The Senior Research Analyst

The investment research segment is responsible for generating recommendations to portfolio managers on companies and industries that they follow. Similar to the portfolio management segment, there are three potential positions: senior research analyst, investment research associate and investment research assistant. Senior research analysts typically have 2 to 4 years of post-MBA research experience. Research associates are usually recent MBA graduates, while assistants are recent college graduates.

Let's take a look at the senior research analyst position.

Senior Research Analyst

Senior research analysts are investment experts in their given industry focus. An equity analyst covers stocks; a fixed income analyst covers bonds.

Their role is to predict the investment potential of the companies in their sector. For instance, take an equity analyst covering computer hardware companies, including Apple Computer. The analyst would be responsible for predicting Apple's future earnings and cash flow, and comparing the fair value of Apple to the expectations of the stock market. To do this, the analyst would build a financial model that included all of the potential variables to derive Apple's earnings and appropriate value (e.g., sales growth and business costs, as well as research and development).

A fixed income analyst focusing on telecom, for example, might be looking at a new high-yield corporate bond issued by Qwest. The main thing the analyst will be looking for is Qwest's ability to pay off that loan --the amount of the bond. The analyst will look at historical cash flows, project future cash flows and look at other debt obligations that might be more senior to the new bond. This will tell the analyst the likelihood that Qwest will be able to pay off the bond.

Analysts spend a considerable amount of time attending industry conferences, meeting with company management and analyzing industry supply and demand trends to derive business forecasts. Many analysts follow 20 to 30 companies and must be an expert on each.

An important part of a senior research analyst's job is to convey their recommendations to the portfolio management teams. Therefore, senior analysts spend considerable time presenting to portfolio managers and issuing investment reports. Because of this, senior research analysts must be articulate and persuasive in their convictions in order to earn respect within the firm. Senior research analysts typically have served as investment research associates for 2 to 4 years, post MBA or CFA, before assuming their position. If successful in their role, many senior analysts move into portfolio management roles later in their careers.