Any tips on making the transition? It seems like a difficult move.
That sounds difficult, since the key skills are different.
F4 ->F8
Yeah, I cover corporates.
FTFY
ftfy
Don’t see the issue, you are essentially analyzing the same things about a company except valuing different part of the capital structure.
I agree it’s not impossible at all, and should be easy for someone who covers HY. If you’re only looking at investment grade, some equity analysts will view your job as boring and slow. Either way, the skillsets for the fundamental analysis shouldn’t be too different.
Yes, if you do HY, the shift should not be so tricky, since HY bonds often have to look carefully at how the equity performs.
But computing the liklihood of default on a senior bond is a very different beast that trying to come up with likely earnings scenarios, terminal values, and a question of how they should be discounted to the present. As a senior bondholder, you don’t really care how the capital structure on top of you performs, so long as you get paid on time and at a good rate (though it is true that if the equity starts heading south, you may get a credit rating change, and that could affect the bond if you do not hold it to maturity).
I think your background would be an advantage. We always look at the entire capital structure and what that implies for the equity, as well as really focus on future cash flows. The analysis would be similar I suspect. There are a lot of bad equity shops though so your mileage will vary.
sell-side HY would be a smooth transition
I know one guy who did it at my firm.
Thanks, I’ve made a number of career transitions having started from an internal reporting role after college and moved my way to trade credit, then business banking, then mid office short duration strategy and finally to a true FI shop. It does look doable, I think I just needed a little encouragement to make another move. I’m thinking about giving an equity role a look in a year or two just to develop a little more versatility.
That’s secret code for bisexual, isn’t it?
You are right. that’s a quite difficult move. I’ve only known 1 that has done it, but it was when they were just a couple years out of school
I’m looking to do this right now, I wanna do Asian equities, but most of my experience is fixed income (done it all). Personally I don’t see any problem though, just show up and tell em you can do it, and then they hire you, and then you do it. Easy!
You only know one person in equities with fixed income experience? Go to a CFA happy hour and you’ll meet plenty.
Your experience in FI tells people you can function in an investment environment where money decisions have to be made and you have to be accountable for your recommendations, so definitely play that up.
My concern over the jump from FI to Equity is that fundamental equity researchers often have doubts about whether people can jump from covering one sector or industry to another because they fear that people won’t be able to get up to speed on understanding the drivers of profitability and customer and supplier dynamics in each industry, or understand how to correct balance sheets for typical shenanigans that go on in one industry but not another.
The jump from one part of the capital structure to another seems like even more reason for people to inject doubt on top of that.
I think the concern would be whether you can really model out and have a good feel for what drives equity prices in whatever industry or industries you’d be researching. Equities and fixed income can crash at the same time if they’re driven by the same thing, but remember that bond returns often have low correlation to stock returns, so the skills in generating outperformance in a bond portfolio are also likely to be uncorrelated to the skills in a stock portfolio, except at a very abstract “general financial intelligence” level. You very likely have that “general financial intelligence,” so play it up, but you’ll need more to make the jump.
So, I think key to your efforts will be to generate some stock research of your own to offset any concerns that your bond research skills - even if formidible - might not translate into good stock research.
In the end, this is no different than other people trying to break into equities, except that you have enough general financial markets experience to convince people that you can thrive under the pressure of manging money and the general business environment. That’s a strong argument in your favor, so play it up; just make sure to firm up the case that you are able to do equities too, and provide some evidence if not proof.
Right, I was just going to ask are there really any skills specific to equities? Because with 15yrs investment experience, this stuff is all the same to me these days; bonds, stocks, patents, real estate, art, whatever. You name it, I can model it. But with equities you really need to know a sector well, all the competitors, general financial statement practices in that area and tricks, etc. That’s all knowable, but still it takes time to get up to speed. How many sectors do people usually specialize in? Certainly nobody can know it all?
For the last 12 months, on my own time, I’ve sniffed all thru the Shanghai, Sinapore, Tokyo, Hong Kong exchanges. Gone thru financials, ratios, followed the news, trade-mechanics per market, investor base differences, general self-education. Not that I’m going to dazzle an Asian dude at the shop who has been doing that for a decade, of course. But not starting from zero.