Long ago, before the Jubilee and the red white and blue sponge cakes, the Financial Times ran an article (last Thursday) on the changing role of the equity researcher.
Therein, it noted that everyone is spending less on equity research than they used to, and that, “The role of the analyst is changing from someone who publishes research, to someone who can put an investor in front of company management.”
Is this true?
Brad Hintz, former CFO at Lehman Brothers, turned senior brokerage analyst at Bernstein research, says it is. Moreover: this is a new development.
“There’s certainly a demand for access to company management from smaller clients,” says Hintz, “There’s a large group of smaller clients who view access to company management as an important part of equity research.”
Although banks have, “corporate access teams” who can help arrange the logistics of meetings between investors and the management of companies they’re investing in, Hintz says it often falls to the equity researchers to make the first approach – and to attend the meetings when they occur.
“Equity researchers tend to have more credibility with the clients,” he says. “This is a new thing, it’s been growing over the past few years.”
Unfortunately, however, facilitating meetings between investors and company management amounts to one more thing in the average equity researcher’s already long and overcrowded day.
“Billy Joel had a song about being a rock star,” says Hintz. “He pointed out that he had to write new music, record new music and then go out on the road and sing it. If he spent too much time on any one of those things, he would fail.
“Being an equity researcher today is similar. You still have to write commentary – clients want an easy-to-read account of the industry.”
As a result, the average equity researcher now works more hours than ever before. The new equity research schedule involves touring with clients and management teams by day, and hosting dinners and writing research reports by night.
Stephane Rambosson, managing partner at search firm Veni Group, agrees that it aids an analyst’s employability if he or she has a close relationship with a corporate management team: “It’s pretty helpful if they can deliver management to investors, but this is far from the only job of an equity researcher.”
With equity research jobs disappearing, equity researchers are under a lot of pressure. Meanwhile, Billy Joel hasn't had a hit for years. Let this be a warning.