Investment banking has a reputation for being a hierarchical industry, but equity research is arguably the least tiered function in the sector.
Analysts are typically arranged by sector, like consumer goods, retail or technology and sub-sets within this, such as ‘food retail’ companies, for example. Sector-focused teams in large banks are expected to cover around 15-35 companies.
Within the equity research teams, you may also find wider beats to cover, particularly if the market isn’t a core one for the investment bank. It’s not uncommon for an analyst to be focused on, say, German mid-cap companies, rather than having one particular sector bias.
Researchers are less focused on chasing job titles and seniority, and more interested in gaining status. For example, getting your name on the Thomson Reuters Extel annual rankings for researchers and salespeople, which is voted for by clients on the buy-side, is often a ticket to career progression and a new job opportunities.
Andy Howard, who was head of Goldman Sachs’ GS Sustain research team until he started his own boutique Didas Research last year, told us that he still gets calls for mining analysts jobs, despite exiting the sector ten years’ ago, because he once received an Extel award.
We’re focused on equity research here, but it’s worth noting that this isn’t the limit of ‘research’ opportunities within investment banking. For a start, there are credit research teams focused on the corporate debt market – namely, how investable the bonds issued by companies are – who liaise with internal trading teams and large investors like hedge funds and asset managers.
Then there’s the portfolio research teams, which take a broader view on the market, rather than looking at specific companies. These are sometimes called ‘strategy’ teams, as they’re taking a look at the likelihood of particular asset classes rising or falling, or overriding views on particular industries.
Some banks also have macro research teams, who look at everything from monetary policy to the output of particular countries. Goldman Sachs, for example, has its ‘global markets institute’, which advises “policy-makers, regulators and investors around the world”.
For any equity research team, the critical time is when they’ve just issued a new piece of research. This means meeting with the sales and trading teams and clients, explaining the rationale for the recommendations within the notes and answering any questions.
“On these days, an equity analyst will then dedicate much of the remainder of the day to calling, emailing or meeting with clients. During the course of these client interactions, numerous questions may arise that require separate follow-up,” says Matthew Thomas, head of Russian/CEEMEA oil and gas equity research at Barclays.
Even on other days, analysts typically spend time on “routine calls” with clients, he says, before moving on to other duties. But around “20-40%” of the job is spent outside of the office, either meeting companies they cover or with clients, he says.
“An analyst will then typically work on reports, gathering and analysing data, updating financial models or spreadsheets, speaking to companies, or writing the text itself,” says Thomas. “A research report can vary widely in length, ranging from short comments on newsflow or specific issues, to in-depth analysis of a stock or full sector.”