Stephen Clapham recently wrote a good post on his blog “Behind the Balance Sheet” why he thinks working as an analyst on the sell-side is harder than working on the buy-side. I agree with much of what he says about the requirements to be a good sell-side analyst and why it is a good place to start your career. But as someone who has worked for twenty years on the buy-side and now works on the sell-side, I respectfully disagree with Steve when he says the sell-side is harder. In my experience, being a buy-side analyst is different and, in many ways, harder than being a sell-side analyst. Let me explain why.
Apr 26, 2023·edited Apr 26, 2023Liked by Joachim Klement
Perfect summary of the position. As a buy curious sell side analyst, I’ve long measured my recommendations in terms of performance rather than hit ratio. It makes you think differently about your ideas. Not all ideas are equal. Performance of ideas, it turns out, is not enough. You also need to allocate notional capital to them based on conviction, and then evaluate your portfolio performance. If you’d done that, I bet your 2013 would feel less awful. Sadly, to my ever deepening frustration, no one on the sell side cares about performance.
As a buy-side pm of 35 years, I’ve always wondered why sell-side analysts don’t develop a uniform metric for reporting the performance of their recommendations, like GIPS on the buy-side. Pre-GIPS the buy-side suffered from the same cherry-picking problems.
The first-mover problems are significant, but surely it would be in the sell-side’s collective interest to develop a set of standards and uniform comparison?
Perfect summary of the position. As a buy curious sell side analyst, I’ve long measured my recommendations in terms of performance rather than hit ratio. It makes you think differently about your ideas. Not all ideas are equal. Performance of ideas, it turns out, is not enough. You also need to allocate notional capital to them based on conviction, and then evaluate your portfolio performance. If you’d done that, I bet your 2013 would feel less awful. Sadly, to my ever deepening frustration, no one on the sell side cares about performance.
As a buy-side pm of 35 years, I’ve always wondered why sell-side analysts don’t develop a uniform metric for reporting the performance of their recommendations, like GIPS on the buy-side. Pre-GIPS the buy-side suffered from the same cherry-picking problems.
The first-mover problems are significant, but surely it would be in the sell-side’s collective interest to develop a set of standards and uniform comparison?
Keep up the good work!