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Equity Research vs Private Equity

Updated on May 2, 2024
Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

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 vast difference between them. Equity Research is all about finding the valuation of the listed companies on stock exchanges, while Private equity research and analyzing the private companies and interpreting your results. This article will point out the major differences between both professions and make it simple for you to compare.

Equity Research vs Private Equity

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What is Equity Research?

Equity Research is a part of the investment banking sector and is meant for intellectual and qualitative students. As an equity research analyst, your role would include talking to the firm’s traders and brokers to discuss and share 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.

Video Explanation on Equity Research vs. Private Equity

 

What is Private Equity?


A private equity analyst is a person who does research and analysis of private companies using financial modeling 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 the 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 be well-versed in English. For pursuing a career in Private Equity, a background in commerce and finance is recommended. It would be best if you were an MBA and should have a skill set for handling multiple tasks, logical reasoning, and analytical reasoning. Candidates with excellent verbal and written communication skills are preferred. 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 the Equity research career are:

  • Trainee: The first step towards a career in Equity Research is a trainee in a company. It teaches you the necessary skills required for stepping in the shoes of an Associate. Training can be of any period between 6 months and one 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 the company’s CEO on his tours and advise him on particular 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.

Along similar lines, career progression in the field of Private Equity involves the following designations:

  • Analysts: As an Analyst, you would support your team members, and your major focus will be on financial modeling and developing your analytical skills. You must be an Analyst for two years before being promoted to an associate position.
  • Associates: Experience of 2 or more years in a PE firm would make you suitable for this position. It requires three years of experience as an associate before applying for an associate director position. You would review applications, support your team members in negotiation and execution, and build a contact network to help the firm.
  • Associate Director: minimum experience of 4 to 5 years is compulsory for an associate director. You would be an essential part of larger transactions and confine yourself 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 a crucial role in fundraising and making strategic decisions for the company.

Equity Research vs. Private Equity – Compensation

Talking about your career in equity research, your earnings as a junior analyst would range somewhere between $45,000 and $50,000 annually. After or promotion as an associate, your basic pay will be $65,000 and range up to $90,000 based on 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 a career in private equity, the pay scale ranges from $40,000 to $100,000 a year. Apart from basic remuneration, additional benefits like bonuses and other payments can get you good money.

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:

Pros

  • Good salary
  • Ample of exit options and opportunities to work
  • Stable working hours

Cons

  • Desk-bound job
  • Longer durations of seating in front of the computer
  • Interdepartmental pressure

In the field of Private equity, your career-related pros and cons would include the following:

Pros

  • Convenient working hours
  • Good salary
  • Ample of knowledge to gain   

Cons

  • In-depth study of things
  • Not much recognition as compared to other fields

What to Choose?

After reading the detailed analysis of both professions, it becomes clear that both options can earn you well and give you monetary benefits. While pursuing a career in equity research can bring you into the limelight, as an aspirant of the private equity sector, you would have to compromise on the limelight factor. Private equity jobs can provide you with valuable experience, which you can use if you decide to foray into other sectors later. Equity Research jobs are for those who have a strong liking towards finance and financial analysis. The decision to choose anyone from the given options is extremely difficult as both the jobs can take your career to different heights.

Reader Interactions

Comments

  1. Michael K says

    You make the topics simple to understand and comprehend.
    Thank you for the insights.

    • Dheeraj Vaidya says

      Thanks for your kind words!

  2. Faraz says

    It was worthy to read this post.. thanks

    • Dheeraj Vaidya says

      thanks Faraz!

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