Q&A: Equity Research Associate Laid Off

Hey guys, I got laid off from a MM bank. I've got 1+ year of equity research experience and 2.5 years of investment research experience. Ask away... /insert shameless looking for a new job solicitation/

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Comments (30)

Mar 3, 2020 - 10:09am

1.) What are you looking to do next?
2.) Why were you laid off?

Array

Mar 3, 2020 - 11:45am

I understand, what were expectations for you starting out from management?
How has MiFID ii been talked about affecting your overall business by the senior guys?
Do you think MiFID ii has affected the quality of research either you or your firm put out?

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Mar 3, 2020 - 3:51pm

Hey sorry to hear about the lay off and thanks for the AMA.

Have you found that industry consolidation has made it more friendly to get into the BB firms rather than the boutiques who may not be able to support the weight of the research groups cost structure? My gut is telling me everywhere is going to be shrinking accordingly, but wondering if you've noticed any talent flow to or from larger shops.

Thanks!

  • Associate 2 in ER
Mar 3, 2020 - 5:03pm

From what I've seen, pretty much everyone is hurting, but people working at BB's are probably faring better because they've got a larger revenue pool, provide quality research, and have good corporate access. Also, when it's easier to cut pay when you're making 500k - 1 mil. Whereas it's much harder when you're making 200k - 400k. And the reason why you're making 200k - 500k is because the money your bank makes for the work you do isn't much. When the bank starts running at a loss, people will get cut much faster than when the margins are just slightly contracting. Put simply, I think that BB's have more operating leverage - decremental margins are much lower at BBs vs lower on the totem pole. I'd imagine that my shop will begin to see more talent outflow as people realize that this could happen to them. If you're gonna get axed without a warning, you might as well make big bucks at a BB right? If BB's are truly feeling pain, my guess is that they will shift coverage to focus almost solely on the names they bank, but the pay will still be good. Lower MM and boutiques don't have that luxury because the names they bank are probably private, ergo, ER gets no slice of the pie.

TLDR: Lower MM and boutiques will struggle because fee compression hits those at the bottom much harder than those at the top (talking to all the left co-bookrunners on the side that's on the occasional lower MM deal every once in a while because they've got a buy rating on the stock, report the news, and are pretty much outsourced IR)

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  • Associate 2 in ER
Mar 3, 2020 - 5:30pm

Future of ER needs to be put into multiple buckets:
BB's/strong banks that get deal flow: Good to go - maybe some slight fee compression, but if your seat is paid for by the companies that you bank, you're fine.
Top MM's/banks that good decent deal flow: Probably face some pressure and will likely reallocate resources to companies they bank or just take a pay cut.
Low MM's and boutiques/banks with poor deal flow: "Full service" will begin to look deceiving. These banks are probably good in a few areas and will stick to those few areas that they are good in. Other areas w/out banking support will get cut.
Other/Boutique Research Firms w/ strong research product: Interesting dynamic. Hard to say. You have to wonder why an analyst chose to go independent. I'm fairly certain the money is less than a BB/strong MM, but I could be wrong.

I wonder if ER turns into a massive conflict of interest. I've noticed that a lot banks skew ratings towards "buy", whereas BB research that I've read sort of do as they please. I.E. Goldman's Industrials whip they're ratings around multiple times a year based on fundamental data/valuation. Whereas a lot of other banks will cheerlead a stock up, and each research report is either "buy on weakness - lowering price target by 30% and maintain buy rating", "flywheel keeps on turning - increasing price target by 30% and maintain buy rating", "Disappointing quarter but valuation looks attractive - lowering price target by 30% and maintain buy rating"

  • Associate 2 in ER
Mar 6, 2020 - 9:55am

Research that I haven't read - Bernstein, Evercore, Needham, Oppenheimer, UBS, Credit Suisse, Piper, Raymond James, Baird, rest of small boutiques
Top 3 based on what I've read would probably be..
William Blair
Goldman (more so for models - some of these models get insane; i.e. modeling media companies by movie...)
RBC/Wells

RBC put out some good industry things
Wells put out a good morning news update for important industry/company events

Something that people might not understand is that a lot of research that's put out is garbage/reporting the news/outsourced IR. Sometimes they will put out good stuff, thought pieces, in depth looks at companies, etc. and that's what I'm rating them on. Note: this ranking is based on what they write, and not what value add they may only give over the phone.

  • Associate 1 in ER
Mar 30, 2020 - 6:58pm

Just adding my $0.02. I put in a year and change in ER and was laid off recently. Was told that buy-side allocation towards smaller ER shops was contracting drastically, hence me being let go. In terms of independent shops, those with select talent and niche industry focus (Wolfe/Sandler/Zelman) will be able to hold their ground for some time IMO.

Mar 31, 2020 - 12:22am

Can you speak on how you got to ER in the first place? (school, internships, landing the job). And any advice for someone who really wants to break into the industry (graduating senior) but just got shafted by a fucking global pandemic?

Jun 16, 2020 - 8:01pm

Sorry to hear that man...I'm also in the job search process (recent grad FT offer got rescinded due to covid)

Can you share any views on networking in ER, like how important is that and how should recent grads approach this? (no direct ER experience, only did private credit internship)

Also, do you see any hiring freeze in BB/boutique ER recently?

Thanks!

  • Anonymous Monkey's picture
  • Anonymous Monkey
  • Rank: Chimp
Jul 9, 2020 - 10:25pm

Look at Gutenberg Research for some (virtual) internship experience every quarter. You could also consider taking the CFA Investment Foundations course, which is entirely free.

  • Consultant in Consulting
Jul 3, 2020 - 3:24pm

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