Grim Days Ahead for Analysts


New York, NY – The news on Wall Street is getting grimmer by the day for equity research analysts.   The JP Morgan acquisition of Bear Stearns and the Bank of America purchase of Merrill Lynch has resulted in scores of analysts to be laid off.  In addition, firms like Goldman Sachs, Citigroup and Morgan Stanley have all reduced their analytical headcount and reduced research coverage.  In the past, good sell-side analysts didn’t worry too much as they could find research or even PM positions on the buy-side.  However, most buy-side firms have been trimming their staffs as well, leaving analysts scratching their heads and wondering where their next paycheck might come from.

Sell-Side Reductions Continue

According to various sources, Wall Street firms have announced 92,260 job cuts since October.  This includes 52,000 jobs or 15% of the workforce at Citigroup, 10% at JP Morgan Chase, Goldman Sachs, and Morgan Stanley, and a 6% reduction at State Street Corp.  In fact, the financial services industry has lost approximately 180,000 jobs – a total that is likely to exceed 200,000 when all is said and done.

These reductions have had impacted Wall Street research departments.  Last spring, JP Morgan Chase laid off a significant number of research staff after acquiring the Bear Stearns business.  In December of last year, the Bank of America started reducing the number of analysts on staff in the wake of the purchase of Merrill Lynch.  Merrill Lynch employed 109 senior equity research analysts while Bank of America employed 47 analysts before the reductions.

Recently, Deutsche Bank announced that it was discontinuing its corporate governance research, JP Morgan and Merrill Lynch moved to end its dedicated ESG research coverage, and Citigroup’s decided to cut back staff at its in-house SRI research team.

In fact, unofficial data collected by Integrity Research Associates suggests that the number of senior publishing analysts at sell-side investment banks and brokerage firms have declined close to 40% over the past twelve months.

In addition, many sell-side firms have decided to drastically reduce or even eliminate employee bonuses – a development that has been felt by most sell-side research analysts who have been able to keep their jobs.  Consequently, a number of sell-side analysts have started looking around for better employment opportunities elsewhere.

Opportunities on the Buy-Side Dry Up

Unfortunately many buy-side firms are not faring too much better than the sell-side, at least when it comes to providing a significant number of new lucrative employment opportunities for research analysts.

Much has been made about the closings or staff reductions at hedge funds.  The Options Group, a search firm that specializes in hedge fund placements, estimates that of the 180,000 financial services jobs lost worldwide, hedge funds eliminated 5,000 to 10,000 jobs in 2008 – a trend that is likely to continue in 2009.  A few of well known hedge funds which laid off staff in 2008 include Perry Capital and Ramius LLC.  Ramius laid off 40 of its 200 employees, while Perry Capital cut 20 positions, less than 20% of their total staff.

The pain, however, has also been felt at long only asset managers and mutual funds as poor performance and significant redemptions have prompted many of these traditional money managers to tighten their belts as well.



Alliance Bernstein

15% of headcount or 850 employees

American Century

17% of headcount or 270 employees

Boston Company

30% of headcount or 90 employees

Credit Suisse Asset Management

100 employees


1,300 employees announced, could rise to 4,000 employees by 2009

Janus Capital

9% of headcount or 115 employees

MFS Investment Management

5% of headcount or 90 employees

Morgan Stanley Asset Management

9% of headcount

Putnam Investments

47 employees

Wellington Management

10% of headcount

Of course, most of these staff reductions have not had a significant impact on the number of portfolio managers or analysts employed, it does indicate that many buy-side firms are looking to reduce their overhead, not increase it – a trend that suggests that there are limited new employment opportunities for research analysts at buy-side firms (though some firms may be looking to replace poor performers with top notch talent from the outside).

Most Indies Shops Likely to Keep It Lean

Independent or alternative research providers are not likely to escape the difficulties.  In fact, we suspect that many indies will also reduce the number of analytical staff they employ in 2009 as tighter commission budgets lead to falling revenues.  A few well-known technology research providers who have recently cut their analytical headcount include Gartner, AMR Research, Yankee Group, and iSupply.Another group of independent research firms that will particularly feel the pinch in 2009 are the 60 to 70 providers who participated in the Global Research Analyst Settlement.  The settlement is slated to come to an end in the summer of 2009, leading to sharp reductions in revenue for the 6 to 12 firms that captured the lion’s share of the settlement business.

Of course, not all alternative research firms will reduce their analytical headcount this year.  We have mentioned some firms in past blogs that are hiring, including Access 342, Off Wall Street, and ResearchEdge.  In fact, Integrity has been hired by one well established firm to help them build new institutional research businesses and hire appropriate analytical staff.

Given the difficult environment finding employment on the sell-side, buy-side, and independent research industry, some sell-side analysts may decide to try their hands at starting their own research boutiques in 2009.  A few firms that have sprung up in recent years as sell-side analysts have decided to start their own research firms include Telsey Advisory Group, Zelman & Associates, and Wolfe Research.  Former Bear Stearns alums, David Malpass, Jonathan Golub, John Ryding and Conrad DeQuandros have all recently struck out on their own to market research under their own banners.

In fact, research distributors like Soleil Securities and StreetBrains in the USA, and Enzard Limited in Hong Kong, have all been ramping up their offerings based on the belief that many research analysts who go out on their own will need a professional sales / distribution platform in order to efficiently commercialize their research.

The Upshot

When all is said and done, it is clear to the team at Integrity Research Associates, that the market for research analysts is likely to be extremely soft in 2009, as weak equity markets, plunging commissions, falling assets under management, and continuing redemptions make sell-side, buy-side, and alternative research providers lean towards reducing analytical headcount rather than increase their hiring of research analysts.


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