How To Get An Equity Research Analyst Job

A Guide to Starting a Career in Asset Management

Gillian Elcock

• Publisher: Ecademy Press
• Year: 2010
• Print ISBN: 9781905823932
• eBook ISBN: 9781907722127
• Topic: Développement personnel
• Subtopic: Finances d'entreprise

Get an Insider's Edge to Starting Your Career as an Equity Research AnalystDo you want to get a job in the asset management industry, analyzing stocks or managing portfolios? It is a highly competitive process, with hundreds of university graduates, MBA students, and others trying to get into the industry every year, but not many available positions.How do you go about convincing a company to give you a job? What will the interviews by like and how should you prepare? Should you apply for sell-side research roles as well as buy-side ones? What are the real differences between the buy and sell side?This book, written by an experienced equity research analyst, will answer these questions and more. It will guide you every step along the way, from choosing which companies to target, to mastering the specialized interview process, so that you can stand out from the pack. It includes: An overview of the asset management industry, also known as the "buy side". Description of the role of the equity research analyst, including a comparison of the buy side and sell side jobs. Tips on preparing a great resume and cover letter. Details about all the most common interview types you are likely to encounter, and how best to prepare for them. Advice on how to be successful once you start your career as an equity research analyst.

Contents

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	Acknowledgements
	Preface
Chapter 1	Understand the Asset Management Industry, the Analyst Role, and the Differences between the Buy and Sell Side
Chapter 2	You Need to Have a Good Resume/CV and Cover Letter
Chapter 3	How to Get an Interview
Chapter 4	Understand the Different Interview Types and Learn How to Prepare for Them

i	Understand and Prepare for the Resume /CV Review Interview
ii	Understand and Prepare for the Stock Pitch Interview
iii	Understand and Prepare for Case and Brainteaser Interviews
iv	Understand and Prepare for the Hostile Interview
v	Understand and Prepare for the Stock Presentation Interview
vi	Understand and Prepare for the “Analyze a Stock on the Day” Interview
vii	Expect Several Rounds of Interviews

Chapter 5	Key Interviewing Tips
Chapter 6	If You Don’t Succeed This Time
Chapter 7	Now That You’ve Got the Job: A Few Tips
	Appendix

Acknowledgements

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I would like to greatly thank the reviewers of this book including Tim Codrington, Carmina Buzuloiu, Christianne Elcock, and Peter Renton. Their comments and suggestions were invaluable.

I would also like to thank Mindy Gibbins-Klein of The Book Midwife and Ecademy Press. Her guidance and coaching enabled me to write this book in a structured manner and at an impressive pace.

My parents, brother, sisters, and entire family have given me great love and support during the writing of the book and at all times. Thank you.

Preface

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I have worked as a buy side equity research analyst for several years. I entered the asset management industry straight after I graduated from business school. I started my career in the U.S. and then moved to London, in the UK.

Before business school, I worked in management consulting in New York City. When I decided that I wanted to work in equity research, I found that there wasn’t a lot of written help on the topic. There were many resources that dealt with investment banking roles, but not much on research specifically.

Luckily, I went to a very large Boston-based business school in the U.S., with investment clubs and helpful second-year students who guided me through the process. Many asset management companies came on campus to recruit, and that is how I got both my summer and full-time positions. However, I still think that I would have benefited from a book that explained the industry and how to prepare for interviews. This is my attempt to write such a book.

This book is targeted primarily towards students: business school students and undergraduates who would like a career in equity research, particularly in asset management i.e. on the buy side. The book should also be helpful for other people who want to get into the industry, for example those with experience in other areas of finance or in other industries altogether. However, many of the examples I use and much of the advice I give is written with students and people who are early in their careers in mind.

Though I am focused on the buy side, this book should also be helpful to people who are interested in sell-side equity research positions, because the interview processes are quite similar. During my career I have interviewed with both the buy and sell side, and received job offers from both.

That being said, I have only ever worked on the buy side. In addition, my experience has been quite specific: fundamental equity research, mostly long-only. The book will be relevant for people who want to work at hedge funds, but mainly if they want to do fundamental research (long or short). This book will be less helpful to people interested in fixed income research, quantitative research, or technical analysis roles.

It can be tough to break into asset management. It is not a big industry in its hiring relative to other branches of finance. In addition, people already on the buy side can sometimes be quite sceptical about the desire of others to enter the industry.

Luckily, I have a lot of experience that I can draw upon to guide you through the process of finding an equity research job. I have had several interviews of all different types at many asset management companies in both the U.S. and the UK (and once in Asia). I have received several job offers, and have of course been turned down for interviews and jobs many times.

This book distils all of this experience into guidelines, tips, and advice that will help you to identify the firms you might want to work for, get interviews, then prepare for and execute the interviews well. At the end of the book I even give you a few tips to start you off on the right foot in your first buy side role. I hope you can learn from my mistakes as well as my successes, as I share my experiences and lessons learnt with you.

Please note, however, that because the book is based on my experiences, almost the entire work consists of statements of my opinions on various matters. You are of course free to agree or disagree with me on any point, and do what you think is best. At the end of the day, you have to do what feels right for you. All I can hope is that you will find some of my advice useful on your journey to getting a job in equity research or asset management. I wish you the best of luck. It is a great industry to work in.

Chapter 1

Understand the Asset Management Industry, the Analyst Role, and the Differences between the Buy and Sell Side

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Given that you’ve picked up this book, you probably have some idea about what asset management is, and what an equity research analyst does. However, I thought it would still be a good idea to describe the industry and the role. I’ll also compare the buy-side and the sell-side. My descriptions of the latter will be based mainly on my observations, as I have never worked on the sell-side, only on the buy-side.

Please note that I may sometimes hyphenate the words “buy-side” and “sell-side”, and at other times I may just write them as two separate words.

Explaining the Asset Management Industry or the “Buy-Side”

The asset management industry refers to a collection of companies that manage assets (money) on behalf of others. Another widely used term for the industry is investment management. In finance, these companies are also referred to as the buy side. Because the companies control assets, they can go into the capital markets and buy stocks and other securities, hence the term.

The assets that these companies manage may, for example, consist of people’s retirement funds or pension plans, money being invested for the education of children, or general savings for the future. A popular way to do this nowadays, of course, is via mutual funds, and some asset management firms do offer mutual funds to the public. In some countries similar investment vehicles are called unit trusts.

The assets that these companies manage are usually held in pools called “portfolios” or “funds”. In order for the investment management companies to know exactly which securities to put into their portfolios, they need people to do extensive research and analysis. When those securities are stocks (or equities), the people who do the research are called “Equity Research Analysts”. The people who make the final decisions about which securities are bought and sold, and who manage the asset pools, are called “portfolio managers” or “fund managers”, terms you may have heard a lot. Sometimes the roles of portfolio manager and analyst are combined in a hybrid role.

Buy-side firms can, of course, sell stocks as well as buy them. They can also short stocks, i.e. sell stocks they don’t own with the aim of buying them back later at a lower price.

Asset Managers Vary in Size

There are many different types of asset management companies. They go from very large ones with tens of billions of dollars of assets under management (AUM) to small boutique firms with a few million. Some of the well-known names in the U.S. include Fidelity, Wellington, T. Rowe Price, Franklin Templeton and The Capital Group. Some of the big firms in the UK include Schroders, Threadneedle, and Newton (most of the large American firms will have offices in London as well).

But it is important to note that in addition to these big gorillas of the industry, there are hundreds of smaller firms around the world. There is a big concentration of them in the U.S. and the U.K, the two countries I have worked in. But there are firms in many other places as well. Any major financial centre is bound to have a few.

The Buy Side Includes Hedge Funds

The buy-side includes hedge funds, a group of companies that has gained a lot of attention and some notoriety over the years. Hedge funds tend to be smaller companies (in terms of assets), though there are a few giant ones out there. They also tend to be more specialized in their investment techniques than the big firms. They are usually more likely to short stocks, use leverage, or employ other strategies that may be considered riskier than traditional long-only buy-and-hold investing. Hedge funds also tend to have a different fee structure from the traditional firms, one which allows them to share some of the upside if they make money for their investors. This accounts for the very large compensation numbers that are sometimes available and often reported at hedge funds.

Important Terms: Long and Short

Two terms that are very important to understand when discussing the investment world are “long” and “short”. They are different ways of saying “buy” and “sell”. To go long a stock is to buy it. To short a stock is a bit more complicated than just selling it. If a fund already owns a stock it can sell it. But to short a stock means to borrow it and sell it into the market. Later, the stock will be bought back, hopefully at a lower price, and returned to the lender. Most traditional buy side firms are long-only: i.e. they will not short stocks, only buy and sell them. Shorting is often done by hedge funds, and the practice has received negative press from time to time. If a firm does short stocks it is often called “long/short” to differentiate it from “long-only” companies. For the purposes of interviewing, you need to understand that if you are asked for a short idea, it means that you need to come up with a stock that you would sell, whereas if someone asks you for a long idea, you need to present a stock that you would buy.

Asset Managers Have Different Investment Styles

Buy-side firms may have specific investment styles that they adhere to. Common examples include Value, Growth, and GARP (Growth at a Reasonable Price). They may also focus on specific geographies and/or stocks of certain market capitalizations (e.g. small-cap stocks or mid-cap stocks). Some large firms may have separate fund management groups that each focus on specific styles and geographies. So, for example, there may be a Large Cap Value team as well as a Small & Mid-Cap Value team. Or there may be a UK Growth Group. The key here is that you should be aware of these distinctions when you are interviewing with a firm or a particular group within a firm.

Value Investing: Value investors focus on buying stocks that are very cheaply valued. They usually believe that companies have an intrinsic value that can be estimated from things like their earnings, assets, and dividends. They will only buy shares if they are trading well below this intrinsic value. Value investors tend to be sceptical about paying for future earnings growth. They prefer to invest in reliable, consistent companies that have been around for a long time, and they will usually avoid the hot new start-ups. Some have an absolute level beyond which they will not pay for a company, no matter what, for example, 16x earnings. Value investors also tend to have the longest time horizons in the investment community. They are willing to buy a stock that is cheap and wait patiently until the market realizes that it is worth more. They are less concerned with near-term catalysts that will get the stock moving. Benjamin Graham is often thought of as the father of value investing, and Warren Buffett, who was one of Graham’s students, is one of the world’s most famous value investors.

Growth Investing: Growth investing i...

Table of contents

• Cover
• Half Title page
• About the Author
• Title page
• Copyright page
• Back Cover
• Contents
• Endnotes