Switching from Fixed Income to Equity

Tried a search for this topic but nothing came up, so apologies in advance if it was posted before: How difficult/possible is it to switch between a fixed income analyst job to an equity analyst job later on? My initial interest is for an equity position but if I have an opportunity for an fixed income gig should I take it? My fear is that once you make the decision you become pigeonholed into that role for a career. Any thoughts or advice would be greatly appreciated. Thanks!

I had this exact dillemma a few years ago. I wanted to get into institutional investing and the first opportunity was a buy-side analyst gig on the fixed-income side. I took it figuring it wold at least get me ‘investing’ experience. Now, after passing Level I, I’m trying to explore opportunities on the equity side. Unfortunately, the comments I’ve gotten so far have been that I don’t have ‘direct experience’ and have only had luck with “entry-level” equity positions, which would also mean entry-level salary. So in my limited searching so far, it seems that the fixed income to equity path is not particularly easy. But that could also have to do with the limited number of jobs out there right now too. Anyway, I also would appreciate any further insight on this!

sounds like a good question for FIAnalyst and anyone else on the fixed income side. as for myself, having spent three years in sell-side research on the equities side, i think the prospects for sell-side ER as a whole are not particularly promising. basically, the sell-side landscape for research analysts is too competitive, commissions continue to shrink, and banks are being progressively forced to look into other types of products besides plain vanilla equities in order to keep up with their competitors. that being said, i’ve heard that there’s some pessimism on the fixed income side too, but i just wondering if it’s as intense as it is on the equities side…

Finally, a thread I can add some value to! I was in similar shoes when I first started; long-term I thought I wanted to work on the equity side. However, after my experience on the credit side, I know I made the right choice, and my interest lies with the distressed/special situation names (which really have both a debt and equity slant). That is not where I work now, but I do a lot of work with those desks. First, to clarify, I am talking about credit research (corporate bonds and credit default swaps). RMBS, CMBS, Credit Card ABS, et al research would still fall into the fixed income arena, although these are not directly transferable to covering either credit or equity. Particularly within credit, high yield research is closer to equity research as you are more reliant on accurate cash flow forecasting and are more able to take advantage in the upside of the business. Also of note should be that as a fixed income analyst you will likely sit on a trading floor. Its a much different environment from the equity business, unless you are a desk analyst. I love it, but others might hate it and prefer a quiet cubicle. As far as prospects; I am more bearish on the future of sell side equity research, but its not exactly peachy for the credit side either. One benefit on the credit side is that we help our desk manage positions; credit is not as liquid as equities so many trades require taking on significant risk until you can unload the inventory. This necessitates people that understand the company and also presents the opportunity for greater profits (or as in this last year, greater losses). Equity and credit have similarities and differences, but you still learn how to look at a company in either case. Also, note that there is a difference between a counterparty credit analyst (risk management) and a credit research analyst (client facing research), so just be clear on what the position is.

Agree with FIAnalyst in that if you work on leveraged/high yield credits then a lot of what you learn is applicable to equity analysis. You’re basically looking to project accurate cash flows in both instances, except equity cares about net income whereas fixed income could care less as long as leverage and interest coverage (using EBITDA or equivalent) are ok. Like FI said, in both cases you’re learning the company - but I think FI is actually more interesting and more in-depth because you really have to understand the capital structure of a company and how it the company will be able to both raise debt and service it. It’s especially interesting if you are on the private side and get to see what the company is really projecting and see their internal models. Compared to public sell-side research, private-side fixed income is much more complex and much more interesting IMHO. Of course, to switch to equity you’d still have to be able to pitch yourself well, but your basic skill set (understanding industry dynamics, how to effectively model a company, how to perform due diligence) should be more than adequate.

RMBS, CMBS, Credit Card ABS, et al > research would still fall into the fixed income > arena, although these are not directly > transferable to covering either credit or equity. Agree. I am an analyst in the ABS group. Unless it’s a private deal, we do not analyze the company’s financial statements. Rather we focus on the structure of the deal itself. I like it so far, but what worries me is that it will be hard to move to a regular investment grade or high yield research because I am not getting the transferable skills.

i think fixed income guys tend to have more of an idea of what is going on in the equity markets than vice versa.