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# Another Investment Management Question

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Director
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31 May 2007, 10:40
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I'm hoping Naturallight and others w/ insights can chime in here.

What do you all think about sell-side jobs, such as working as a research associate and eventually working up to portfolio manager? Is there just a huge gap in prestige and compensation between sell-side and buy-side?
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31 May 2007, 15:33
Johnny, just a quick reply as I am studying for the CFA exam this Saturday. One recommendation as an additional reference resource would be analystforum.com. You will find a lot of AM types there.

As a gross generalization, I believe sell side pay starting out is marginally higher that buy side. Everyone talks about the exit opportunities on the sell side ie many want to eventually go on to PE, VC, HF, AM. I have heard that sell side research is a great place to build your primary research skills because the research is prepared for public distribution and is usually more detailed than the internal buy side research. I have heard from at least one person on the sell side that your opportunity to leverage the experience in sell side research into a buy side opportunity can be really dependent upon the industry that you cover. For example, if you are doing auto parts or newspapers you aren't going to draw much buy side interest compared to Mining or Oil right now.
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31 May 2007, 17:46
Depends on what product. Avoid equities, IMO.
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31 May 2007, 18:45
I work for an investment consulting firm and I talk to buy-side managers and analysts on a daily basis. I can't tell you how man times I've heard PMs make one or more of the following comments:

"We read some of the sell-side research, but it's not very helpful. Most of those guys don't add any value."

"We just hired [insert name] from the sell-side. We don't usually like to take anyone from the sell-side, but he is particularly insightful."

"[insert name] used to work on the sell-side...but we forgive him."

My point is, you can definitely make the transition, but just understand that many highly respected AM shops pride themselves on never having been a part of the sell-side. Additionally, there have been countless articles in the WSJ, FT, etc. about how sell-side research is near worthless at this point. I'm not sure I completely agree, but I do somewhat. Again, you can make the transition, but just be aware of the way that the sell-side industry is viewed by some.
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01 Jun 2007, 06:02
cnc2 - I'll check out that forum, thanks for the info.

faceman - That's the same sort of stuff I've heard, it like the way i-bankers talk about muni bankers or something, sell-side just doesn't seem to get respect. And I guess it makes sense, it's like if you're interested in buying a car, do you want the opinion of the mechanic who works for the dealership that's trying to sell you the car, or the mechanic that works for you who's goal is get you the best car.

By the way faceman, I'm curious about your background, how did you end up in investment consulting, that sounds like a great job but I imagine very "niche" and difficult to break into.
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01 Jun 2007, 06:54
Johnny - I took a pain in arse route. Portfolio admin --> performance analysis --> research at an investment consulting firm. There are easier ways, and post b-school would be one of them. I'm planning to go to b-school starting in the fall of '08, and then I'm going to try to transfer to the buy-side.

I think investment consulting/research at the lower level is either a straight out of school thing (which is actually becoming a bit less common at my firm as they prefer some experience) or transferring into a crappier position (like I did) and waiting for something to open up, and then hopefully getting that position (which I got lucky with). At the higher level, at least where I work, they take most of their consultants straight out of top 20 b-schools or they take people with lots of experience (and usually with an MBA/CFA or sometimes a JD) and start them at a higher level in the firm.
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01 Jun 2007, 07:04
Cool, thanks for the info.
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01 Jun 2007, 11:56
Quote:
What do you all think about sell-side jobs, such as working as a research associate and eventually working up to portfolio manager? Is there just a huge gap in prestige and compensation between sell-side and buy-side?

I'm not an expert on this, but I don't think you can really be a PM on the "sell-side". In general, the buy-side makes money based on managing assets, and the sell-side makes money by selling services like i-banking, research, brokerage, and derivatives or other structured products.

So if you're an equity research analyst on the sell-side, you're probably working at a bank like Morgan Stanley, and your research gets purchased by guys on the buy-side who are looking for new investment opportunities.

If you're an equity research analyst on the buy-side, you're working for a mutual fund, endowment, pension plan, etc and your research gets used by a PM at your firm as he decides whether or not to buy and sell.

I'm not really sure which is more prestigious or which pays better. Personally, I'm looking for stuff on the buy-side.
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01 Jun 2007, 12:20
Naturallight - I think I was confused about the different heirarchies in my last post, you're right, a PM on the sell-side doesn't make sense.
01 Jun 2007, 12:20
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