Analysts are crucial and fund managers need to be able to trust them to make the right calls, but what are the characteristics that make a good one stand out?
Aside from the usual qualifications and degrees, one thing that RWC Partners’ European equity manager Ed Rumble tries to find out is whether an analyst can handle failure.
Fund managers fail a lot he says, which is in the job description. But this poses an issue when hiring an analyst straight out of the top universities.
‘You get sent a CV and you think, “Jesus, this guy is a rocket scientist,”’ Rumble says.
‘He or she has got A*s coming out of their ears, a first-class degree and has gone and done a masters or whatever. And you think this guy has never made a mistake – he has got 95% on every test he’s ever taken.
‘I just wonder how he is going to react in a situation where the pass mark is 55% and basically nobody gets higher than 60%.
‘How is somebody who has always got 95% in everything going to cope when the best he can do is 60%? That is actually quite an interesting question.’
When it comes to hiring, IQ isn’t everything, says William Casement, founder of Work Savvy, a company that helps to integrate graduates in the workplace.
Casement notes that applicants are now being tested for their emotional intelligence as well as the more traditional requirements.
‘It’s all about how you interact with other people and empathise with them. Fund managers want people who will fit into a team. They don’t want a whole load of mavericks and they don’t want a whole load of leaders either.
‘They don’t just look at the CVs. They take it a little deeper to find out how people react in certain situations, so emotional intelligence is absolutely key.
Showing an interest
Rumble is currently in the process of recruiting an analyst and is focusing on a number of different qualities as he attempts to pick the right person.
‘There are a number of attributes that a successful analyst will possess. The first is to be interested and curious about how companies make money and what drives them. That is an obvious point because they are going to be looking at that every day, so intellectual curiosity is important.’
Robert Lloyd, a fund manager at Blue Whale, is finding that while there are a lot of people who would like to work in the industry, the proportion of those who are ‘actually really good’ is a lot smaller.
Particularly when it comes to hiring from outside the industry, he agrees that the recruit needs to demonstrate an interest in investments. ‘For instance, you might start the interview by asking them to tell you something interesting they read in the Financial Times to try and get a sense of whether they are keen on the industry.’
He also looks to see whether they have been running a personal portfolio or can prove their interest in other ways.
Are you experienced?
Lloyd says he particularly targets the big four accountancy firms and candidates who have the Association of Chartered Accountants qualification.
‘Generally, what I find is that when it comes to those sort of guys who have not had any experience, if they are really clever the lack of experience does not really matter. They will get it eventually.
‘They will pick it up quickly, so if you can just find someone who is smart and who has an interest in the industry, you can bring him in and it will take them six months or so but they will get on board pretty quickly.’
When hiring from within the industry, however, he first looks at an analyst’s pedigree: which firms they have worked for and what areas they have covered.
‘The thing about people who have already worked in the industry before is that they have some preconceived ideas about how to approach investing,’ Lloyd says.
After the initial review, Lloyd asks his potential recruits to do a case study, presenting their views on an investment idea.
‘For people who have already worked in the industry before and have experience, the case study is a large part of it. It is not uncommon for most places to do two or three case studies separately.
‘Part of it is that you get to see how they think, to see whether that is going to be compatible with your investment process, and also to see the quality of their analysis.’