Equity Research vs Private Equity – Both the Equity Research profession and Private Equity may seem to run along the same lines but there lies a huge difference between the two of them. Equity Research is all about finding the valuation of the listed companies on stock exchanges while Private equity is researching and analysing the private companies and interpreting your results. In this article, we will try to point out the major differences between both the professions and make it simple for you for a comparison.
What is Equity Research?
Equity Research is a part of investment banking sector and is meant for the intellectual and qualitative students. Your role as an equity research analyst would include talking to firm’s traders and brokers for discussing and sharing investment recommendations for clients. You would have to collect information and research on the companies you cover, perform financial statement analysis and based on this research you would prepare detailed equity reports along with complex financial models, relative valuations (like PE ratio, PBV ratio etc), comparable comps among others.
What is Private Equity?
A private equity analyst is a person who does research and analysis on private companies using financial modelling techniques. A private equity analyst acts as a support for Private Equity companies and trading groups by providing analytical and asset valuation support. The major focus is on recommending strategies for highest return on investment and balancing the equity and debt instruments. List of top private equity companies
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Pre-Requisites to the career
Usually CAs, and MBAs are the top choices of recruiters for the position of equity research analyst but it is not mandatory to have a commerce background. You have to master your analytical and quantitative skills and should have a strong interest in financial markets, accounting and economics. You should also possess excellent communication skills and should be well versed in English. For pursuing a career in the field of Private Equity, a background in commerce and finance is recommended. You should be an MBA and should have skills set of handling multiple tasks, logical reasoning and analytical reasoning. Candidates with excellent verbal and written communication skills are preferred. Do have a look at this article – Can an engineer get into investment banking
Equity Research vs Private Equity – Employment Outlook
Basic job roles that are a part of Equity research career are:
- Trainee: The very first step towards a career in Equity Research is being a trainee in a company. It teaches you necessary skills required for stepping in the shoes of Associate. Training can be of any time period between 6 months and 1 year. And generally involves workshops, case studies and lectures.
- Associate: Trainees with experience of 1 or 2 years are hired as Associates. Associate equity research analysts provide written reports and company opinions to the sales department of the firm.
- Senior Analyst: Senior analyst is a reputed position to acquire. You would accompany CEO of the company in his tours and advise him on the special matters.
Generally, a candidate works as an associate for three years and works as a senior analyst for several years before being promoted to the position of Vice President.
On the similar lines, career progression in the field of Private Equity involves following designations:
- Analysts: As an Analyst you would support your team members and your major focus will be on financial modelling and developing your analytical skills. You are required to be an Analyst for 2 years before being promoted to the position of associate.
- Associates: Experience of 2 or more years in a PE firm would make you suitable for this position. You would review applications, support your team members in negotiation and execution and build a contact network to help the firm. It requires 3 years of experience as an associate before applying for the post of associate director.
- Associate Director: a minimum experience of 4 to 5 years is compulsory for being an associate director. You would be an important part of larger transactions and you would confine yourselves to mid-market transactions as an associate director.
- Investment Director: Only those candidates who are highly experienced are selected for this position. As an Investment Director, you would play an extremely important role in fund raising and taking strategic decisions for the company.
Equity Research vs Private Equity – Compensation
Talking about your career in the field of equity research, your earnings as a junior analyst would range somewhere between $45,000 and $50,000 annually and after or promotion as associate your basic pay will be $65,000 and can range upto $90,000 on the basis of your performance and experience. As a senior analyst, a basic compensation of $125,000 to $250,000 will be provided and you can earn a hefty amount from the bonus which can be 2-5 times the base compensation.
While speaking of the career in private equity pay scale range from $40,000 to $100,000 a year. Apart from basic remuneration, additional benefits like bonus and other emoluments can get you a good money.
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Equity Research vs Private Equity – Pros & Cons
As a candidate pursuing your career in the field of equity research, pros and cons in your career aspects will be:
- Good salary
- Ample of exit options and opportunities to work
- Stable working hours
- Desk-bound job
- Longer durations of seating in front of computer
- Inter departmental pressure
In the field of Private equity your career related pros and cons would include following:
- Convenient working hours
- Good salary
- Ample of knowledge to gain
- In-depth study of things
- Not much recognition as compared to other fields
What to Choose?
After reading the detailed analysis of both the professions, it becomes clear that both the options can earn you good and give you monetary benefits. While pursuing career in equity research can bring you in the limelight and as an aspirant of private equity sector you would have to compromise on the limelight factor. Private equity jobs can provide you valuable experience which can be used if, later, you decide to foray into other sectors. Equity Research jobs are for those who have a strong liking towards finance and financial analysis. The decision to choose any one from the given options is extremely difficult as both the jobs can take your career to different heights.