Equity researchers are leaving banks and joining hedge funds. Didier Scemema, the former head of technology research at Bank of America Merrill Lynch has collected his bonus and left for Odey Asset Management, reports Financial News. Alastair Johnson, a Citigroup analyst, has gone to Majedie Asset Management. Citi analyst Adrian Cattley is going to Capeview Capital. Two Deutsche Bank analysts have even set up their own funds.
Why the sudden rush?
As we've reported previously, Citi is said to have paid its equity researchers poorly last year. Headhunters say it's not the only one. “Market conditions mean that analysts in investment banks have seen their pay reduced for some time now," says Oliver Rolfe, managing director at search firm Spartan Partnership. "Many have only received small to medium upticks recently. With the long hours and travel requirements of the job, more are looking to move to the buy side and to hedge funds in particular.”
Another equities headhunter adds that a lot of researchers in banks are earning £150k ($247k), but working eleven or twelve hour days: "They have to do the research, to write some very detailed reports and to meet clients and companies. There's a lot of travelling - it's a demanding life and people are getting burnt out.
"It might be worth it for £300k-£400k, but not for £150k," he adds. "It doesn't add up."
However, one senior equity researcher, speaking anonymously as he's not permitted to discuss his job, says the disgruntlement of his profession is nothing new: "Equity researchers have always complained about being underpaid," he says. He argues that market conditions are driving equity researchers out of banks and into funds. Now that macroeconomic stressors have gone and equities have rallied, he says equity dispersion has grown and stock picking makes sense for hedge funds again. "This time last year, it was all about predicting what the ECB would do next. Now, hedge funds need people who can pinpoint the best stocks to invest in," he says,
This isn't to say that moving into an equity research job in a hedge fund is easy. "Hedge funds only want the creme de la creme," says Zaheer Ebrahim at search firm the Kennedy Group, which places equity professionals into hedge funds. "They might take a senior analyst with a good track record, or they'll take a junior person who they think is super-bright and intelligent."
If you do go to a hedge fund as an analyst you'll get paid, says Ebrahim. "In a hedge fund you'll be attached to a team, and that team will be attached to a P&L," he says.
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