Equity Research Exit Opportunities

Hi, I was a sell side equity research associate for 1.5 years before getting the ax as part of wall street’s downsizing( think Wachovia, HSBC, Bofa). It seems to me that research is a dying breed and difficult to break out of. It seems extremely difficult to break into the buy side hedge funds or asset management as I am competing with bankers with the same industry focus. And for Private equity, it is very rare for an ER associate to break in. That leaves banking. How difficult is it to break into banking from ER? Do investment banks count ER experience or would i come in as a first year analyst? If i stay in ER, how possible is it to move to become an associate in IB after another year without an mba? Alot of recuriters say they are looking for transactional experience but what does a banker do that an ER analyst doesnt do skill wise? Any comments would be greatly appreciated. Thanks in advance

YoMama14 Wrote: ------------------------------------------------------- > Hi, I was a sell side equity research associate > for 1.5 years before getting the ax as part of > wall street’s downsizing( think Wachovia, HSBC, > Bofa). It seems to me that research is a dying > breed and difficult to break out of. It seems > extremely difficult to break into the buy side > hedge funds or asset management as I am competing > with bankers with the same industry focus. The sell-side research skill is one that’s still valued; however you are trying to get another job at a time that’s very, very tough. There are still hedge funds recruiting now, but you should see things pick up quite a bit more around January. However there will be a lot of competition for these jobs and my suggestion is that you interview for both sell-side and buy-side opportunities – at 1.5 years of sell-side experience, it should be respectable but there are also a lot of people like you, and you’re best off taking a sell-side job first (assuming you get one) while continuing your search for buy-side roles if that’s what you want to do. Start floating your resume out to headhunters ASAP if you haven’t done it already, and most importantly, make sure you have a good “story” to tell - there are quite a few people like you looking for jobs so you really have to come across knowing what you want and leaving an impression. > And for Private equity, it is very rare for an ER > associate to break in. Yes it is, but it’s tough for bankers to break into too. Private equity hiring has diminished considerably since the summer time and there are even plenty of bankers (including some from your bank) that are trying to find PE work but can’t land a gig. You can definitely make the transition from research, but it’s a move that’s generally tough unless you’re really good at your job…and again, at this point in the year, it’s even tougher. The hiring environment could improve beginning the end of January, though. > That leaves banking. How > difficult is it to break into banking from ER? Do > investment banks count ER experience or would i > come in as a first year analyst? If i stay in ER, > how possible is it to move to become an associate > in IB after another year without an mba? Alot of > recuriters say they are looking for transactional > experience but what does a banker do that an ER > analyst doesnt do skill wise? Mainly it’s the modeling and the deal experience. That’s not necessarily to say that banking analysts all have some amazing insight into deals; in fact, that’s pretty hard to get just over a few months, but what they do have is an understanding of how the deal process works, and that’s important because banking is very process-oriented. Best way to get into banking (which is something I recommend you explore right now, because ANY front-office sell-side role beats being unemployed and your exit opportunities are considerably better in banking anyway) is to tap all the friends in your network and try to get in any way that you can. You can also make a better case for yourself by teaching yourself how to build LBO/M&A models and spread comps; at this point, they want someone to hit the ground running because they do all their training in the summer, so any initiative you can show in this area is a clear positive. You’d probably begin as a first-year analyst if you’re actually able to get in off-cycle, which again is a tough thing to do. But hey, at this point, you gotta take what you can get and you could do much worse than banking (in fact I might even say that you probably couldn’t do better). > Any comments would be greatly appreciated. Thanks in advance Hope this helps. It’s not fun being unemployed but I know some other people in your situation and I would give them the same advice.

I am still convinced that more traditional long only mutual funds / hedge funds that employ fundamental bottom-up analysis prefer equity research analysts to investment bankers…

ditto. investment banking seems more about networking than company analysis.

Too bad the world is stuffed with quant hfs that really just target bankers with modeling skills…

phBOOM Wrote: ------------------------------------------------------- > Too bad the world is stuffed with quant hfs that > really just target bankers with modeling skills… Quant hedge funds most certainly do not target typical bankers. (Not real quant funds anyway). They target PhD’s, etc… But bankers are targeted by a lot of regular HF’s because their modeling skills tend to be more indepth than those of their ER counterparts.

Banker’s with modeling skill? In my views, typical bankers are high-level sales person. They don’t have the level of quant. ability compare to ER.

I think some people on this board confuse quant ability with excel modeling ability. Quant driven hedge funds/etc. are looking for PhD-level knowledge, not some excel jockey.

ws Wrote: ------------------------------------------------------- > Banker’s with modeling skill? In my views, > typical bankers are high-level sales person. They > don’t have the level of quant. ability compare to > ER. I think if you ever worked in banking (which I did not) or even went through training with the investment bankers (which I did), you’ll see that they have a lot more experience with building many different kinds of models for different scenarios, transactions, etc. And while it’s true that folks in research tend to have a better handle on the assumptions that drive a model or understand how to build revenue and market projections (since that’s their job), working in research is much more about maintaining models on the day-to-day rather than building them. There are analysts in banking that spend days just building out different models for different deal structures, while in other cases they may spend quite a bit of time putting together some seriously elaborate LBO/M&A models. Basically, there are quite a few buy-side firms that definitely value the industry knowledge of the research analyst, and obviously this is where people from a research background have the advantage. In other cases, and especially on the junior levels, many buy-side shops just care about modeling experience and exposure to different types of transactions/financings, and at these firms it should make pretty logical sense why bankers are favored over research analysts.

excellent post numi. Could you recommend any books/links on IB modeling ? What references did they use in the training class ? Thanks numi Wrote: ------------------------------------------------------- > ws Wrote: > -------------------------------------------------- > ----- > > Banker’s with modeling skill? In my views, > > typical bankers are high-level sales person. > They > > don’t have the level of quant. ability compare > to > > ER. > > > I think if you ever worked in banking (which I did > not) or even went through training with the > investment bankers (which I did), you’ll see that > they have a lot more experience with building many > different kinds of models for different scenarios, > transactions, etc. And while it’s true that folks > in research tend to have a better handle on the > assumptions that drive a model or understand how > to build revenue and market projections (since > that’s their job), working in research is much > more about maintaining models on the day-to-day > rather than building them. There are analysts in > banking that spend days just building out > different models for different deal structures, > while in other cases they may spend quite a bit of > time putting together some seriously elaborate > LBO/M&A models. > > Basically, there are quite a few buy-side firms > that definitely value the industry knowledge of > the research analyst, and obviously this is where > people from a research background have the > advantage. In other cases, and especially on the > junior levels, many buy-side shops just care about > modeling experience and exposure to different > types of transactions/financings, and at these > firms it should make pretty logical sense why > bankers are favored over research analysts.

Thanks numi for the advice. I remember you were trying to break into pe. How was your experience with the process? I am trying to get jobs in all areas and have had a few interviews, from buy-side to sell side research (BB/MM), botique/mm banking, and start up pe shops. It doesnt seem like things will open up until January. However, competition is fierce, I feel like i should find something sooner than later as there will be more competition when citi/wachovia lay off more people. What would you expect pay is for a MM in sell side research such as Jefferies/Piper/Lazard is for someone with 2 years experience ? According to II compensation table, average salary of ER associates is 150K. I am interviewing with one start up pe, however, they say hours are going to be bad at first along with pay. Would you say working for a start up pe wil put me in an advantage to get into a decent MM PE firm or would just going to a MM Banking firm be better?

YoMama14 Wrote: ------------------------------------------------------- > Thanks numi for the advice. I remember you were > trying to break into pe. How was your experience > with the process? I am trying to get jobs in all > areas and have had a few interviews, from buy-side > to sell side research (BB/MM), botique/mm banking, > and start up pe shops. It doesnt seem like things > will open up until January. However, competition > is fierce, I feel like i should find something > sooner than later as there will be more > competition when citi/wachovia lay off more > people. You should definitely be interviewing as much as you can right now and getting your resume out there. Yes, hiring will pick up in January but there will also be a lot more turnover. And your concerns that there will be more competition from Citi, Wachovia, and other big banks are definitely valid. You should be preparing furiously for your interviews and really know your “story”…and it’s never too early to start because it could take several weeks or even a few months to find a position that you really want. > What would you expect pay is for a MM in sell side > research such as Jefferies/Piper/Lazard is for > someone with 2 years experience ? According to II > compensation table, average salary of ER > associates is 150K. This is the sort of comp that you will likely see as a third-year or even an MBA level. I don’t think you will get that type of comp in this market right now especially if you don’t have a job at the moment. If I were in your situation, I would be pretty happy getting base equal or slightly greater than what you had been making at your last job. > I am interviewing with one > start up pe, however, they say hours are going to > be bad at first along with pay. Would you say > working for a start up pe wil put me in an > advantage to get into a decent MM PE firm or would > just going to a MM Banking firm be better? It really depends what you’d be doing at that start-up PE shop. You really need to ask what your job will entail at that PE shop – if it’s a startup, there’s a good chance that you’d be pretty busy with fundraising and deal sourcing (i.e. cold calling in some cases!) rather than deal execution – and as someone starting a career in private equity, you really need to be focused on getting into a place where you can focus on deals and be able to see the transaction process from beginning to end. The skills that are most valued for someone looking to build a career in PE are pretty much the analytical ones, and just spending your time on deal sourcing and stuff like that just isn’t that valuable, because you’ll be spending more time on the phone and trying to solicit deals rather than thinking critically about how to invest. That being said, I’d still almost invariably say that your prospects of getting into a decent PE shop will be many times better if you can land a stint at a mid-market banking firm – and doing banking would definitely be worth it for you if you can get an opportunity there (which I think is still a long shot but worth a try). The reason is because you will be doing a lot of modeling and going through a formal training program, not to mention that with any luck you’ll actually be working on different types of deals (unless the markets continue to deteriorate) - and as you look for PE opportunities down the line, the one thing they really don’t want to do is to train or teach you a lot, which is sort of why sell-side is good preparation for the buy-side. They really want someone that can hit the ground running.