Many of the recent conversations we have been having with our clients at Laz Partners have centred around buy-side credit analysts and what actually differentiates a very strong analyst from one who is good (or above average).
Strong technical fundamentals, namely fundamental analysis, sector knowledge and modelling, are a given but there are certain skills that are a real extension of these core competencies that can set an analyst apart. What is increasingly being screened for in first round interviews and early discussions is something that isn't as easily defined on paper.
For many clients we are working with, conviction is a highly valued quality. By that, I mean the ability to hold a view on a name and defend it with real authority in front of portfolio managers, investment committees, traders and also other analysts, with the ability to also push back when the analyst genuinely believes in the view they are defending.
Having good conviction also feeds into the ability to contribute to position sizing, with analyst input increasingly factoring into how meaningfully a name sits in the book and giving more overall responsibility at the analyst level. Conviction often comes with maturity and experience, which means that analysts 3-4 years into their career who can demonstrate true conviction in their views (backed by clear rationale and fundamentals) are highly valued.
Additionally, sector depth and breadth are valued not just for coverage in specific sectors in isolation but also for the read-across this enables, with the most effective analysts able to connect what is happening in one part of the market to implications elsewhere in broader, adjacent sectors.
AI is the other significant factor shaping how research functions are evolving, and this is a theme that of course extends well beyond credit research. The analysts who are working out how to harness these tools to sharpen their output are those with an edge. It essentially comes down to how AI is being used for agile timesaving and where analysts can then direct the time that has been saved to other meaningful analysis.
These are skills that are often recognised as being necessary but are sometimes not called out explicitly enough to be given the weight they deserve, and could therefore be considered underrated.
