HF vs Equity Research

Posting this here since this area seems to have more active charterholders. I’m trying to pick between a conventional research analyst role with a middle market bank and a more generalist role at a hedge fund. The research role (IMO) plays well into getting into buy-side and focuses on what I want to do in the long run. The HF role pays more, but focuses on the risk side of the house. The HF is a top-20 HF while the research role, at the end of the day, is still with a middle market bank (so not sure about exit ops and my belief of it allowing me to get into buy-side). I was initially tilting towards the HF role, but not sure if it’ll enable me to get into portfolio management later.

Can you guys please chime in with your opinions? Thanks.

Sup little cubby.

Do you have two offers? What’s the pay difference like? Knowing nothing else, I’d say the research role would put you in a narrow straight path into buyside. Again, that’s knowing nothing else. The risk side of the house may be more of a jump to get to FO on the buyside.

Agree with CFAvsMBA. Unless you have a clear pathway to moving from risk to a security analyst role, I’d be inclined to say you may actually be better off starting in sell-side research. However, it all really depends on how creatively you try to network within the “top 20 HF.” However, from what I know having spent time in sell-side research and now working at a hedge fund, crossing over from a middle office role to front office even within the same fund can be difficult.

CFAvsMBA - have the HF offer, awaiting the other one (it’s really 50-50, more like 33% since they were down to 1/3). So don’t know the $ difference for certain yet. However, based on the HR input, I do get the feeling that they will be below what the HF is offering.

numi - did you make the jump from sell-side to HF within ER? I do tend to agree with you that moving from MO to FO could be a challenege, hence the post. If it matters, “top 20” because the HF has 25B AUM. Doesn’t really reflect on the teams/operations.

Thanks for spreading the love, guys. More inputs/opinions welcome!

I’m going to throw this in for the sake of argument, but are you certain that you want to do equity research, no matter what? Depending on the role at the hedge fund, risk or other non-research positions might not be a bad job. Many non front office people at “top” companies are paid more than run-of-the-mill research staff, and I’m sure at their age, they could not care less that they don’t do the stuff that they thought would be fun at some point. Ultimately, the choice is up to you, but if you work outside the FO, this does not exactly make you a loser or something.

^ Yeah, FO ain’t all that. The market gods are a fickle bunch, easily offended and very unforgiving. You’re one wrong call from the street at times.

Bump bump. Just wanted to make my 600th post! Good discussion.

Yeah, I often think it would be kind of nice to be in a role where I didn’t have to constantly keep up with everything happening…recently it seems like the fire hose has extra pressure.

ohai, brain_wash - thanks for an alternate perspective. I’m indifferent between FO/BO roles, especially if the pay scales well. Heck, I have a buddy of mine who is rolling in major dough building quant models and coding in Hong Kong. But he is the kind of guy who does 3rd degree integrals in his head.

I was fishing for various perspectives with regards to the potential of someone exiting into the buy-side from a HF vs. a sell-side gig. Wanted to see if the charter gods look down upon people coming from a HF MO/BO (although numi’s point is well-taken that ultimately it will come down to networking).

Honestly, all these jobs pay so well that I wouldn’t get hung up too much in the money side of things. Find the area that you enjoy the work the most. It’s hard to be a star at something you’re not fully invested in. And you’ll find eventually money won’t be as much a motivator to you. If you never earn the higher salary, you won’t miss it.

So take the spot that you’ll be most excited about. I’m not in the “cool” side of this business, but I can probably venture the guess that a standout middle office rockstar at a hedge fund that’s adding tons of value and has the respect of his leadership team has probably got more exit opportunities than a research guy that hates his job and struggles through the day.

I’m not saying you’ll enjoy MO more or you’ll struggle in research or any of that, I’m just saying you’ll be most successful in what you enjoy and success brings more exit opportunities in my experience than a specific job title or experience (within reason, a rockstar McD’s cashier probably isn’t going far…).

Take that with a grain of sand because I’m not in that side of the biz, but that’s my life experience in the broader business world.

Take the one that provides better experience. Starting income does not matter if you are truly interested in staying in the industry.

Here’s another tidbit I forgot to share - the HF role had me meet with teams across four different departments, all the way up to their CFO. The ER role was the MD and the analyst. I definitely felt that the HF role was more get down and dirty, with high visibility (I felt more important within this setting. LOL). The ER role is just that, ER. Can’t read into the HF experience too much, but sharing it with you guys to see if you guys get into such interviews and my kind of experience would be an insight into the type of things I may do. I definitely wouldn’t mind being a jack of all trades coz IMO it would provide a better learning experience in dealing with portfolios as a whole (trading, tech, marketing, risk) as opposed to specializing in ER.

Can some of the ER guys here share as to what the learning curve is like: for e.g. doing sell-side research and the jumping to buy-side ER and then getting into a PM role years later?

Thanks again for all the feedback.

In your position I would take the ER job.

A risk management job at a HF can be cool too, depending on what you will be doing.

Do what you think will be the most fun to you.

At least you know what an ER job. Risk mangement can be anything, watch out for title pimping.

No, I decided to do something a bit less conventional and move to private equity. However, I’ve always been in various front office roles including investment banking and am now an equity analyst at a hedge fund. I wasn’t sure earlier in my career that I wanted to do public markets investing, but I’m much happier at a hedge fund now. The work, while having some common building blocks as sell-side research, is really quite different. There are so many more considerations that go into making investment decisions, whereas equity research in contrast had a lot more to do with finding incrmeental data points, keeping a pulse on management teams, staying in the flow of information with buy-siders and tradres, and so forth.

If your end goal is to become an equity analyst at a hedge fund, you will have a hard time getting in from anywhere. It’s a very competitive business and one that is contracting in terms of seats available. Ironically, the inflows are going up. Basically, the big are getting bigger while the small are getting smaller. Therefore, you will have a tough time getting in from a middle market bank and even tougher time getting in from risk management. But, anything in life worth having is worth competing for.

More importantly, and frankly, I think you just need to figure out what you’re more passionate about. Ask people in those roles what they do every day and see if you could get excited by it. ohai raised a good point in that just because people on this forum think that equity research is a “sexier” title doesn’t necessarily mean that you will like it equally. If you’re in some risk management role at a big fund, and you’ve made yourself an essential part of the team and firm culture (which is why you were asked to meet with the PM, analysts, etc. - bunch of different people), you’re arguably harder to replace than some sell-side research associate. We have risk management people at our fund too and judging by the number of years they’ve been here, they’re probably paid a decent penny and have good work/life balance. They would probably have a hard time finding a gig elsewhere that paid as much, while the firm would probably have a difficult time finding a replacement that we trust and expect to fit in with the firm culture.

I really like what I do as an equity analyst. It’s fun and challenging, I meet many interesting people, and I feel like I’m building a valuable life skill: investing. At a larger fund, the potential payouts can be big if you’re right but obviously more painful if you’re wrong.

What keeps me up at night (like right now) is just thinking about various situations that can derail my potential investments, because they just crossed my mind after I had dinner and I was able to think more clearly outside the office. Other times I ask myself whether the exuberance I experience making $6mm for the firm on a trade offsets the $5mm I lost on another (this actually happened fairly recently, basically on the same day). Seems like it would be an easy question since I’m still up net $1mm, but you just don’t know how these things work out and the markets can change on you instantly. I can tell you that the glory I feel on a gain is far less than the pain I feel on a loss. Losses can also have a compounding effect in that if you make a string of bad calls, even if your investment process is sound, it’s hard not to lose faith in your own abilities. Even worse, your PM to think you’ve just lost your edge at which point you may have just found yourself in a vicious downward cycle.

Not trying to dramatize things as a successful career on the buy-side can be very lucrative, but it isn’t exactly rainbows and unicorns either. The pressure to perform is tremendous and is present all the time. Trying to keep yourself psychologically grounded day in and day out is not something everyone can do. I’ve had success in the field so far so want to keep it going, but every single day I have to ask myself, “How can I be better at what I do?” It’s not just because I’m an ambitious person. It’s what I have to do to survive in this business.

Hope this gives you some perspective of what things are like in this biz

Separately I encourage you to read my interview series in Mergers & Inquisitions about equity research and hedge funds. They are two-part and four-part series, respectively, about how to break into the field. I’m recommending them to you not only for your benefit to try to think about getting in, but to give you a taste of what people actually do on the job. You may find out that you really like analyzing stocks (be it buy-side or sell-side)…or as ohai and others suggested, there’s also the possibility that you don’t find it fascinating at all. I genuinely believe that if you find something you’re passionate about, or even highly motivated by, you will do well. It doesn’t matter what anyone else thinks at that point. Your overall level of happiness will speak for itself.



Living that dream right now. Desperately trying to escape. Love RM stuff. Wish I did more of it in my job, which is apparently being a “risk advisor.” Not a lot of risk managing going on…

If the job has a clear description, I wouldn’t be so worried.

Good posts, numi^.

At least you can use the title pimping to your advantage in interviews with other companies.

Yeah the title is ok I guess for a move. It’s actually a pretty solid job, so it wasn’t misleading in terms of seniority or whatever, with tons of executive exposure. But there very little quantitative work, and my mind is starting to rot. I need to get back to the quantitative modeling world, not this powerpoint nonsense.