What does a Research Analyst do?
Equity and Fixed Income Research Analysts
Research analysts prepare analyses on companies or industries and comprise equity analysts that research stock issuers and fixed income analysts that research bond issuers. Equity analysts are divided by industry specialization with coverage in verticals that could include: Aerospace, Agriculture (could include sustainability), Airlines, Apparel, Automotive, Biotechnology, Chemicals, Computers, Consumer Goods, Defense (perhaps part of Public Sector), Education, Energy, Financial Services, Government (perhaps part of Public Sector), Health Care, High Technology, Insurance, Legal, Manufacturing, Media & Entertainment, Medical Devices, Nonprofit, Pharmaceuticals, Publishing, Real Estate, Retail/Wholesale, Software, Technology, Telecommunications, Transportation, etc. Fixed income analysts are often divided by sub-asset class and can cover high-yield debt (sometimes referred to as junk bonds), convertible bonds, distressed bonds, etc.
Sell-Side and Buy-Side Research Analysts
Research analysts are also divided into sell-side research analysts who work for brokerage firms and buy-side research analysts who work for mutual funds, hedge funds, pension funds and trusts. Sell-side analysts produce research reports with actionable recommendation of “Buy”, “Hold” or “Sell” that their companies distribute to institutional and retail clients. Buy-side analysts identify investment opportunities for internal dissemination that the money and portfolio managers of their own companies use.
What are common post-MBA Research Analyst positions?
Per above, brokerage firms (sell-side) and mutual funds, hedge funds, pension funds and trusts (buy-side) hire research analysts into equity and fixed income research positions. Both sell-side and buy-side companies hire Summer Associate positions and make full-time offers to select Summer Associates that usually include second year tuition.
Both sell-side and buy-side analysts research companies that are usually within the same industry or group of industries. They read the same news, build the same valuation models, conduct the same market analyses and speak to many of the same industry players (firms, competitors, suppliers and companies). Sell-side research is often deeper as many buy-side analysts draw from the various research reports of sell-side analysts in making internal recommendations. Some say bulge bracket sell-side firms seek to cover more companies while more boutique shops dig deeper. A new Associate could expect to initially cover 10-20+ companies on the sell-side.
Some people prefer the buy-side because of shorter hours and a path to becoming a portfolio manager. While other people prefer sell-side positions because compensation is usually, but not necessarily, higher. Exit opportunities on the sell-side include moving up to eventually head equity research or working for one of the companies under coverage in an investor relations role.