermediate/advanced financial than sit through class doing hours of adjusting entries for homework and other boring, repetitive crap. That's why I'm wondering if finance + self-study accounting will work (and yes, I can motivate myself to self-study on my own) instead of accounting + self-study finance.

Dec 31, 1969 - 7:23pm

Repetition -> habit -> personality -> success! Take the accounting classes - trust me, once you graduate, you won't have the time/inclination to start studying accounting.

Ever see a guy say good-bye to a shoe?
Dec 31, 1969 - 7:24pm

ER to activist hedge fund? (Originally Posted: 05/17/2010)

I am new to this site, but was looking for information on breaking into an activist hedge fund. I am about to begin a two-year equity research program at a mid tier (Barclays/DB/BAML) BB, but was looking to go to an activist hedge fund afterwards.

Where can I find more information about breaking in? Also, how have activist funds done recently? Is someone with an ER background acceptable? What is comp/lifestyle like at some of these places? I can't imagine culture is great with so many confrontational people around.

I searched on this site, and the other times it has been discussed didn't go into great detail.

Dec 31, 1969 - 7:26pm

ER>Hedge Fund Success Stories (Originally Posted: 05/23/2012)

For anyone who has successfully transitioned from ER (preferably sell-side) to a hedge fund, can you detail the process? For example, were you contacted or did you use a head hunter? What was the interview process like and what do you think pushed you over the top? Any and all detail would be appreciated. If you know of someone and can share their story, that would be helpful as well.

Dec 31, 1969 - 7:28pm

There is no magic bullet on the correct path from ER to HF analyst.

I do know it does not happen at the junior level, as it usually takes many years of experience at minimum and you need to have some sort of decent stock coverage. Just being an associate won't cut it, as who would trust you to make decisions in a cut-throat environment for the best performance?

If you switch to a HF as a start-up with a buddy that is a different story, but in the post-2008 environment its incredibly difficult to raise money for new hedge funds unless the backers have a proven track record or very strong reputation within the industry already.

Dec 31, 1969 - 7:30pm

BB ER Post-MBA to get into HF down the road? (Originally Posted: 12/23/2014)

I'm an MBA student at a top 10-20, but not elite program. Assuming that I'm interested in long-short equity value or possibly distressed debt, what type of work experience should I aim for post-MBA?
Is BB ER my best option?

Dec 31, 1969 - 7:32pm

I can't really think of many people who have started their research career in ER/HF post MBA. You might have an easier switch doing PE for a few yrs then making the transition to a HF. This is just my opinion. I only say this because it seems to me that HFs don't really place much value on an MBA unless you are at the PM level or above.

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  • 1
Dec 31, 1969 - 7:33pm

I used to work in sell side equity research and moved over to the buy side. BB ER will open up doors for you more so than working at a smaller shop. However, I think investment banking or even consulting will position you better for a HF role than ER - so I would exhaust those two options first.

I think an MBA is a bigger deal at certain long-only firms. I don't know if it adds much for someone looking to work at a HF.

Best of luck!

Dec 31, 1969 - 7:34pm

Why are you so interested in a hedge fund as opposed to some more traditional mutual funds? Many people wet themselves when they hear "hedge", but in all reality you have a better shot at a long-only, traditional mutual fund. And, by the way, there are much fewer people who can really be good at shorting, therefore, why not just stick with what you're likely going to be good at, long?

If you are good at short-selling and you know it, you should definitely go after the HF community because, in my experience, they are in short supply.

Dec 31, 1969 - 7:35pm

yes BB ER is your best bet, definitely better than banking post MBA assuming you cannot get into the buyside straight out of your degree

~~
by the way -- I actually think it's a lot harder to outperform in a long only mutual fund than it is at a hedge fund. in a long only fund you are benchmarked against an index, and often times have very strict style limitations (eg SMID-cap value), along with concentration limits as well. in a hedge fund you just have to make money...

Dec 31, 1969 - 7:36pm

If people want to end up in HF, why not equity research but IB? (Originally Posted: 11/13/2012)

I mean equity research is more close to the stocks, IB skills would not be that important except modeling. If my understanding is correct, then why?

Dec 31, 1969 - 7:38pm

Yes, it is. This is actually why I chose ER over IB. I want to work for an equity focused hedge fund long term, and figured that out early on.

But there are a few caveats:

(1) You will only be appealing to equity focused funds. Distressed debt, credit, merger arb, etc. are effectively off the table. You don't work with debt much in ER. While it isn't rocket science (I was able to teach myself a lot of the material), good luck convincing a headhunter to take a chance.

(2) There is no pipeline. You will be reaching out to hedge funds and headhunters, not the other way around. ER is a much smaller field, and people tend to stay in it for several years. You don't have an 80+ entry level employees looking for a job every year (as you would have in a BB IB department).

Dec 31, 1969 - 7:39pm

Because most funds all you do is model (at least early on) and IBD will give you the most in-depth modeling experience. Dynamics told me they prefer IBD for long/short because of the transactional experience and the more extensive modeling. You guys can argue this however you like but if a top HH thinks this way then that's your best foot in the door.

Dec 31, 1969 - 7:41pm

This was actually discussed extensively in a longer thread almost two years ago.
//www.wallstreetoasis.com/forums/investment-banking-vs-research#comment-3…

Look specifically at the 3rd post and any others by DurbanDiMangus. Essentially it boils down to the perception you will have coming out of that role.

Sadly, it's analogous to so many other things in life that are driven by "prestige," but the image among recruiters is that the technical skillset those coming from a 2-year banking stint have is more rigorous and their deal experience is broad-based, giving them an advantage over the ER guys. Many senior guys at the top funds everyone dreams of will specifically ask headhunters to go out and find IBD analysts. There's also the element of a filtering process; people recognize that IBD recruiting is an intensely competitive process.

I am permanently behind on PMs, it's not personal.

  • 3
Dec 31, 1969 - 7:53pm
APAE:
Sadly, it's analogous to so many other things in life that are driven by "prestige," but the image among recruiters is that the technical skillset those coming from a 2-year banking stint have is more rigorous and their deal experience is broad-based, giving them an advantage over the ER guys.

Precisely. I'm of the skool of thought that feels this "image" is basically a self-reinforcing delusion. Personally I don't see how formatting pitchbooks and following orders is "more rigorous", but I'm also pretty dense.

Dec 31, 1969 - 8:15pm
APAE:
This was actually discussed extensively in a longer thread almost two years ago.
//www.wallstreetoasis.com/forums/investment-banking-vs-research#comment-3…

Look specifically at the 3rd post and any others by DurbanDiMangus. Essentially it boils down to the perception you will have coming out of that role.

That was a really informative discussion. Does any of this change at the post-MBA level? Obviously the standard path is IBD analyst -> HF analyst but what about coming out of an MBA program? As a career switcher I was also naively thinking some time in ER would be most applicable to HF work and would help me make the transition. Should I be considering an IBD Associate role and then trying to switch from there? I know that as an Associate you aren't quite as involved in the models as the analyst is.

Dec 31, 1969 - 7:42pm

1) IB candidates are perceived to be stronger in general as its more competitive
2) Sellside research analysts bullshit too much about equities. Banking analysts bullshit as well but they do it about whole companies and everyone knows its bullshit so its easier to get rid of.
3) Sellside er teaches you the wrong modelling / thinking about stocks, this is similar to 2. It's much easier to start from a clean slate banking analyst that only has the modelling skill set and none of the preconceived notions that need to be untrained.

Dec 31, 1969 - 7:44pm
leveredarb:
1) IB candidates are perceived to be stronger in general as its more competitive
2) Sellside research analysts bullshit too much about equities. Banking analysts bullshit as well but they do it about whole companies and everyone knows its bullshit so its easier to get rid of.
3) Sellside er teaches you the wrong modelling / thinking about stocks, this is similar to 2. It's much easier to start from a clean slate banking analyst that only has the modelling skill set and none of the preconceived notions that need to be untrained.

I would say this applies more to senior level hires (but this may very well be the perception - in which case it is as good as reality). Your are an excel monkey for your first few years, cranking out models and presentations.

In ER, you won't be modeling transactions beyond their basic impact on the balance sheet/eps/earnings forecasts. However, you will be spreading comps and building DCFs just like banking analysts. I will admit ER focuses too much on details - your model might be 5x larger than an IB analyst's, but still arrives at nearly the same value. I am sure this would kill efficiency at a hedge fund.

Perhaps a good follow up question would be: If ER associates are overlooked by headhunters, how can you improve your odds at landing a buyside offer?

Dec 31, 1969 - 7:43pm

Like some of the other people said, banking is simply a much better pipeline of high-quality candidates and funds assume they know how to model well and have a good understanding of how to navigate a financial statement. That's not to say ER candidates don't, since their job is actually way closer to what you'd do at an equity HF, but the pipeline is just easier and we know top students go into banking and so if we take bankers we're getting the cream of the crop. I personally think it's bullshit, but that's more or less the general thinking of headhunters and most hedge funds.

That said, your chances at a fund that does value or something exclusively in equity should be as close to a banker's as anything. Credit, distressed, etc. are the only funds I'd say bankers definitely have a better skill set and experience set coming in. But that stuff is actually pretty damn easy to pick up on the job.

I hate victims who respect their executioners
  • 3
Dec 31, 1969 - 7:45pm

Doesn't make a lot of sense still.

Surely, the guys that do the best and going to be the best additions to a hedge fund are the guys that live and breath the stock markets. Wouldn't a college senior who loves the equities markets and quite possibly trades his own account (and has possibly been doing this since high school) be the sort of guy that is going to ER or even sales and trading and eventually will be the best guy who succeeds at the hedge fund level because equities are his passion.

The whole prestige idea doesn't seem to make too much sense. Seems to me that a large majority of the people who land in BB IBD jobs do so because it's seen as prestigious then jump to a hedge fund because it's prestigious without having much knowledge or even real interest in the stock markets. Are these guys going to be the guys who end up being great PM's? I'd be interested to know how many of the great L/S managers ever worked in IBD.

Seems to me like this is a case of many of the people on here who say their goal is "BB IBD, Top MBA and then megafund PE" and if you asked them why they couldn't tell you.

Merger Arbitrage I can understand, but for credit hedge funds you'd also think that Credit Research would be the best place to start as well - i.e. those people who actually like credit markets and have an interest in it.

Dec 31, 1969 - 7:49pm
adast027:
Doesn't make a lot of sense still.

Nobody said it had to make sense.

I hate victims who respect their executioners
Dec 31, 1969 - 7:52pm
adast027:

The whole prestige idea doesn't seem to make too much sense. Seems to me that a large majority of the people who land in BB IBD jobs do so because it's seen as prestigious then jump to a hedge fund because it's prestigious without having much knowledge or even real interest in the stock markets. Are these guys going to be the guys who end up being great PM's? I'd be interested to know how many of the great L/S managers ever worked in IBD.

Seems to me like this is a case of many of the people on here who say their goal is "BB IBD, Top MBA and then megafund PE" and if you asked them why they couldn't tell you.

Completely agree.

Dec 31, 1969 - 7:47pm

Pre-Eliot Spitzer (when I graduated), I always thought of ER as more desirable/prestigious than banking. Interesting to hear how things have changed or how my perception was wrong.

Dec 31, 1969 - 7:57pm
SirTradesaLot:
Pre-Eliot Spitzer (when I graduated), I always thought of ER as more desirable/prestigious than banking. Interesting to hear how things have changed or how my perception was wrong.

why are ppl throwing around spitzer? i think i missed how his hookers changed finance...

Dec 31, 1969 - 7:48pm

Probably largely driven by (as the first reply alluded to) the supply of IBD analysts vs. ER analysts. ER intakes are about 1/10th IBD intakes, with a lot of the hiring also being qualified accountants instead of college kids. ER might be the better programme, but chances are you can find better individuals in IBD just by virtue of IBD being much bigger.

I mean logically someone who works in a role that is very similar to what a hedge fund does (because they're tailoring their research for hedge funds/other investors), actually has contact with hedge funds and actually has some market exposure is in a much better position. Sure, IBD people work longer but a lot of that time is "wasted" (from a hedge fund viewpoint) relative to what ER analysts do.

There's also the other great point raised in the first post that not every hedge fund is equity based. Then again, it's not like the IBD skillset is really that much more applicable for other asset classes, at least judging by how little the typical IBD analyst seems to know about debt products. edit: and that's just debt, virtually no advantage for most strategies

Dec 31, 1969 - 7:50pm

Now I don't necessarily mean this in a negative way, but one might say that hedge funds are bastions of elitism, fortresses of pretension that snobbery lovers go to hide in and be protected from cruel world outside that tries to passively instill egalitarian principles into the collective subconscious.

Guess which other area of work that offers entry level positions fits that description...

Dec 31, 1969 - 7:51pm
Going Concern:
Now I don't necessarily mean this in a negative way, but one might say that hedge funds are bastions of elitism, fortresses of pretension that snobbery lovers go to hide in and be protected from cruel world outside that tries to passively instill egalitarian principles into the collective subconscious.

Guess which other area of work that offers entry level positions fits that description...

Ya no that's definitely us

I hate victims who respect their executioners
  • 1
Dec 31, 1969 - 7:54pm

the thing with ER is that it is much more situational than banking. Is the analyst you work for any good? If not you probably will have minimal exposure to institutional clients. Does your analyst trust you (once you get to a certain point)? Once again, if not you probably will have minimal exposure to clients. And then finally how is your firm where you work at viewed on the street? You can talk to buy-side guys, a lot of them prefer certain firms to others, and it isn't always about being the best stock picker. It could be exposure to management, the conferences you run, more general macro economic pieces of research that clients appreciate, it could be a number of things. If you work with a good analyst at a good firm in ER, you will get ALOT of calls after your second year from other firms and head hunters, trust me. You just don't hear about it as much because there are SO many fewer younger people in ER than in Banking.

Now with all that said, if your goal is get into a HF, and you have both an ER gig and a IB gig lined up, take the IB gig, your chances of getting in are much higher because a lot of the other things i mentioned don't matter nearly as much. Being the associate for a bad or selfish research analyst is one of the worst gigs on wall street, and most of the time it is impossible for you to know until you actually start.

Dec 31, 1969 - 8:02pm

http://www.forbes.com/sites/brettnelson/2012/09/27/a-decade-after-eliot…

I'm still not too clear on this whole Eliot Spitzer business. As the link above highlights, the number of sell recs has definitely gone down in the last 10 years (which doesn't bode overly well for ER's credibility), but the global settlement should have made sell recs more prevalent since research analysts no longer had to worry about losing banking revenue. So if we assume cause and effect, the data doesn't make too much sense. Someone wanna lend a helping hand here?

Best Response
Dec 31, 1969 - 8:09pm
Going Concern:
http://www.forbes.com/sites/brettnelson/2012/09/27/a-decade-after-eliot…

I'm still not too clear on this whole Eliot Spitzer business. As the link above highlights, the number of sell recs has definitely gone down in the last 10 years (which doesn't bode overly well for ER's credibility), but the global settlement should have made sell recs more prevalent since research analysts no longer had to worry about losing banking revenue. So if we assume cause and effect, the data doesn't make too much sense. Someone wanna lend a helping hand here?

If you aren't made aware IBD's pitches, then you want to keep buys/holds on everything that could even possibly generate IB revenue. Hard to win a bake-off if an analyst is advocating a short of that company. It also has to do with how ER generates revenue - if ER can't generate IB fees, then they need to add more value through corporate access. Again, hard to do if you have a sell on the stock.

But this would imply that Eliot Spitzer waged this war to advance his own career, not clean up Wall Street. A politician would never pass bad legislation to curry favor with voters, right?

Dec 31, 1969 - 8:04pm

This thread is full of some many inaccuracies. As someone who has worked in both BB IBD and ER, I'd like to clear a few things up.

  1. IBD is NOT more selective or harder than get into than ER. ER doesn't have 100 analyst classes and it is usually on an as needed basis. ER also rarely hires out of undergrad, you add no value out of undergrad and ER runs too lean to waste time training you.

  2. HF's LOVE ER guys, every guy who has left my ER firm, has gone to a top, top HF (Soros, Man, Tiger etc). ER guys have one HUGE advantage - They already have the hook ups. IBD folks need to rely on headhunters, ER guys have extensive communication with the buyside almost everyday..i.e this week I'm going to a basketball game with 5 highlevel buysiders.

  3. The caveat is your desirability depends on your analyst. If you work for a nobody, don't expect wonders. If you work for an II ranked analyst, you're good to go.

  4. As someone who has done both IBD and ER, the skill set is without a doubt more relevant in ER, as long you focus on equities...distressed funds etc are the exception.

Dec 31, 1969 - 8:05pm

There is a stigma about equity research at hedge funds, because you learn to automatically disregard their opinions. Of course they are valuable to get ramped up on a company and keep you up to date on sentiment and the latest news, but hedge funds are quick to use equity research folks as a contrarian indicator and look through their notes/models in painstaking detail to find mistakes that can be exploited. There is a certain belief (almost unconscious) that because junior equity research guys have learned their craft in this environment, they cannot unlearn this, and are tainted. Junior investment bankers, on the other hand, everyone realizes that they know absolutely nothing except how to be a model jockey. So they are more malleable, as long as you see the passion and the raw talent, you can transform them into a thinker.

I will probably get hate for this post, but I am merely trying to explain a phenomenon that is not well understood. I will note that my firm wouldn't be against hiring someone from equity research, particularly if it was a junior analyst that we had a call with and impressed us with their knowledge of the company we were asking about. But honestly, it doesn't happen often. Of course, every fund has a different hiring philosophy, and I'm sure there are ones that have a more favorable view of an equity research background (particularly ones that have ex-equity research guys).

Dec 31, 1969 - 8:06pm
slowdive:
There is a stigma about equity research at hedge funds, because you learn to automatically disregard their opinions. Of course they are valuable to get ramped up on a company and keep you up to date on sentiment and the latest news, but hedge funds are quick to use equity research folks as a contrarian indicator and look through their notes/models in painstaking detail to find mistakes that can be exploited. There is a certain belief (almost unconscious) that because junior equity research guys have learned their craft in this environment, they cannot unlearn this, and are tainted. Junior investment bankers, on the other hand, everyone realizes that they know absolutely nothing except how to be a model jockey. So they are more malleable, as long as you see the passion and the raw talent, you can transform them into a thinker.

I will probably get hate for this post, but I am merely trying to explain a phenomenon that is not well understood. I will note that my firm wouldn't be against hiring someone from equity research, particularly if it was a junior analyst that we had a call with and impressed us with their knowledge of the company we were asking about. But honestly, it doesn't happen often. Of course, every fund has a different hiring philosophy, and I'm sure there are ones that have a more favorable view of an equity research background (particularly ones that have ex-equity research guys).

I pretty much agree with this. I know I'm definitely in the camp that thinks using sell side analysts for information only helps when you have particular objective questions that you can't get answers to without the type of openness management would have with the ER guys. Very few analysts do I want to get the opinion of on a name I'm looking at, and I never use them to get up to speed on a company... you can do that on your own and usually much better than the research guys since they don't know what you will think is most important. Obviously I could be biased like you said but I truly do think that sell side doesn't look at the stuff that we care about and that's mostly because they're focused on only the next quarter or two whereas I might be looking at the business as a 5 year investment.

But of the few analysts that I do trust, I'd give them or their associates priority way faster than I'd give it to some superstar junior banker. When someone has the natural edge that some great investors seem to just be born with, it's not hard to see that, so again it's more about the individual than whether or not you took the ER or IBD route. Unfortunately since most people in these fields are pretty homogeneous it's safer to pick the banker or at least recruit them harder, but more of the guys that stand out will probably come from ER.

I hate victims who respect their executioners
  • 3
Dec 31, 1969 - 8:07pm
slowdive:
There is a stigma about equity research at hedge funds, because you learn to automatically disregard their opinions. Of course they are valuable to get ramped up on a company and keep you up to date on sentiment and the latest news, but hedge funds are quick to use equity research folks as a contrarian indicator and look through their notes/models in painstaking detail to find mistakes that can be exploited. There is a certain belief (almost unconscious) that because junior equity research guys have learned their craft in this environment, they cannot unlearn this, and are tainted. Junior investment bankers, on the other hand, everyone realizes that they know absolutely nothing except how to be a model jockey. So they are more malleable, as long as you see the passion and the raw talent, you can transform them into a thinker.

I don't necessarily disagree but it's really mind boggling to be honest. The irony of knowing nothing to be someone's strongest asset! ER guys may not know all the sneaky tricks that HF bros do, but a good chunk of the work and thought process is overlapping.

Dec 31, 1969 - 8:18pm

Had this discussion at work the other day. The conclusion was that:

ER teaches you the exact wrong way to think, if you want to be an investor.

IB doesn't teach you how to think about anything at all, and you are still a blank slate when you come out.

For a junior employee, the consensus was that they would rather find a motivated/hardworking banker, who they can teach to think like an investor.

Array

  • 2
Dec 31, 1969 - 8:21pm

Cries:

Had this discussion at work the other day. The conclusion was that:

ER teaches you the exact wrong way to think, if you want to be an investor.

IB doesn't teach you how to think about anything at all, and you are still a blank slate when you come out.

For a junior employee, the consensus was that they would rather find a motivated/hardworking banker, who they can teach to think like an investor.

This logic is amazing.

Let's hire someone who knows nothing, because people can never learn new things, right?

Wait, but the M&A guy has learned wrong things in his finance courses in college as well! Better to hire a hard working and motivated high school kid than someone who has been ruined by false knowledge.

Hang on there, the high school kid has learned how to think wrongly as well in his economics classes! Better to hire a hardworking and motivated toddler than some high school kid!

I totally agree with you that people in research aren't motivated or work hard, despite the fact that it's much harder to land a position and they're still at the office long after I have left. No wonder hardly any HF can make consistent returns with logic like this.

As an aside, I have no skin in the game here, as I'm not in equity/rates research, but I do think this thread is hilarious.

Dec 31, 1969 - 8:20pm

Tree vs Forest.

Studying the numbers vs Studying the business.

etc etc

Array

Dec 31, 1969 - 8:24pm

^ How exactly does the research department track HF trades which go through multiple different brokers and borrows are through the prime brokerage division?

Please let me know if this happens at your bank, it'll be important for the deposition.

Dec 31, 1969 - 8:26pm

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Dec 31, 1969 - 8:29pm

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Don´t say this in a banking interview: Which superhero would you be and why? I want to be like Robin Hood, stealing from the rich and giving to the poor - me.
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