Equity Research Update

Water Cooler Careers
#1

Have you noticed any significant development in Equity Research lately? Would you still recommend someone this as a career?

#2

bump

#3

Dying business.

#4

Can’t be. I’m a member of several equity investing groups on facebook and almost all of the members are beating the market left and right with a shoestring budget.

#5

You’re a member of the Beardstown Ladies?

#6

Pays well. But may not last

#7

Which equity investing groups on fb? Let us in

#8

Not sure about fb but wallstreetbets brah

#9

All da way to da MU uuuuunnnn

#10

Good career relative to what?

#11

Plumbing. Answer is always no.

#12

I guess plumbing is the gold standard. Tech people have started comparing themselves with plumbers too !

#13

Seems like folks at BB will be the only ones with job security while everyone else will be fighting for the leftovers.

#14

I’m not so sure that is true. It’s a biased sample, but in my sector the investors we spoke to said BB weren’t as good as some of the smaller firms and research only shops that focus on the sector

#15

huh? if anything folks at BB - sell side analysts - are the leftovers…the buyside folks will still get paid well and do well. As a whole, the pie is shrinking though.

#16

I do not think it is “dying” by any stretch unless you work in a firm with 5 guys and can’t afford an analyst. Most systematic traders with large budgets that I speak with are ALWAYS (or almost always) looking for a Datafeed of analyst estimates and revisions.

#17

[quote=“nigelnyc”]

I do not think it is “dying” by any stretch unless you work in a firm with 5 guys and can’t afford an analyst. Most systematic traders with large budgets that I speak with are ALWAYS (or almost always) looking for a Datafeed of analyst estimates and revisions.

[/quote

A hedge fund of 5 usually means they manage ~$300MM. This means it generates $4.5MM in mgmt fees. Let’s say they generated 5% profit and assume the fund hit hmv. Then, the incentive is $2.25. So, 5 person fund just generated $6.75MM in one year. I would say they can afford an analyst or two.

But the fundamental question is, if i were the owner of that fund…why would I pay 3 analysts combined $1MM when I can just hire 1 programmer to take their spot for $250k. I, CEO/CIO, will review those reports and decide whether to go long or short.

Above scenario is overly simplified but is the talk in the hedge fund world…actually for at least a couple years now. You see most traders are out at medium funds replaced by automation.

#18

You make a point. BUT, after deducting salaries, tech, office space, corporate card expenses that 6.75 million could easily be 3 or 4 million. Doesn’t sound like so much.

To your second point…what is the point of hiring a programmer if he doesn’t know finance and can not interpret the data himself? Or the MD/PM not knowing code but knows finance. Leads to the problem of too many cooks in the kitchen. I have already seen a few systematic shops blow up. For example, if you write a program to “Sell” if a particular company misses earnings how many other firms are writing the same simple program? The stock drops 20% due to these algos when fundamentally it should only drop 5%.Then you have the fundamental-value guys jumping in buying cheap. Your programmer is worthless at this point, back to the drawing board to see what went wrong. Now you need to use some level of independent judgement to decide what to do next.

Automation is great. But only to an extent. As a PM/MD of any particular hedge fund you still have to read the news and apply a certain amount of mosaic theory to any particular strategy. You can get all your news, pricing data and fundamental data automated if you like…to the tune of 100K+ per year. I don’t know any systematic funds producing eye-popping returns consistently. Seems like automation is just making people lazy and impatient.

#19

First BOLD: You must be killing it raking in high 7 figures?

Second BOLD: Just ask CEOs at Citadel, Two Sigma, Millennium, Renaissance, Blackrock, etc etc etc

#20

Now you are being just childish. Where do you live? In the grand scheme of things, tell someone in New York (who works in the Investment Industry) you run a fund with 300 million AUM with 5 other guys and your net profit was 3 or 4 million dollars. They will simply shrug their shoulders. That might be eye-popping in your part of the world. And to your second point…produce some numbers of these firms, your point is useless without it.

AND I might add…produce some numbers of their systematic strategies, not the firm as a whole.