I always wanted to be an equity research analyst (sell side or buy side). But now that I finally broke in, and have been here for some time, I realize how bad shape the industry is in.
Buy side keeps getting hit by shift to passive, while sell-side (where I am) faces structural challenges from MIFID-2, as well as declining volumes. My firm just laid off 4 teams last week, and this comes after a talk by our Director of Research that bank is "investing in research"
Now, I am trying to strategize what to do and where to look?
Any suggestions about the most fulfilling exit opportunities (has to be related to directly investing in public/private), with a good long term outlook?
I am in the same shoe as you. Been on the sell side for 2 years now. I had an honest discussion with my analyst this past week, and he was brutally honest in saying that realistically only the top 10 (possibly top 5) analysts of a sector could justify their existence under MIFID2, which suggests massive industry consolidation lies still further down the road.
But if this is what you want to do, and you think you have what it takes to consistently create value over the long term, then you'll do fine where you are.
Personally, I'm crossing out large-cap public equities AM off my list. Even if I think I may have an edge now, it'd be incredibly difficult to compete once some of the machine learning shops get up and running. I think small caps, especially in the smaller AUM funds, could do alright. Smaller PE/VC funds will probably do better, but opportunities are tough to come by.
I agree about the industry consolidation part. From my perspective, its either small cap or private/VC where you can generate good value long term. As far as PE is concerned, I don't really have the 'pedigree' or deal experience, so I have knocked that one off my list.
I have seen a few people move over to these 'Big Data' platform- curious if you know whats the outlook there? and if you think its gaining traction with AM/HF?
I can definitely feel your pain having been in this field, both sell side and buy side, for about 4 years now. I'd recommend you be creative when looking for your next role and be willing to go to something completely outside your wheelhouse. To this end, things like corp dev, IBD/ECM, and even government roles are all worth considering.
In my last job hunt, I had surprisingly good reception for a number of opportunities both outside traditional 'exit opps' and well outside my industry vertical. Ended up staying in research for a number of reasons, but the opportunity is definitely out there.
PM me if you want more details / commentary, but I definitely agree that the environment is brutal and looking for the exit door before the next wave of layoffs is probably a good idea.
About looking for something out of the wheelhouse, would you think Corporate Banking is a reasonable next step? I understand that shuts out a lot of opportunities on the equity side, but from what I could tell, it seems like something if you stick out (which is more likely than IBD given better work/life) could be quite lucrative. Just throwing it out the and keeping an open mind.
If I'm interpreting this correctly, you're saying going from ER to Corporate Banking?
If so, I'll premise my response by saying I know very little about the day to day life of a corporate banker. Having said that, corporate banking is not facing the same structural headwinds as ER. Also, given the bespoke nature of some of the products they offer (e.g. Extending credit whilst using some uncommon hard asset as collateral) it is probably more resistant to automization. In terms of actually getting a job outside your wheelhouse, it's always about telling the story (sound familiar to ER yet?). But I've found my ER experiences to be very transferable to a number of other opportunities so long as you illustrate your ability to think analytically in concrete terms and show a passion for work in general (latter sounds like unicorn fart kinds of nonsense, but it is VERY important in switching outside your wheelhouse, at least in my experience).
From what little I know, the life style is better and if that's what you want in the long run, it definitely warrants further investigation.
Happy to go into further detail if you have any follow up questions.
Like you, I've worked in ER for about 4 years now but might be looking to do something else. Could you go into more detail on the non traditional exit opps you looked into? Thanks!
Genuinely curious, since I've always thought being an equity analyst would be a rewarding position:
Do you ever think that it could be that the content is just not there? Our IB firm gets equity research all the time, but unless it's an initiating coverage report, I feel these reports lack content. I know clients can call or schedule calls at any time to pick your brain, but I'm just not sure the updates and whatnot are valuable.
It's tough. Most analysts just care about marketing and big picture stuff. So a lot of the drive for truly innovative ideas has to come from associates, from my experience. But associates just want to learn about the markets, do their two years, and bounce to greener pastures. So the inherent incentive for improvement just isn't there, in my view.
I have an idea of a new type of research start-up. Current equity research lacks imagination in its business model. I don't think equity research is necessarily declining, you just have to redefine yourself and come up with more innovative business model.
Do people think BB ER will be able to weather the storm a bit better?
Probably will? Someone has to do the research. But it probably won't be all that lucrative going forward, if I were to hazard a guess. Comp has been contracting, even among associates.
My take is that ER is shrinking as more active management/machine learning is taking place, Just take a look at BlackRock
I am currently a sell side recruiter and most recently we have seen a boost in the need for Equity Research Analysts, specifically associate level. Although it might seem as if the market is contracting, there will always be a need for research. Please feel free to message me with any questions! Maybe I can help!!
Would you say the boost is due to many sell side research folks jumping to the buy side or is it due to sell side research departments expanding?
My thinking would be sell side associates leaving.. so there are positions opening.
For now at least
Some of my friends left ER and took solid IR gigs at very strong companies (multi billion market caps). They seem to be doing quite will with it. Not a bad way to go.
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