INVESTMENT MANAGEMENT: FUNCTIONS
sell-side. Th ey go to the market themselves,
and they are remunerated the same way as a
sell-side trader. Sell-side traders get paid well
RESEARCH
because they are eff ectively running a P&L
account. On the buy-side, trading is a
BY: MAHA KHAN PHILLIPS
cost-saving exercise. Where fund performance
is diffi cult to get, the few basis points you can re living in the middle of the information age, and yet, as
get by good quality trading makes a the adage goes: information does not mean necessarily
diff erence,” Yates explains. W
e’
mean knowledge. For research analysts, this has never been
truer. Analysts have a variety of technologies at their disposal, whether
CONTROLLED ENVIRONMENT it is their Bloomberg screens, the internet, data providers, the media,
Trading is a very controlled environment, for results broadcasts, or sell-side reports. But all of this means only one
obvious reasons. “It’s easy to get things wrong,” thing: sifting through what is relevant, and what is not, is the analyst’s
explains Iraj Ispahani, regional market leader, greatest talent, and where he or she provides the most value.
EMEA, for Korn Ferry International, the In asset management, a research department is generally structured in
recruitment fi rm. “You start as the junior three diff erent ways. In the fi rst model, researchers are future portfolio
person on the desk and that’s how you learn, managers, learning key analytical skills and building up their knowledge
by being with experienced people, and by and experience of a sector before cutting their teeth into a portfolio.
learning about risk and how settlements work. Th ey will work closely with fund managers, and observe and learn. In
Th ings move very quickly, and whereas on the the second model, a fund management house will have a stand alone
advisory side and corporate fi nance side there research department with its own analysts, with varying degrees of
are a lot of people who will check your work, authority in portfolio management. In the last model, research and
there aren’t so many here.” portfolio management will be undertaken by the same person.
As a result, says Ispahani, “Traders tend to “Of these, none of them are superior,” explains Ella Brown, CFA, and
be people who can think quickly, and who former global head of equity research at ABN Amro Asset Management.
have quite a strong stomach. Th ey are people “What’s key is that when you join a fi rm, you understand which business
who actually don’t like a lot of paperwork.”
Cg
model they are using, and you confi rm your entry based on that.”
Are there certain skills you would consider useful
“What’s key is that when you join a
for your job?
It’s vital that you have a disciplined approach – fi rm, you understand which business
create a set of rules and stick to them. You need a
good understanding of the fundamentals: equity
model they are using, and you
fundamentals, credit fundamentals etc. and a good
grasp of the derivatives market.
confi rm your entry based on that”
How do you think the role you’re in now will
change over time? Ella Brown, CFA, ABN Amro Asset Management
For hedge funds that survive, the opportunity cost of
capital will be higher. Portfolios will have to be
Research analysts who want a wider role within the company may
nimbler and more effi ciently structured and trades
will be dictated by their relative risk/reward ratio.
choose the second model. Th ey may also choose an investment house
where the research drives investments. Fund manager
Do you have advice for someone intending to
AllianceBernstein, for example, is very much a case in point. “Our
pursue the same career path?
research team works extremely closely with the investment team, and is
Trading convertibles and volatility requires
central to the decision-making process. We don’t have portfolio
knowledge of a variety of markets, ranging form
managers, we have people who are analogous, but our research analysts
fi xed income to equity, from credit to equity
are the experts on the companies and industries that they follow,”
derivatives. Try to understand the correlation among
explains Jim Gerber, director of global value research. It is a company
these different asset classes and how to use them to
where “the analyst owns the stock, and the analyst maintains our
manage risk in a hybrid portfolio.
external relationship with companies.”
However, the closer an analyst is to the investment process, the more
WWW.CFAUK.ORG CAREERS GUIDE 2009 47
330-55 investman_functions.indd 470-55 investman_functions.indd 47 222/11/08 11:59:372/11/08 11:59:37
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