Feel Trapped, Exit Opps From Sell-Side ER?

CeilingAvenue's picture
Rank: Orangutan | 299

WSO,

I am currently a second year Equity Research Associate (~2.5+ years of work experience) looking to next steps. Long-term, I cannot see myself as a sell-side Equity Research Analyst. Rather, I would like to break into Corporate Development or go to a fund. My current team has strong recognition on the Street however, I'm not at a BB therefore exit opportunities seem to be limited (outside of staying in sell-side research). I'm seeking some help on deciding what the best next steps are and below are a few of the ideas I have mulled over.

My current plan is to study for the GMAT and get into a top b-school with the intention to jump to the buy-side research (without another several years on the sell-side). I believe this is the most simple and logical approach given I have some weak points (e.g. I was an Economics undergrad so all my finance/business knowledge was self-learned or on the job, creating some gaps) and a relatively small network (non-target, liberal arts undergrad). Also, the idea of two years to focus on learning and networking while having flexibility schedule sounds nice.

Alternatively, I could leave for another job. So far, it seems this is a more difficult path that would require me to take several small steps to get where I want to be. For example, Current role -> BB ER -> small fund -> better fund or Current role -> IR -> climb the ranks/better firms -> lateral to CD? The upside is I don't have to pay for b-school and I get to leave my current team quicker (MBA would start in Fall 2021 assuming I get into a top program).

Honestly, I'm not sure about either of these options. I don't like my current position and see little purpose in my everyday life. As depressing as that sounds, I'm feel kinda trapped and unsure of how to move towards next steps. I don't mind the hours but I just want to enjoy what I do on a daily basis. Any guidance or insight would be much appreciated. Thanks!

Comments (40)

Feb 19, 2020

1.) I don't understand the point of a sell-side guy going to get an MBA if they want to end up in buy-side research. If your team is respected then buy-side will not care about the BB brand name or lack thereof.
2.) The path from a smaller buy-side fund to a larger one seems way smarter than going back to school.
3.) I've had a few colleagues get corp. dev positions and I work at a MM so that should be an option as long as you keep your eyes open and remain flexible.
4.) IR is an option of course.

To me, it sounds like you're not sure if you even want to work in finance and you want to get an MBA to delay a decision on that by two years. If that's the case then you need to seriously evaluate what you really want to do and go from there. Good luck.

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Feb 19, 2020

Thanks for the response. Seems like you are not fully understanding my thought process so let me break it down. First, I want to work in finance. I'm unsure of the direction I want to go with it. I provided a few paths I evaluated. The MBA does give me two years to figure out the direction I want to go while enabling me to keep all options open. IMO, that is not a bad thing.

The positives for an MBA: 1) You get paid more; 2) most top asset managers (more interested in long-only) do not lateral hire, they hire out of undergrad and/or post-MBA; 3) meet tons of people (what if you want to start a fund?); 4) fill gaps in your knowledge (already alluded to this); 5) enable me to be more selective in the recruiting process to find a good a cultural fit (super important to me).

Currently, I compete against BB (IBD or ER) people looking to make the same move. Which one would you take?

1) Fair point. The firm is only well respected in a specific sector, limits the scope. See point above, well respected BBers (ER or IBD) will get the position before I do.

2) Sure, from a financial perspective. But an MBA is useful for more than just changing career paths. I view the MBA path as easier. I came from a non-target, and was a late bloomer in finance. I had to work hard to get into credit ratings, and the same to get into equity research. I have historically taken the more difficult path (non-target -> credit ratings -> boutique sell-side ER rather than target -> BB sell-side ER). I think it would be a nice change of pace to not have to scratch and claw. And believe me, it is not a walk in the park to find a small fund willing to take two years of experience from a boutique, no matter how good the analyst.

3) Most Corp Dev jobs are looking for M&A experience (IBD or prior Corp Dev). To be honest, I view this one as actually the one where an MBA is most helpful. I've had a few interviews, consistently getting feedback that there were other candidates with an M&A background. Nonetheless, I'll keep pushing that.

4) Yep, just feel like I could get stuck in IR long-term which to me, seems underwhelming.

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Feb 27, 2020

why did this get shit. very accurate. funds dont give a fuck about bb, its all about team/analyst. corp dev jump to sector is very doable.

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Most Helpful
Feb 19, 2020

I agree with @BobTheBaker. I'm in sell-side ER now and attending an MBA this Fall with the intention of entering an industry/function (consulting) that I wouldn't have access to had I stayed in ER.

Some thoughts having done some homework and being in a similar spot:

  • I'd first decide if buy-side is really what you want to do. You say you feel trapped and don't see an everday purpose in your job. IMO if you don't enjoy sifting through 10-k's, guidance #s, and writing reports on the sell-side, you're going to feel the same on the buy-side too. Particularly if you go to a L/S fund that tries to predict quarterly results like you do in your current role.
  • Going to a L/S fund is a very common next step from sell-side ER. If you're interested in long-only type places, that's going to be a difficult transition from both sell-side and a top MBA since there aren't too many available roles and the industry is shrinking. My original plan was to use an MBA to transition into a long-only. Having worked in sell-side ER and researched opportunities post-MBA, I realized that chances are slim and not worth betting an MBA on. I've actually posted something about this a while back and got good advice.
  • Another idea without an MBA might be reaching out to industry contacts... do any of the companies you cover have a corporate strategy or similar type group? Maybe see if you can apply for a post-MBA type function or program since your knowledge of the industry and company should outweigh whatever you learn in an MBA.
  • I still think an MBA is a good option as I'm doing that myself, but I would reevaluate your career goal of staying in the investment world as that doesn't seem to fulfill you currently. I hope I'm not discouraging you, I'm just speaking from my experience. I too have been discouraged by the monotony/routine of our job. I decided I wanted to at least try something different when I was up late studying for the CFA after a long day at work. Literally said "nope this aint for me" and then started applying to programs.
  • If however you're still reading 10-Ks, market research, and preparing pitches for companies outside of work and you feel a genuine compulsion to find alpha, then ignore everything I said and start applying to L/S roles via LinkedIn, recruiters, etc.

edit: holy shit, just realizedwe were messaging each other 2 years ago about equity research jobs.

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Feb 19, 2020

This. Super helpful. Seems like you understand my internal conflict.

Personally, I don't mind reading, 10-k's, guidance, modeling, etc. But not a fan of the writing... I chose finance based on my enjoyment of abstract thinking and numbers. That's why I came into the industry with buy-side being the goal.

The most the soul-crushing piece is that my intentions were to transition to long-only. Is there a situation in which the odds of that transition are more likely? I would appreciate if you could dive deeper into that (I'll check your post too). Also, I looked down the Corporate Strategy/Development path but I can humbly say I don't know much about the day to day therefore I'm hesitant to pursue it given I fear it would lead to more monotony/routine. Also, just generally unsure if it aligns with what I enjoy.

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Feb 19, 2020

Just checked my messages and saw that. Haha, that's amazing - you were instrumental in the ER transition. And now, well here we are.

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  • Analyst 3+ in HF - EquityHedge
Feb 20, 2020

Curious, why are you so set on LO? L/S usually has higher comp and there are more opps with potential to transition to PM.

Mar 7, 2020

This is helpful. You mention that if you don't enjoy reading 10ks, sifting through guidance, etc, maybe investment management isn't the right path. Beyond corp dev what other roles are out there? Fortune 500, 8-5 mindset seems soul crushing, especially for those of us that are still relatively young.

Feb 19, 2020

Good comments above. Here's how I think about it, which overlaps a bit with what others have said.

I'm buy side at a small fund. Fundamental L/S equity. What I've learned in this role is that you have to love the chase for returns. Meaning the ugly side of it . . digging through often dry info looking for clues and confirming beliefs.

If that sounds obvious, let me be more precise: IMHO, liking that borderline grun work isn't enough. You have to love it because its pretty much the whole job. And its pretty much the whole job, because its the only thing that adds any value.

I think the biggest myth about this role is that you get to spend a lot of intellectual time letting your brilliant mind run wild and think about the world in new ways and be creative and all that.

But all that fun thinking doesn't add much value, and that's because the whole fucking world is doing it too. I mean seriously, some days it feels like everyone thinks they can do my job. Who in this world doesn't think they could be a professional investor if they put their mind to it. My family has ideas, my LPs have ideas, my doorman has ideas.

True story: there's a dude at my local Trader Joe's who knows Tesla is going to zero. I told him not to short it, and he said "but I can buy a put." Dude stocks shelves, but he has a ready answer on puts vs. naked shorts. When he sees me - a professional fund manager - he sees a guy with an un-nuanced view of risk who buys too many avocados.

That's not true for most professions. How's this for irony: I left the legal profession because the work was way too easy and I felt I need to grow into something more challenging like investing. But when I was a lawyer, no non-lawyer thought they could do my job. And now as investor, everyone thinks they can do my job. Crazy . . people respect the easy job but not the hard one.

So how does this all relate to you. My point is, the cool-sounding part of investing (being a contrarian, a thinker, a philosopher king) adds limited value and doesn't get respect from others. When I refer to respect, I don't mean prestige bc who cares about that . . what I mean is, its hard to get buy in from employers, LPs etc.

Thus, its really about the grind. Gathering info doesnt sound or feel as cool as out-thinking the masses. But this is an info gathering job.

Few people like info gathering, and even fewer love it. But good news . . since so few love it, if you're one of the few that does, that's all you need. You don't need bank pedigree or an MBA. I happen to have both, and they don't do much for me. My willingness to spend all day reading Ks is what will drive my success, and others' unwillingness to do that is what will drive them to other industries.

tl;dr - if you like reading almost 100% of the time, skip the MBA and work your way up the ladder. If you don't, then go do the MBA and find a better career fit for you.

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Feb 19, 2020

Enjoyed reading this. I honestly don't view reading and searching for clues as grunt work - I enjoy it. Not too creative to begin with either, so I view your take on this as a plus for buy-side. The one thing I like the least right now is my firm's culture and writing without purpose. I enjoy reading carefully but on the sell-side (at least at my firm) our goal is to publish reports as quick as possible (sometimes sacrificing quality). If I had more autonomy and time to digest, I'd probably enjoy work more.

My friends aka self-proclaimed investors would be upset to hear your take on their contrarian strategies. Nonetheless, I agree completely.

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Feb 20, 2020
CeilingAvenue:

Enjoyed reading this. I honestly don't view reading and searching for clues as grunt work - I enjoy it. Not too creative to begin with either, so I view your take on this as a plus for buy-side. The one thing I like the least right now is my firm's culture and writing without purpose. I enjoy reading carefully but on the sell-side (at least at my firm) our goal is to publish reports as quick as possible (sometimes sacrificing quality). If I had more autonomy and time to digest, I'd probably enjoy work more.

My friends aka self-proclaimed investors would be upset to hear your take on their contrarian strategies. Nonetheless, I agree completely.

I get what you're saying about sell-side (it all depends on the shop sometimes as well), but part of publishing is getting stuff out the door. If everyone waited for everything to be the highest quality and perfect, nothing would ever get done (no cell phones, cars, books), thats where the balance comes in.

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Feb 20, 2020

Piggy-backing on this, it is all about the grind. Most jobs that people think are "fun" are really about the grind.

Being a good actor isn't showing up, saying two lines, and going home. You have to be creative, do research to understand the character.

Being an NFL QB isn't about throwing 15 passing on Sunday then going home. You have to watch an incessant amount of game film.

If you want to be a good investor, its all about reading. Buffet says, if you want to do what he does, just read 500 pages a day, but no one wants to do that. Everyone has an idea, but not many want to find the data to back it up.

I would say, don't get discouraged by the mentality that "everyone can do it", because if they could, they would, That's also a lot of professions, what separates them is people who actually go out and do it, and those that actually don't. I also think people don't understand true investing, meaning doing the actual work.

(Side note: is the sign of a crash typically when people not officially involved in the market begin to "play" it. Isn't that how the .com crash and housing bubble burst?)

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Feb 20, 2020
ironman32:

Everyone has an idea, but not many want to find the data to back it up.

So true. This is the investor's version of "everybody wants to go to heaven, nobody wants to die."

ironman32:

(Side note: is the sign of a crash typically when people not officially involved in the market begin to "play" it. Isn't that how the .com crash and housing bubble burst?)

Its a sign, yes. In 2008 there was the strippers with 6 houses. In 2000 (when I was a teenager and y'all were learning to walk or even crawl) I can tell you it got super weird how everyone was talking tech stocks all of a sudden.

I wouldn't want to be long or short the market right now because in both directions we have unprecedented experiments and the market is the guinea pig.

In the positive direction, we have record high multiples and leverage, and a market that climbs relentlessly, even in brief periods of bad economic news.

In the negative direction, we have central banks that pump liquidity into the system constantly, even in the longer periods of positive economic news.

Both situations are weird AF. I have 5 longs and 2 shorts, each one was reviewed for many months before taking a position; in this market nothing feels comfortable except something I know backward and forward.

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Feb 26, 2020

This is the truest thing I've ever heard. I was just reading this thread for fun (I'm a sell-side fixed income trader, not even interested in ER) and seriously investing/trading is a grind. Everyone thinks life as a trader is so fun and interesting...not the truth at all (same thing applies to HF traders). You wake up day in day out at the crack of dawn, you're reading markets all fucking day, you're glued to your bloomberg all hours of the day (even at home)...it is a truly a GRIND. And you're expected to perform every minute of every day you work, no excuses. I think the most important thing in any job is consistency. If you have a strong work ethic and learn to perform consistently you can achieve anything. It's all about putting the time in, and developing a strong and consistent work ethic.

Feb 27, 2020

man, you are awfully full of yourself considering you are at a mickey mouse shop

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Feb 27, 2020

Maybe one day, after years of hard work and strong returns, I'll be able to work my way up to being an accountant like you. It's a tall order, but a man can dream.

Feb 19, 2020

good friend of mine went from sell side ER to a long only fund. You should stay on the sellside for about 4 years before trying to make the jump. Develop more experience, widen the list of companies you cover, learn some technical analysis (i know, you researchers think this is impossible...but i can guarantee you there are ways to use price action to aid in trading decisions that have meaningful impact to investment returns).

After 4 years, you would be able to transition to the buyside, where things get more fun.

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Feb 20, 2020

is sell-side ER really so bad? I did a rotation in it as part of my investment banking training and it was quite interesting actually. Get to sit across the table from C-levels and learn about their business and industry. Get to come up with neat new thematic pieces (alt-protein, solar revolution, affects of viral outbreak). And get good client exposure too at the conferences or when they call to do a download. It's not so bad is it guys? And hope you're not thinking PE is all lapdances and G6s, because we're all out of lapdances.

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Feb 20, 2020

Not looking for PE but +1 for the last sentence lol. Anyways, ER starts out interesting but when you cover the same 15+ companies and don't always see eye to eye with your team, it can be draining. Most view it as a path to HF/AM. Much of the job involves tasks with little value add, especially when the Analyst prefers to "own" the communication side. Now, I'll be the first to say it has taught many valuable skills but the upside from here is limited.

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Feb 21, 2020

fair enough. [turns head]
"Can we buy the man a lapdance please?"

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Feb 25, 2020

Have you ever though about starting a business? ER analysts have an incredible wealth on industry and operational knowledge, and I've seen tons VCs come from ER (kirsten Green at forerunner for example covered retail before pioneering the VC DTC boom w/ by being early into dollar shave club, waby parker etc.,). As long as your coverage isn't something with insane barrier to entry (industrials, aerospace, etc.,) chances are you might be able to think of a way to disrupt the space. this is of course not the easy way out

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Feb 25, 2020

Didn't know that about Forerunner. On a related note:

Bill Gurley, General Partner at Benchmark Capital (investors in Uber, GrubHub, OpenTable, Zillow, among others) also has a equity research background. He got his CFA and worked at CS First Boston prior to becoming a VC.

Gene Munster, one of the top "tech" equity research analysts, specifically when it comes to Apple, started his own VC firm after leaving Piper Jaffray.

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Feb 26, 2020

Yep. Theres tons. I think of it as kind a natural downstream progression where realy you're just studying businesses and business models at different stages

ER (public stage mature companies) ---> PE/Growth (call it 'mid stage' companies) ---> VC ('pre company' companies)

Don't think of this as a career path, as PE typically requires the transactional experience provided by investment banking given the fact they use so much debt, but VC firms don't use debt so it seems to me a lot of times Equity Research Analysts can kind of hop over that private equity stage (or can't get in) and get right to VC or even starting their own businesses

Feb 26, 2020

Interesting thought but I'd argue that for starting a VC fund, the names listed are anomalies. Other than Bill Gurley, all had 10+ years of experience as lead analysts covering their respective industries. I think the path at a junior level seems doable, but to move up the chain an MBA would likely be necessary.

Feb 26, 2020

yes, to start a fund would be wild - but i tihnk VC/entrprenurship is a decent route for someone from the background

  • Investment Analyst in HF - Event
Mar 1, 2020

Imo, asap pick if you want to do corporate development or go to a fund. If you can't figure it out now then go to bschool but if not you need to specialize hard as both are very competitive and its difficult to win against other candidates who are balls to the wall in either one.

Regarding the "I'm not at a BB therefore exit opportunities seem to be limited (outside of staying in sell-side research)", i disagree on the take as I went from grad to mm sellside equity research to a ~$600m equity l/s fund in 10 months. Definitely not impossible, but required a lot of hustle and love of the game.

My very best advice if you want to go to a fund is to actually generate some original investment ideas, create pitches, if possible put risk on in your PA and manage the position, and share your research with funds you'd want to work at. It's the best possible exercise as (1) you find out if you're any good and/or like this work and (2) it's the best tool possible to get a good, yes it can be better than unncessary Bschool for hf world.

I'd also say niche-ify yourself as much as possible. For example, if you do a few merger arb pitches, or shorts, then you can learn a bit about the strategy and if you like it and then get a job doing one of those strats.

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Mar 4, 2020

Appreciate this. The Corp Dev idea is sort of a secondary plan, so I tossed it in there. I've been managing my personal account but mostly stay within my comfort zone. Time has been a slight issue in terms of staying active with that (just initiated on some new names in the midst of earnings and also GMAT).

Mar 4, 2020

But I'll for sure pick it back up soon.

Mar 1, 2020

omg.......now I can see myself in a very similar situation when I reach your watermark of 2.5 yrs!

Mar 29, 2020
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