A Day in the Life of an Investment Research Analyst

The core responsibility of an investment research analyst is to provide investment recommendations to portfolio managers (this type of role is referred as “buy-side”) or third-party clients such as individual investors (“sell-side”). This includes both generating new ideas and monitoring the existing holdings in the portfolio. Analysts evaluate financial, market, and economic data along with various qualitative aspects such as the quality of management and the competitive edge of the product/service that the company offers. They typically follow an established investment process and framework to select their companies, for example value investors would screen the market for stocks that are trading below their fair price. Analysts prepare very detailed reports when offering their view on a company and are typically challenged by other members of the team on their findings (usually structured as an investment committee). Investment research analysts specialise in specific asset class such as equities or fixed income.

Typical Day in the Life of an Investment Research Analyst

Read the News and Go Through Emails

Investment research analysts typically start their day by catching up with the news about the companies they cover as well as any market developments. Unless an analyst covers a market that is outside the region in which they reside, for example covering emerging markets out of Europe, they should be at their desk for the market opening. For instance, the London Stock Exchange opens at 8.00am.

Write Reports and Keep Track of Companies Under Coverage

Research analysts are responsible for running financial models and coming up with estimates and price targets for the stocks they cover. Updating their system regularly and writing reports is key part of the job. Companies are reporting their earnings every quarter (also known as “earnings season”) and this is the time analysts might make changes to their models and estimates. Other news such as new product lines, management change, corporate restructuring or company bids could also have a significant impact on its share price. Therefore, reports and estimates are typically updated daily.

Below is an example of the key features in a research report.

Source: Financial Edge Training

Additional industry Example of a research report can be accessed here[1].

Keep in Touch with Company Management

Speaking to the companies that the analysts cover or are invested in is very important. Today, along with webinars, analysts can access company representatives such as investor relations executives through virtual meetings. These calls would normally happen following a results release or major changes at the firm. Since such communication is quite sensitive and could impact the company’s share price (should an analyst change their estimate because of the information received), the regulators are very strict on the type of information that is allowed to be discussed/disclosed. As an example, here are the rules issued by the Securities and Exchange Commission (SEC) in the US about fair disclosure and insider trading.

Team Meetings

Investment research teams normally have their desks next to each other to promote free communication and the flow of ideas. In addition, formal team meetings take place on a regular basis – usually every week, in which analysts and portfolio managers are discussing both the stocks in the portfolio but also potential opportunities. Depending on the investment strategy, team meetings are also held to discuss portfolio weightings, allocation, and overall positioning. For example, if a strategy rebalances every month, portfolio discussions could take monthly.

Other Activities

• Company visits – meeting with company management such as executive and finance directors in person is an important part of the research process. Most often, these meetings take place annually and research teams take this as a chance to complement their operational due diligence on the company. Depending on the market coverage, some analysts, such as those covering emerging markets, may be required to travel more compared to those that cover the local market.
• Investor days – mid- and large-size companies usually organize investor days during which they invite their shareholders (and some prospect institutional investors) and offer them insights such as financial results and their forward-looking estimates (only publicly available information) and management’s vision for the company and the market they operate in.
• Investment conferences – asset management firms organize various events including investment conferences, at which they put forward investment teams to present to clients. Normally, it is portfolio managers that lead those discussions, but they tend to bring analysts along and ask them to comment on their sector and stock coverage.
• Industry-specific conferences (non-investment) – this is quite common for analysts that specialize in areas such as healthcare, which is highly sensitive to regulatory approvals and scientific discoveries. Other such example is the technology sector that is highly sensitive to innovation. By attending these conferences, an analyst remains current on top industry news and trends, and would factor that into their company evaluation.
• Client meetings – from time to time, analysts might also be asked to attend client meetings along with portfolio managers. While the latter would do most of the talking, analysts are expected to jump in when it comes to specific stock examples.

What are the Different Levels of the Investment Research Analyst Role?

Depending on the size and structure of the firm, the investment research analyst role can range across different levels of seniority depending on experience and knowledge of the market as well education and industry qualifications. Although the hierarchy tends to be relatively flat compared to other areas of the financial industry such as investment banking, below we outline the typical analyst levels that would be represented at a large organisation.

• Interns and graduates – this is the first level in the analyst career path and is offered to final year students or graduates. An internship may last anything between a few months up to a year, where the duration of a graduate program is typically 18 months.
• Junior Analyst – this role is typically offered following a successful graduate training program, which includes rotating through different departments and teams at the organization. Successful candidates will be part of a specialist team and will have the chance to specialize in a specific area of the market. That can a particular sector or region, for example technology stocks or emerging markets debt.
• Analyst – after gaining some experience and become familiar with the market in which they are active, junior analysts are promoted to analyst. Around five years of experience would put them into that category. Analysts are usually given more independence in their research, while juniors are typically supervised until they learn the fundamentals of the process.
• Senior Analyst – after around ten years of experience in a particular market, analysts would already have gained a very detailed knowledge about the companies in that area as well as the market specifics. They are expected to provide the highest quality ideas to portfolio managers, but also to challenge them during the decision-making process. Senior analysts may also be involved in some asset allocation activities.
• Portfolio manager – although the main responsibility of a portfolio manager is to construct a portfolio and select companies from a pre-filtered investment universe, some may prefer to keep their stock coverage and monitor the companies on their list and portfolio along with the analyst team. This typically supports the consistent application of the process across other members of the team.

Possible Reporting Lines

While line management would also differ depending on the structure of the organisation, analysts are most often reporting to one of the following:

• Portfolio Manager – this is very common reporting line where a portfolio manager is also overseeing a team of analysts that he/she works closely with. This structure is popular both at a small “boutique” type firms that manage a small number of strategies, but also at larger companies where individual teams are given more independence.
• Head of Research – this role would typically exist at large companies, where the number of analysts and stocks under coverage is relatively high. For example, a team of ten analysts that cover European small cap equities would be considered large. The head of research would also work closely with the portfolio manager(s) and would ensure the quality of the research.
• Senior Analyst – reporting to a senior analyst is more common across mid and small size firms, where the more senior individuals are also encouraged to take on some people management responsibilities to both further boost their profile, but also free the portfolio managers more time to focus on running their portfolios.

Get the same training we teach at sell-side and buy-side research firms in some of the largest global investment banks with our online Research Analyst certificate. Learn the technical skills needed to succeed as an analyst, understand the role of a research analyst, explore the day-to-day responsibilities and how research analysts generate investment ideas. The course covers real case studies and includes an expert interview with an equity analyst.

Conclusion

The role of an investment research analyst can be quite interesting, and they can see the impact of their work through the recommendations they make. The skills required for the job are a mix of quantitative, such as financial modelling and being fluent in reading company statements, as well as qualitative in assessing the management of a company and its overall competitiveness. Another attractive feature of the job is its better work-life balance compared to other areas of the financial industry (typical number of hours per week is between 50 and 60 and rarely exceeds that).