Equity analysis is a jack-of-all-trades type of job: Asif Khan

Asif Khan, managing partner at Edge Asset Management Company Limited, talks about skills needed to be a financial analyst and its career prospects

The Business Standard (TBS): You started your career as an equity analyst, and now you are one of the owners of an asset management company. Please tell us about the journey.

Asif Khan (AK): I graduated from North South University with a dual major in finance and economics in 2008. Then I started working for a brokerage called Equity Partners Limited. Later, that brokerage was acquired by Brac Bank and renamed Brac EPL.

After about six months there, I got an offer to work with a US-based hedge fund called Caravel Management that invested in many countries around the world. I worked for them for about four-and-a-half years, covering South Asian markets like Bangladesh, Pakistan, and Sri Lanka. I used to operate from both Dhaka and New York.

Then I went back to Brac EPL for about one-and-a-half years or so. Finally, I moved to a UK-based investment bank that wanted to grow their Asian business. It was called Exotix back then and was later rebranded as Tellimer. I worked there for two-and-a-half years as their associate director, looking at the South Asian region.

Then, the last step was starting my own companies, Edge Asset Management Limited and Edge Research & Consulting Limited. Those were set up in mid-2017. From 2018, we were working there full-time. So, throughout my career, I was involved in equity research. 

TBS: How many analysts does a firm need and why?

AK: It totally depends on how many companies the firm wants to look at. If you look at a brokerage like Brac EPL, you will see that it mostly focuses on foreign investors and does not research a lot of companies. For 15-20 companies or so, you can run a team with three to four analysts, which I think is good enough. That means about five stocks per analyst.

There are certain brokerages that cater to local investors as well, and they tend to look at 30 stocks or even more. In that situation, there is a logic for having a slightly bigger team. For example, you can go for a team of up to five people.

It is totally subjective based on the brokerage or the research firm.

TBS: How does an analyst play a role in valuing stocks?

AK: Basically, an analyst becomes an expert in a sector. They are assigned one or two sectors. So, someone will be looking at banking, someone will be at telecom. Over the years, he accumulates a lot of knowledge about this sector and builds contacts. He has lots of insights and independent thoughts on the sector in addition to staying on top of all the key developments.

All this knowledge an analyst develops about the sector – the players, their positioning, and their competitive advantages – allows them to basically create a model of the future and to ultimately lead to the valuation.

TBS: What are the current career prospects of an equity analyst in Bangladesh?

AK: Actually, if you think about any career prospect, it is a question of demand and supply. On the demand side, it depends on how many jobs are available. On the supply side, it depends on how many people are applying.

Given what we have seen in the stock market for the last two-and-a-half years, it has been a slightly tough period and brokers have seen their profits come under some pressure. As a result, the demand for analysts is not at its highest right now. On the other hand, the supply of analysts is also low. From that perspective, it is kind of a balanced situation.

Also, equity analysts can move to corporations who are looking for business analysts. They can move to investment banking and venture capital. I have seen equity analysts moving to startups as well. So, there are a lot of roads an equity analyst can take.

TBS: Can anyone become an analyst? What skills do they require?

AK: I think anyone can become an analyst. We have seen that in developed markets people with engineering and computer science backgrounds have become equity analysts with almost no prior knowledge of finance and investing.

But in Bangladesh, we typically see that finance graduates are mostly interested in becoming equity research analysts. Quite often, we see that they pursue the Chartered Financial Analyst (CFA) designation as well. By the time they graduate, they may have already passed CFA level-1.

It is actually a jack-of-all-trades type of job because you need to be able to analyse business strategy, understand marketing, the distribution channels, the supply chain etc. You need to be able to create financial models and use valuation methods.

And then there is the need to have good communication skills because when you are trying to find insights from your company or sector contacts, a lot depends on how you write or ask the question. Finally, even after I have created a valuation or recommendation, to convince my clients to act upon my recommendation, I need to have persuasion skills. So, communication skills really matter.

TBS: How safe is equity research from automation?

AK: This issue is more prominent in developed markets where quant-based trading has become very popular over the last decade or so. In the Bangladesh market, it is too early for us to be at risk. So, I do not see a big challenge there.

Rather, the challenge comes from how well the stock market performs, and how the profitability of the stockbrokers, who typically employ equity analysts, is. 

TBS: What is the starting salary of an analyst and how much can a senior analyst earn?

AK: This is actually quite subjective because it depends on companies. Top places like Brac EPL or IDLC can definitely afford to give a handsome salary, and the starting amount could be around Tk40,000-50,000 per month. In other smaller brokerages, the salary can start from Tk30,000.

For senior analysts, it depends on factors such as the employer and the contribution you are making to the company. According to their contribution, the salary can exceed Tk2 lakh per month.