Investment Banking Analysts Are Hot Again

They were once blamed for feeding the frenzy of the bust. But now investment banking analysts who cover the tech sector are once again the darlings of Wall Street, as a new generation of social media startups gets ready to go public.

There’s big money to be made by investment banks advising companies like Facebook and Groupon. So investment banks are now “sparring” over specialists who know the search and social media sectors. They need skilled analysts to tell the stories of these hot companies, reports The New York Times.

“It is red-hot out there,” says Gustavo G. Dolfino, president of the WhiteRock Group, a Wall Street recruitment firm that conducts searches for analysts. Many analysts have been jumping from one bank to another, and pulling down multi-million dollar paychecks as a result.

According to industry insiders, three analysts have done particularly well lately. Douglas Anmuth was lured to JPMorgan Chase earlier this year with a pay package valued at roughly $2 million. Heather Bellini switched to Goldman Sachs for a pay package worth almost $3 million. And JPMorgan tried to lure Mark Mahaney over from Citigroup with a $3 million pay package, but he opted to stay at Citi and accept a raise.

This is a far cry from the average compensation of less than $800,000 for star analysts as of 2005, a figure that in itself has dropped from $1.45 million after the debacle. Research budgets were slashed in the wake of the tech crash and subsequent 2003 legal settlement, led by then New York attorney general Eliot Spitzer, to clip the wings of analysts who had been touting questionable stocks.

But the big story now is the Facebooks, LinkedIns and Groupons of the world. Social media stocks have soared in anticipation of IPOs. Analysts who cover booming industries or sectors ripe for takeovers tend to be most in demand. Today, those sectors happen to be oil, mining, information technology, and emerging economies.

Internet analysts are among the hottest commodities. At the height of the boom, 616 Wall Street analysts covered the sector. Today, it’s only 362, according to The Times. And only a fraction of these analysts specialize in social networking stocks.

What’s your take? Do you think the bidding war for tech analysts is just another sign of a market overheating? Or on the flip side … are you adjusting your career aspirations to follow the tech sector? Add your comments below.

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