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 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 analyzing 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 comparison.
What is Equity Research?
Equity ResearchEquity ResearchEquity Research refers to the study of a business, i.e., analyzing a company's financials, performing Ratio Analysis, Financial forecasting in Excel (Financial Modeling), & exploring scenarios to make insightful BUY/HOLD/SELL stock investment recommendations. Moreover, the Equity Research Analysts discuss their findings & details in the Equity Research Reports. is a part of the investment banking sector and is meant for intellectual and qualitative students. Your role as an equity research analyst would include talking to the 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 ratioPE RatioThe price to earnings (PE) ratio measures the relative value of the corporate stocks, i.e., whether it is undervalued or overvalued. It is calculated as the proportion of the current price per share to the earnings per share. , PBV ratioPBV RatioPrice to Book Value Ratio or P/B Ratio helps to identify stock opportunities in Financial companies, especially banks, and is used with other valuation tools like PE Ratio, PCF, EV/EBITDA. Price to Book Value Ratio = Price Per Share / Book Value Per Share , etc.), comparable comps among others.
What is Private Equity?
A private equity analystPrivate Equity AnalystA private equity analyst is an analyst who looks for undervalued companies for a private equity investor to buy, take them private and earn profits. The companies are primarily unlisted, and the risk is higher. 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 instrumentsDebt InstrumentsDebt instruments provide finance for the company's growth, investments, and future planning and agree to repay the same within the stipulated time. Long-term instruments include debentures, bonds, GDRs from foreign investors. Short-term instruments include working capital loans, short-term loans.. List of top private equity companiesTop Private Equity CompaniesPrivate equity firms are investment managers who invest in many corporations' private equities using various strategies such as leveraged buyouts, growth capital, and venture capital. The top private equity firms include Apollo Global Management LLC, Blackstone Group LP, Carlyle Group, and KKR & Company LP.
If you wish to gain Private Equity Skills Professionally, then you may look at this Private Equity Training.
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 marketsFinancial MarketsThe term "financial market" refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces., 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 a skill 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 the Equity research careerEquity Research CareerEquity research comprises an individual's expertise in researching, reporting, projections, and predictions surrounding a company's stock. The top five careers in equity research are - Market research analyst, Sector research analyst, Senior equity research analyst, Fund manager, and Chief investment officer. are:
- Trainee: The very first step towards a career in Equity ResearchCareer In Equity ResearchAn Analyst working in the equity research department is responsible for preparing various valuation research reports and financial models which is essential for the stakeholders. Equity research entails following job opportunities: 1.Makret Research Analyst 2.Sector Research Specialist 3.Senior Equity research Analyst 4.Fund Manager 5.Chief Investment Officer is a trainee in a company. It teaches you the 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 analystsEquity Research AnalystsAn equity research analyst is a qualified professional who interprets financial information and trends of an organization or industry to provide recommendations, opinions, reports, and projections on the corporate stocks to facilitate equity trading. 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 CEO of the company on 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 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 modelingFinancial ModelingFinancial modeling refers to the use of excel-based models to reflect a company's projected financial performance. Such models represent the financial situation by taking into account risks and future assumptions, which are critical for making significant decisions in the future, such as raising capital or valuing a business, and interpreting their impact. 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: minimum experience of 4 to 5 years is compulsory for being an associate director. You would be an essential 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 a crucial role in fundraising and making 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 an associate, your basic pay will be $65,000 and can range up to $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 bonuses and other emoluments can get you good money.
If you want to learn Equity Research professionally, then you may want to look at 40+ video hours of Equity Research Training Course.
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 the computer
- Interdepartmental pressure
In the field of Private equity, your career-related pros and cons would include the 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 well and give you monetary benefits. While pursuing a career in equity research can bring you in the limelight, and as an aspirant of the 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 jobsEquity Research JobsEquity research analysts jobs are competent for the candidates who have a keen interest and understanding in financial analysis of the companies. The profile includes suggesting equities as well as buying and selling the stocks on the clients' behalf. 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.