Which skills are required for equity and fixed income research jobs?

The researchers employed by banks are an interesting breed. They often build models, like bankers do. They’re often on the phone, like traders are. But their role is very different – and requires a very different skillset.

Click here to join the bubble by eFinancialCareers, our new anonymous community. ✍️

Research analysts generally sit in the sales & trading division of an investment bank. In many ways, they are the academics of banking: they need to be comfortable reading company accounts and economic data and absorbing much more detailed information than in some other investment banking specialties. Researchers are often the experts that others consult.

If you want to work in research, the first thing you’ll need – if it counts as a skill – is to be a morning person. Fergus Neve, who covers oil supermajors for Rothschild & Co. Redburn, told us that he wakes up at 5:40am.

The second is an excellent memory, as well as an insane capacity to absorb new information frequently. Neve described how his team sits around for hours in total discussing the news relevant in their industry and is frequently approached by his clients to ask what impact certain stories have on equity outlooks.

There's also surprising scope for creativity. The best analysts can take a sideways view and see something that others have missed is what really makes an analyst stand out. Neve frequently works on long and short research notes, as well as in-depth industry deep-dives. These projects can take days or weeks or months, and do involve some creative writing – for example, he wrote a report that he dubbed Strait Talking after the closure of the Straits of Hormuz. In many ways, the job is similar to journalism.

Research analysts are not Excel monkeys. Neve does not spend swathes of his day modelling, and usually just makes small tweaks to his existing models. That’s especially pertinent in a world of AI-empowered research, when small boutiques can mass-pride reams and reams of research essentially at will. More on AI skills further down, however.

Researchers need to be people people. They are expected to make phone calls and presentations to investors and market their ideas and research, and to build relationships with companies in order to understand them and make forecasts. So, although the ability to build an accurate spreadsheet model is important, the ability to communicate and relate to other people is vital.

Talking to - and observing - clients isn't just about high level discussions with the c-suite. As a Citadel researcher (covering restaurant chains) told us a few years ago, "the best analysts live their coverage... There’s only so much you can learn from analyzing the data, which is always backwards looking. You never know if a company might have the next Popeye’s chicken sandwich."

The highest levels of a bank’s research department – the superstar analysts and strategists, who regularly appear on the news and quoted in the press – might find themselves spending nearly all of their time out meeting clients and companies, with a team of juniors back in the office to do the background work and come up with the numbers and facts to support their views.

At that level, travel is frequent. Neve noted that he travelled frequently, despite being just a few years into his career. And a retired equity researcher of 30 years who we spoke to last year said that "as a senior researcher, there are client and investor calls... there’s quite a bit of travelling."

That isn't necessarily a bad thing. Senior analysts are paid well and are extremely respected by the companies that they cover and are trusted by their clients. "At senior levels, you meet investors and company management, and this is how you often gain the most valuable ideas. Knowing what the street is saying about a stock is important and adds value to clients," the senior researcher said.

As you get more senior, therefore, your skillset increasingly includes people skills. "Equity research is still about relationships," the senior researcher said. "From my perspective, it’s what kept the job interesting and what gave me my edge."

These attributes are general across the research team. However, there are also a few differences between the skills needed of equity and fixed income (debt researchers). 

In general, because of the way that the underlying securities work and the risk to the downside, debt analysis has a greater need for skills like precision and attention to detail. By comparison, equity analysts are expected to publish earnings forecasts and price targets, and an equity analyst can sometimes get away with a few minor errors if their big picture understanding of broad trends is really good. 

In both equity and debt research, there is often room for analysts to move on to other areas of the banking industry; because you build up a visible track record of successful and unsuccessful recommendations, analysts are often recruited by hedge funds and firms on the buy side. Hedge funds like a different kind of research, though. - You'll need to be quick and responsive to market trends rather than a writer of long thematic pieces.

Hedge fund researchers tend to have much broader remits than bank researchers, which are more specialized. A Citadel analyst that we spoke to two years ago, for example, covered 40 to 50 different stocks in his area. Neve, who works for the research team of an investment bank, covers just the European Oil & Gas supermajors – five companies at most.

Analysts who have strong relationships and understanding of the companies they cover will sometimes find themselves gravitating toward roles in corporate finance/capital markets or M&A advisory. There is also a marked trend for equity analysts to end up in investor relations for the firms they’ve previously covered, too.

Click here to return to "What are bank research jobs?".

Have a confidential story, tip, or comment you’d like to share? Contact: +44 7537 182250 (SMS, WhatsApp or voicemail). Telegram: @SarahButcher. Signal: sarahbutcher.22  Click here to fill in our anonymous form, or email editortips@efinancialcareers.com. 

Bear with us if you leave a comment at the bottom of this article: comments are moderated intermittently by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. You must take sole responsibility for comments you post on this site. We will take reasonable steps to weed out anything that we consider to be offensive or inappropriate.