Senior equity researchers are in back demand. With MiFID II looming, and investment banks switching from a publish-and-be-damned approach to a need to impress clients with deep analysis, the market for highly ranked analysts has taken off in London.
In the past few weeks, senior research analysts have been moving between large investment banks.
Jeff Largey, head of EMEA metals mining research at Macquarie, has just joined Goldman Sachs, according to our sources. Meanwhile, Michael Tyndall, a director in European auto research at Barclays, has just been hired by Citigroup, Ed Ridley-Day, who was leading the medical technologies research team at Bank of America Merrill Lynch, has just joined Nomura and Ignacio Cerezo, a banking analyst at UBS, has been recruited by Credit Suisse.
Under MiFID II, investment banks can’t bundle research together with trading spreads and commissions to asset management clients. Instead, asset managers need to break out the cost of research separately from the payments for transactions for trades.
Research has traditionally been viewed as a carrot to induce asset managers to trade with a particular bank and, as a result, senior analysts have suggested that the value of that research has diminished. Euromoney suggests that 8,000 reports are produced every day – or 3 million a year – and around 5% are actually read.
The ranks of research analysts in investment banking has been decimated in recent years – by 50% according to some estimates – and seasoned researchers are in short supply. Some have defected to the buy-side, others have started their own research boutiques in anticipation if increased demand for meatier research.
MiFID II has revived the fortunes of investment banks' equity researchers, but there's still a reluctance to recruit in wholesale numbers across the board. Instead, demand has picked up for highly-rated analysts who can produce the sort of in-depth research that clients are likely to demand under the new regime. Supporting these are teams of juniors that are doing the grunt work. Recruiters suggest that the typical structure of an equity research team now is two highly-rated senior analysts supported by five juniors.
Under the new regime, mediocre researchers are no longer required. The ranks of research analysts in investment banking has been decimated in recent years – by 50% according to some estimates. At the same time, desirable seasoned researchers are in short supply. Some have defected to the buy-side, others have started their own research boutiques in anticipation if increased demand for meatier research.
A report released earlier this year by Accenture said that the “average age and experience of sell-side analysts goes down every year” and with it the lack of real insight. Expect the poaching of seasoned analysts to continue.