Tag Archives: Equity Research Private Equity

Record capital reserves, changing investor expectations, and fast technological disruption define the new era private equity firms are entering. The private equity scene is being shaped by both opportunities and headwinds as world economies progressively calm from past volatility. Companies are changing quickly with developments in artificial intelligence, an explosion in private credit, and more focus on ESG compliance.

Private Equity Firms: Market Size & Growth Trajectory

Although data analytics and artificial intelligence have improved how private equity companies run, essentially the industry’s expansion still depends on capital flows, strategic positioning, and supportive legal surroundings. With estimates pointing toward USD 1.3 trillion by 2034, translating to a CAGR of almost 8.6%, the global private equity market was valued USD 565 billion in 2024 and projects USD 613 billion in 2025.

2025–2026 Market Snapshot of Private Equity

2025–2026 Market Snapshot of Private Equity

Market Leaders by Region

North America maintained its dominance with over 33% of global private equity activity in 2024, while Asia-Pacific emerged as the fastest-growing region, thanks to increasing fintech adoption, infrastructure development, and favourable government support.

Key Agents of Development

Key drivers of growth in the private equity sector included record-high levels of dry powder, which empowered firms to pursue bold investment strategies. There was also accelerated interest in green and digital infrastructure, reflecting a shift toward sustainable and future-ready assets. Additionally, investor appetite remained strong for technology-centric opportunities, further shaping the investment landscape.

Private Equity Firms: Deal Deployment and Dry Powder

With fundraising momentum still strong, dealmakers face the challenge of deploying record-high dry powder effectively. Despite strong capital reserves, economic uncertainty and valuation gaps have slowed down investment velocity, compelling firms to reevaluate their entry strategies. By 2025, dry powder hits historical highs close to USD 1 trillion. This shows strong fundraising; but slow deployment rates.

Capital Overhang Factors

High interest rates have made leveraged buyouts more expensive, while valuation mismatches between buyers and sellers continue to stall negotiations. Ongoing concerns over regulatory developments—particularly in areas like ESG requirements and tariffs—have contributed to cautious capital deployment.

Deal Flow Snapshot

During Q1 2025, the market recorded 4,535 deals worth USD 567 billion globally. While this represents a slight increase from Q4 2024 in volume, the average deal size has reduced due to tighter financing conditions.

Private Equity Firms: Exit Environment & IPO Activity

Exits are making a gradual comeback as IPO windows open and buyer appetite improves. While challenges remain in timing and valuation, strategic exits through public listings and M&A are regaining traction in 2025.Deal entrance slowed, but early 2025 saw signs of rebirth for exits. The 2023 closing IPO window started to reopen.

Exit Highlights

Total global exit value reached USD 186.6 billion across 402 deals in Q1 2025. Notably, Chime’s USD 18.4 billion IPO marked a standout tech exit.

Recovery Drivers

The rebound is being driven by multiple factors, including investor demand for growth sectors like healthcare and technology, reduced inflationary pressure, and general partners (GPs) strategically timing exits to meet LP expectations for liquidity.

Private Equity Firms: Secondary Markets & Liquidity Innovations

As the need for interim liquidity rises, firms are turning to secondary markets and innovative capital structures. GP-led deals and continuation funds are increasingly common tools to extend holding periods and unlock value. To control liquidity, companies depend on secondary markets and NAV-based loans more and more.

Liquidity Tools and Growth

In 2024, the secondary market hit USD 160 billion and is projected to surpass USD 220 billion in 2025. Firms are increasingly turning to NAV-based loans and structured equity solutions to maintain portfolio agility.

Innovative Structures

Firms are embracing innovative structures like GP-led secondaries to enable flexible exits, continuation funds to retain top-performing assets longer, and preferred equity instruments to provide partial liquidity while maintaining future upside.

Private Equity Firms: Sector Preferences in 2025

Investment focus continues to narrow toward high-growth, resilient industries with strong fundamentals. Sectors like healthcare, technology, and sustainable infrastructure lead the way in attracting capital and deal activity. Private equity capital is heavily concentrated in resilient and high.

Key Trends Transforming Private Equity Firms in 2025

Key Trends Transforming Private Equity Firms in 2025

Sector Highlights and Sector Investment Examples

Technology and healthcare together account for over 40% of total deal activity. Green infrastructure, particularly climate tech and clean energy transition projects, is gaining momentum as firms align investment theses with ESG trends. Private equity firms are actively investing in sectors like data centre infrastructure, SaaS-based enterprise solutions, and healthcare diagnostics, with a focus on expansion, acquisitions, and platform rollups to drive value and scale.

Private Equity Firms: Embracing AI & Technology

Digital transformation is accelerating across the investment lifecycle. Firms are increasingly leveraging AI to automate due diligence, analyse unstructured data, and drive data-backed portfolio decisions. AI is revolutionizing how firms operates, from deal sourcing to post-acquisition monitoring.

Strategic Applications of AI and Performance Impact

Automated due diligence processes help reduce errors and speed up evaluation cycles.

Predictive analytics are being used to forecast portfolio-level risk events.

Natural Language Processing (NLP) assists in extracting key insights from financial documents.

AI is proving its value: due diligence times have decreased by up to 70%, while firms report operational cost savings of around 30%. Additionally, AI tools are helping firms better identify ideal exit timing.

Private Equity Firms: Rise of Private Credit

With traditional lending channels tightening, private credit is emerging as a crucial funding source. It offers more control and customization, allowing firms to tailor solutions for portfolio companies. PE sponsors are covering the void left by traditional lending tightening with private credit.

Private Credit AUM Growth

Private credit now commands USD 1.6 trillion in AUM and is expected to triple by 2029. This form of debt is increasingly being used in leveraged buyouts, refinancings, and growth capital rounds.

Strategic consequences

These strategies offer firms greater control over capital structure design, enabling more tailored and flexible solutions for complex or distressed deals. They also open new opportunities for sector-specific lending, enhancing both agility and strategic reach.

Private Equity Firms: ESG and Regulatory Pressures

Complying with ESG mandates and global regulatory standards has become central to investment strategy. As reporting requirements grow, firms are building robust frameworks to meet transparency and accountability expectations. ESG is no more a choice. Regulatory examination is becoming more and more important worldwide.

ESG Integration

About 60% of firms now have ESG mandates embedded in LP agreements. ESG analysis is increasingly being included in due diligence and valuations.

Regulatory Shifts

Key updates include enhanced ESG disclosure rules from the U.S. SEC and new fundraising frameworks under the EU SFDR (Sustainable Finance Disclosure Regulation).

Private Equity Firms: Investor Sentiment & Fundraising Dynamics

Fundraising remains strong, but investor preferences are shifting toward differentiated strategies and niche asset classes. Firms are under pressure to demonstrate value creation, risk management, and alignment with LP goals. Private equity still attracts a lot of investor interest, but allocations are getting more selective.

LP Behaviour Trends and Fundraising Metrics

Only 28% of LPs plan to increase buyout allocations in 2025, down from 34% in 2024. Instead, they’re pivoting toward secondaries, private credit, and opportunistic funds. Global fundraising in Q1 2025 reached USD 1.1 trillion, with 78% of funds closing at or above target—a strong indication of LP confidence despite broader economic concerns.

Private Equity Firms: Risks & Headwinds

Macroeconomic volatility, inflation concerns, and global uncertainties pose significant challenges. Firms must navigate operational inefficiencies, talent retention issues, and competitive pressures in deal sourcing. Many difficulties still exist even with progress.

Challenges Ahead

Rising interest rates and unpredictable inflation levels.

Regulatory tensions related to tariffs and capital movement.

Middle-market deal competition and pressure to retain top talent.

Private Equity Firms: Future Vision 2026 and Beyond

The private equity ecosystem is evolving fast, and firms that embrace strategic agility will lead the next wave of growth. With AUM expected to reach USD 6 trillion by 2026, firms are doubling down on digitization, diversification, and long-term value creation.

Strategic Priorities for 2026

Strategic innovations in deal structuring have allowed firms to gain greater control over capital structures, enabling them to craft flexible solutions for complex or distressed transactions. This approach also paves the way for targeted, sector-specific lending opportunities, further strengthening investment precision and adaptability. PE firms that integrate innovation with robust governance are best positioned to thrive in the shifting global landscape. Those able to pivot quickly, manage risk proactively, and deliver transparency will define leadership into 2026 and beyond.

Magistral Consulting Services for Private Equity Firms

Magistral Consulting provides complete transaction origination, due diligence, and portfolio management services to private equity companies. They provide target screening, financial modeling, investment research, and pitch decks and PPMs. They aid fund administration, ESG compliance, and LP reporting. Magistral improves operational efficiency and decision-making using AI and data analytics. The firm’s private credit structuring, secondary market assistance, and exit strategy preparation help PE firms expand and compete in a changing investment environment.

 

About Magistral Consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates, and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modelling, Portfolio Management, and Equity Research

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The article is authored by the Marketing Department of Magistral Consulting. For any business inquiries, you can reach out to prabhash.choudhary@magistralconsulting.com

AI is streamlining due diligence, enabling predictive risk analysis, and supporting real-time decision-making. It reduces due diligence time by up to 70% and operational costs by 30%, while also enhancing exit timing precision.

With traditional banks tightening lending, private credit is filling the gap by offering customized, flexible financing. The AUM for private credit stands at USD 1.6 trillion and is projected to triple by 2029.

Over 60% of private equity firms now embed ESG into LP agreements. With tighter global regulations, firms must prioritize transparency, ESG reporting, and regulatory compliance to attract and retain investors.

 

Shivanshi is a Business Development Executive at Magistral Consulting, specializing in lead generation, deal origination, and fundraising support for global startups and PE/VC firms. She works closely with clients across the US, UK, and MENA to deliver customized research and financial solutions. Her expertise lies in connecting investors with high-potential opportunities through data-driven outreach.

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In the evolving environment of private equity (PE), businesses must be equipped with partners who not only understand the financial nuances but are proficient in navigating the complexities of strategic planning. As we progress into 2025, certain prominent emerging trends and forecast are shaping the industry, evidencing the influential role of consulting services. Here, we discuss how private equity consulting can contribute to your investment strategy.

Understanding Private Equity Consulting

Private equity consulting is now a requirement that offers insights to enable investors to make informed choices, optimize portfolios, and enhance operational efficiency.

Global private equity deal-making reached a 14 percent growth to $2 trillion in 2024 in the Bain & Company Global Private Equity Report 2025, the third-most-active year of the asset class. The growth is a testament to the worth of specialist advising in the context of increased deal flow and complexity.

The Importance of Private Equity Consulting

Private equity firms feel the heat to deliver improved returns. With deal complexity and growth issues, having consultants at every stage of the investment process is invaluable. They bring in experience and fresh thinking, ensuring well-informed decisions are taken that maximize profitability and growth.

But recent trends depict a mixed scenario. While dealmaking increased in 2024, fundraising declined. Fundraising in private asset classes fell for the third consecutive year, reaching $1.1 trillion in 2024—24% less than in the previous year and 40% below the 2021 peak, according to Bain & Company. The decline is a reminder of the need for strategic direction in coping with a challenging fundraising environment.

Key Services Provided by Private Equity Consultants

Due Diligence and Risk Evaluation

The consultants help the investors in assessing potential investments via thorough due diligence, comprising financial review, market analysis, operational audits, and risk analyses. Bain & Company highlights in the 2025 Global Private Equity Report that rigorous due diligence is essential in a competitive market where seeking value amidst economic uncertainties is of prime importance.

Mergers and Acquisitions (M&A) Advisory

Private equity advisors are central to recommending acquisition targets, structuring deals, and negotiating. They also help with post-merger integration, ensuring acquisitions support strategic objectives and realize maximum value. In 2024, U.S. private equity activity picked up, with deal volumes and values much greater than in the prior year. This recovery underscores the value of specialist advisory services in realizing M&A potential.

Portfolio Management and Optimization

Consultants assist PE companies in optimizing portfolios by determining areas of improvement, streamlining operations, lowering costs, and finding growth opportunities. They offer actionable advice on how to increase the value of portfolio companies and aid in restructuring or repositioning companies to suit market needs.

The 2025 Global Private Equity Report states that with stabilization of economic conditions, there’s increased emphasis on improving operations within portfolios in order to generate returns.

Exit Strategy Planning

Upon exiting investments, there is a need for carefully thought-out strategy to ensure optimum return. Consultants walk companies through procedures such as sales, IPOs, or secondary buyouts, positioning portfolio companies to receive highest possible prices.

Private equity exits rose to $902 billion in 2024, from $754 billion in 2023, but remain below pandemic highs. With more funds reaching the end of their life cycles, the need to return capital to investors grows, and strategic exit planning becomes crucial.

Emerging Trends in Private Equity Consulting

Emerging Trends in Private Equity Consulting

Shift towards Operational Value Creation

In 2025, the focus is radically redirected away from financial engineering in the past to value creation through operations. Private equity firms are increasingly looking to increase the operational efficiency of their target firms. This implies establishing strategic initiatives aimed at driving growth and profitability. Consultants are the force behind highlighting inefficiencies and suggesting enhancement to operate the business more efficiently.

Artificial Intelligence (AI) Integration in Investment Strategies

The combination of machine learning and AI is turning into a cornerstone in investment strategies. The technologies assist in analyzing data, predicting market trends, and sensing investment opportunities. Private equity organizations are leveraging AI to be competitive, and consultants have a significant role in implementing the technologies effectively.

Emphasis on Environmental, Social, and Governance (ESG) Factors

There is more emphasis on ESG factors in investment. Investors increasingly seek opportunities that enable sustainable and ethical conduct. Companies are being assisted by consultants to develop frameworks for assessing and integrating ESG factors into their investment process, with a focus on compliance and reputation management.

Emergence of Add-On Acquisitions

Add-on acquisitions are becoming increasingly popular as a vehicle to increase portfolio company values. By acquiring smaller, complementary companies, companies can pursue growth and operational synergies. Consultants assist in the targeting of suitable targets and the completion of these transactions.

Growth in Distressed Asset Investments

Financial uncertainties have promoted growth in distressed asset investments. Private equity investors are taking maximum advantage of acquisitions of under-priced assets with the possibility of a turnaround. Restructuring experts have a critical role to analyze such opportunities and come up with turnaround plans.

Strategic Forecasts for 2025

Strategic Forecasts for 2025

Picking up Deal Activity

Anticipations are for further increase in deal activity through to the year 2025. Companies are working hard to seek investment, especially in industry areas that prove to be growth-focussed and robust. Advisors are given deals sourcing and thorough due diligence to secure alignment at the strategic level.

Growing Commitments to Private Equity

LPs are also demonstrating increased hunger for private equity, with 30% of LPs surveyed recently expressing a desire to boost allocations within the next 12 months. This is prompted by the diversification and strong return capabilities of the asset class. Consultants are of very important assistance to LPs in terms of portfolio construction and manager selection.

Emerging Markets Growth

Private equity grows to be more drawn to emerging economies. Emerging economies have the promise of growth because they possess developing consumers and novel infrastructures. Internal market experts offer insightful perspectives into the true nature of these markets and help with the ability to navigate in regulation arenas.

Alternative Financing Mechanisms Development

Other forms of funding, including private credit and secondary transactions, are on the rise. These enhance flexibility and access to alternative sources of capital for companies. Negotiation of these transactions and their effects on overall investment strategy falls within the purview of consultants.

Emphasis on Restructuring and Turnaround Strategy

During market volatility, there is greater demand for turnaround and restructuring efforts. Private equity sponsors are hiring consultants to assist distressed portfolio companies and release value through strategic actions.

Conclusion

As the private equity landscape continues to evolve in 2025, consulting services have become more integrated than ever. Trends and projections described above emphasize the fast-paced character of the industry and the need for expert advice. Private equity consultants are not merely consultants but strategic allies, helping firms to steer through complexities, capitalize on opportunities, and realize sustainable growth in a competitive market.

Through the services of expert consultants, firms can gain determination and analytical support for all their decisions. From due diligence, guidance on a M&A transaction, or development of an exit strategy, consultants offer the expertise private equity firms require to be successful in the current competitive marketplace. As the private equity market develops, turning to the wisdom of seasoned advisors will continue to be a major influence on success and maximizing returns for investors and portfolio companies alike.

About Magistral consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates and Portfolio companies. Its functional expertise is in Deal origination, Deal Execution, Due Diligence, Financial Modeling, Portfolio Management and Equity Research.

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The article is Authored by Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

How Private Equity Consulting Can Enhance Your Investment Strategy

Private equity consulting provides strategic insights to investors, helping them make informed decisions, optimize portfolios, and improve operational efficiency. As deal complexity and competition increase, consulting services play a crucial role in maximizing profitability and ensuring successful investments.
Private equity consultants assist with due diligence, mergers and acquisitions (M&A) advisory, portfolio management, and exit strategy planning. They help investors assess risks, streamline operations, and navigate complex transactions to enhance investment value.
It ensures firms stay agile, mitigate risks, and maximize investment returns in a rapidly evolving financial landscape.
AI and machine learning are being used to analyze market data, predict trends, and identify investment opportunities. Consultants are helping firms integrate AI into their strategies to enhance decision-making and maintain a competitive edge.
A well-planned exit strategy ensures that investments yield the highest possible returns. Consultants help firms execute sales, IPOs, or secondary buyouts, positioning portfolio companies for successful exits in a competitive market.
Magistral Consulting

Introduction

Investment in real estate involves a classic way of building a diversified portfolio, a hedge against inflation, and a fairly steady source of income. Property investment is a foundation investment for any, but major private equity firms are the most sophisticated real estate investors, signifying its importance that conscientious decision-making is required. The article unveils the consequences of making such an irreversible investment decision and the level of concentration applied for selection.

Prime Investment Areas of Private Equity Firms

In the province of real estate, the degree of ownership in investment plays a vital role. The levy of acquisition depends on the extent of authority. The extension of authority broadly covers:

High Return Investment Property for Private Equity

High Return Investment Property for Private Equity

Commercial Property

A high-deposit non-residential property is invested for an official purpose. The anatomy of investment in these requires adequate savings, profits, and security. Commercial real estate is a long-term game that allows firms to ride economic waves. However, the post-pandemic picture unfolds an ousting reality of private equity firms and venture capital investment in commercial real estate as it faces a sharp decline from an investment of $37 billion in 2023 compared to $52.08 billion in 2021. As the world is getting back to normal, notwithstanding the unfortunate period faced, commercial real estate is all set for revival. 

Residential Property

The eternal need for a home has made the residential property traditional, stable, and consistent in demand. The synonym of stability serves its investors as a sense of security making them less susceptible to market fluctuations. The rise in central bank interest rates to fight back surging inflation has shown a noteworthy impact on economic activities, which weakened the demand for self-owned houses. Even the strongest economies around the globe are refusing to show a surge. Although during the pandemic the buyers paid top dollar for these residential properties now even the potential buyers continue to face a bidding war. Considering all the residential properties continue to be an attractive asset class for investors the normalization of interest rates will rewind time.

Mix-used Property

In the era of innovation, the areas of investments got upcycled. Innovation brings in new and investments are no exception to it. Mix-use properties are a combination of both commercial and residential under the same roof. Referring to the surging opportunities, mixed-use is the next phase of the mall’s natural evolution to a more viable and sustainable investment. An analysis by JLL revealed insights about the U.S. mall redevelopment program that 70 out of 153 are mixed-use projects that incorporate at least three different useful properties. Major areas for such investments are California, Texas, and Florida with the fastest-growing populations.

The major driving force for such evolution is the redundancy of the retail market as it seems impossible to visualize a pure-play retail mall full. As investment in properties has become a point of convenience over a point of location, investment in mixed-use properties is a billowing opportunity for private equity firms, and by tapping the same investors, they can make their pockets deep. There are two common types of this multi-parting structure:

Horizontal Mixed-Use Development

The redevelopment of the former Landmark Mall property in Alexandria now known as West End Alexandria is a definitive explanation of the horizontal mixed-use structure with roughly 4 acres of publicly accessible parks and open space and the 11-acre hospital campus which counted for a great moment for private equity firms. In the pipeline, currently, Hudson Yards in the U.S. is an ongoing real estate project that is catching the eyes of investors and will be an illustrious opportunity.

Vertical Mixed-Use Development

Located along Manhattan’s East River, the Freedom Plaza created history by introducing a single project with a multi-purpose floor-wise division each dedicated to a particular area, the building behaved as a model of blazing investment. Projects like these are designed for those with high ambitions and who prefer a close connection within the periphery, with only one space dedicated to public accessibility.

Further, these properties are classified into classes based on the combination of physical, geographical, and demographic characteristics. They can be classified into three classes:

Real Estate Asset Class

Real Estate Asset Class

Class A

Professionally managed, properties with high-income earning tenants with low vacancy rates. It’s the finest choice a private equity firms can have with high investment and low or no maintenance cost. Popular geographies like California U.S., including areas like San Francisco, San Diego, Los Angeles, Santa Barbara, and Silicon Valley embody significant opportunities for investors.

Class B

A step down in investment cost with hot demand and higher risk. Its class is comparatively low, but it manages to provide handsome returns to investors. A lucrative option for investors with a value-added strategy. The returns are based on the condition of the property.

Class C

Sits on the opposite end of the spectrum from Class A. Functional space with substantial refurbishment requirements can be an exemplary option for investors with tight pockets. Although, these are popular for their immediate returns and also present an opportunity to purchase, renovate and flip.

The decisions of the private equity firms are broadly based on three main factors which are investment requirement, risk and return, and immediate returns.

Magistral’s services for Private Equity Firms

We offer outsourcing services by bringing deep industry knowledge, market insights, and best practices in terms of offshore capabilities and capacities to help global Private Equity Firms tide through resource constraints without breaking the banks. Here are our service offerings:

Deal Sourcing

A pathway through which financial groups find various investable worthy deals to keep an uninterrupted deal flow.

Target Evaluation

It is an approach that aims to identify and secure high-quality targets with substantial development potential.

Financial Modelling

An efficient presentation of numerical data of a company’s operations in the past, present, and future.

Due Diligence

An integrated investigation and verification followed by companies to avoid any potential conflicts.

Data Room Management

Management of a data room which contains legally sensitive documents and files (usually related to merger and acquisition).

Portfolio Monitoring

Involves tracking and analyzing the performance of the portfolio.

Deal Execution

The final word of contract for merger and acquisition.

Exit Support

A walk-off strategy for unproductive parts of the business. 

With our specialized finance team, we serve not only a theoretical model but also prepare an all-encompassing platform to accommodate all available quantitative and qualitative inputs from multiple stakeholders.

We render an offshore team that acts as an extended team with highly flexible hours of service in different time zones, an AI-led solution for data protection, and all project iterations are completed without any additional cost making the whole experience cost-effective.

We provide services related to hedging such as GP profiling, GP due diligence, and GP list generation and discussion facilitation which helps our clients gain a competitive edge in the market.

About Magistral Consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates, and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modelling, Portfolio Management, and Equity Research

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The article is authored by the Marketing Department of Magistral Consulting. For any business inquiries, you can reach out to prabhash.choudhary@magistralconsulting.com

Magistral Consulting

Introduction

In the realm of finance, equity research plays a pivotal role for investors, serving as a guiding light to aid them in making well-informed investment decisions within the intricate landscape of financial markets. As investors traverse the complexities of this financial terrain in pursuit of lucrative opportunities, understanding the essence of it becomes paramount. This guide endeavors to shed light on various facets, encompassing its significance, methodologies, and best practices.

It holds indispensable value for investors as it furnishes a sturdy groundwork for assessing the performance and future potential of publicly traded companies. Through a thorough exploration of its intricacies, investors acquire invaluable insights that bolster their confidence in navigating financial markets.

Throughout the course of this guide, readers will immerse themselves in the fundamental tenets of equity research, delving into its methodologies and strategic approaches. From scrutinizing fundamental aspects to leveraging technical tools, this guide provides an exhaustive overview of the analytical methods employed by experts to discern opportunities and mitigate risks in the dynamic realm of the stock market.

Understanding Equity Research

It embodies a systematic and meticulous approach to dissecting financial data, with a primary focus on publicly traded companies. The overarching objective is to furnish investors with insightful recommendations, guiding them in pivotal decisions regarding stock purchase, sale, or retention. This multifaceted process entails a thorough examination of diverse factors, ranging from the company’s financial performance to prevailing industry trends, competitive dynamics, and broader macroeconomic conditions.

The Importance of Equity Research

The paramount significance of equity research cannot be overstated, as it serves as a linchpin in facilitating informed investment decisions. By unraveling the intrinsic value of stocks, it empowers investors to meticulously assess the associated risks and rewards inherent in each investment opportunity. Furthermore, it assumes a pivotal role for institutional investors, fund managers, and financial analysts, offering indispensable insights that underpin strategic investment formulations and portfolio management.

Methodologies in Equity Research

Analyzing financial data and market trends to gauge the performance and future outlook of publicly traded companies is a core aspect of equity research. Analysts employ a range of methodologies to collect data, assess information, and create investment suggestions. Below, we outline the primary methodologies that are commonly used:

Methodologies in Equity Research

Methodologies in Equity Research

Fundamental Analysis

Fundamental analysis serves as the bedrock of equity research, focusing on evaluating a company’s stock’s intrinsic value by examining its financial performance and qualitative attributes. Analysts meticulously review the company’s financial statements, including income statements, balance sheets, and cash flow statements, to evaluate metrics such as revenue growth, profitability margins, earnings per share (EPS), and return on equity (ROE). Additionally, qualitative factors such as the company’s business model, management team, competitive advantages, industry dynamics, and macroeconomic trends are considered. Fundamental analysis assists investors in understanding a company’s underlying value and making well-informed decisions regarding stock transactions.

Technical Analysis

Technical analysis is a strategy that involves predicting future price movements and spotting trading prospects by reviewing past market data, particularly price and volume patterns. Analysts utilize various technical indicators, chart patterns, and statistical methods to understand market trends and investor behavior. Commonly used technical indicators include moving averages, the relative strength index (RSI), Bollinger Bands, and MACD (Moving Average Convergence Divergence). This method is widely favored by short-term traders aiming to capitalize on market inefficiencies and exploit trends in price movements.

Quantitative Analysis

Quantitative analysis examines financial data using statistical and mathematical models to find trends or correlations that can inform investment choices. This strategy uses quantitative methods to quantify risk, forecast stock prices, and optimize investment portfolios. These methods include regression analysis, time series analysis, and machine learning algorithms. To produce extra returns, or alpha, in the financial markets, quantitative analysts, or “quants,” often use quantitative models or unique trading methods.

Qualitative Research

Qualitative research focuses on understanding the qualitative aspects of a company, industry, or market that are difficult to quantify. Analysts conduct interviews with company management, industry experts, suppliers, customers, and other stakeholders to gain insights into the company’s strategy, competitive positioning, growth prospects, and potential risks. Qualitative research also involves analyzing industry reports, news articles, regulatory filings, and other non-financial sources of information to gain a holistic understanding of the investment opportunity.

Key Components of Equity Research Reports

Equity research reports are vital tools for investors, providing comprehensive insights into the performance and potential of publicly traded companies. These reports typically consist of several key components, each playing a crucial role in informing investment decisions. Below are the essential elements commonly found in its reports:

Key Components of Equity Research Reports

Key Components of Equity Research Reports

Executive Summary

Functioning as the pivotal snapshot, the executive summary serves as the distillation of the research report’s essence. It concisely delineates crucial findings, investment recommendations, and the target price, furnishing stakeholders with a swift yet comprehensive overview of the analysis.

Company Overview

This segment delves deeply into the intricacies of the company under scrutiny, presenting a panoramic exploration of its business model, products/services, market positioning, and competitive advantages.

Financial Analysis

A meticulous dissection of the company’s financial performance constitutes the cornerstone of this section. From meticulously scrutinizing revenue growth and profitability margins to delving into liquidity ratios and leverage ratios, analysts proffer an exhaustive assessment of the company’s financial robustness and operational efficacy.

Valuation Analysis

Valuation analysis assumes pivotal importance within Equity Research, endeavoring to gauge the intrinsic value of the company’s stock. By harnessing a diverse array of methodologies such as discounted cash flow (DCF), comparable company analysis (CCA), and precedent transactions analysis (PTA), analysts strive to ascertain a fair and precise valuation.

Investment Thesis

Representing the apex of exhaustive analysis and contemplation, the investment thesis articulates the rationale underpinning the investment recommendation. Irrespective of bullish or bearish sentiments, the investment thesis furnishes stakeholders with a crystalline insight into the research findings and analysis, empowering them to make judicious investment decisions.

Challenges and Limitations of Equity Research

Despite its indispensability, it is not devoid of challenges and limitations, necessitating a nuanced understanding:

Information Asymmetry

Analysts often grapple with the challenge of accessing timely and accurate information, leading to information asymmetry among market participants.

Bias and Conflicts of Interest

The specter of bias and conflicts of interest looms large in Equity Research, especially in cases where analysts are affiliated with investment banks or brokerage firms. Such affiliations may potentially compromise the objectivity and impartiality of research reports.

Market Volatility

Effectively predicting stock prices and valuations is extremely difficult due to the inherent volatility of financial markets and the unpredictability of economic situations. It demands for a versatile and adaptable strategy.

Regulatory Compliance

Compliance with an array of regulatory requirements, including Regulation AC and MiFID II, imposes additional burdens on its analysts, necessitating meticulous adherence to regulatory stipulations.

Magistral’s Equity Research Services

Magistral Consulting emerges as a reliable entity in the industry, known for its comprehensive Research services. With a firm dedication to delivering insightful and actionable research, Magistral Consulting stands out as a prominent provider of equity analysis services in the financial market.

Fundamental Analysis

Our service enhances fundamental analysis through a range of offerings including customized models tailored to investors’ needs for assessing financial statements and predicting future performance, detailed quarterly earnings reviews highlighting key financial metrics and trends, transcripts and reviews of earnings calls providing insights into management perspectives and expectations, and thematic reports focusing on specific equity sectors or industries, enabling investors to gain deeper insights into industry dynamics and make more informed investment decisions.

Quantitative Analysis

We support quantitative analysis through data processing (cleansing, mining, classification), data analysis (statistical tools, correlation, regression), and specialized commodities performance tracking, enabling investors to gain valuable insights and make informed decisions in financial markets.

Credit Analysis

We aid credit analysis through Country and Company Risk Analysis. It assesses economic and political factors in different countries and evaluates individual companies’ financial health, management quality, and industry dynamics, empowering investors to make informed credit decisions.

Content Marketing

We boost content marketing with Industry Reports, Indices Tracking, and Event/News Analysis. Its insightful reports attract audiences, data-driven analysis enhances credibility, and timely updates keep marketers informed. Overall, Magistral enables compelling content creation, driving engagement and building brand authority.

About Magistral Consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates, and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modelling, Portfolio Management, and Equity Research

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The article is authored by the Marketing Department of Magistral Consulting. For any business inquiries, you can reach out to prabhash.choudhary@magistralconsulting.com

Magistral Consulting

Introduction

In the present fast-paced and ever-evolving business realm, companies need a profound grasp of their customers, competitors, and market trends. This necessitates the use of top-tier global market research services to obtain invaluable insights and make well-informed decisions that can propel success in a globalized market place. To achieve this goal, global market research services can provide a significant role. These services offer valuable insights into a range of aspects such as consumer behavior, industry trends, market size, and competition.

Global market research services encompass the collection and analysis of data from diverse sources, including surveys, focus groups, interviews, and secondary research. The gathered information is then utilized to equip companies with the necessary information to make informed decisions about their products, services, and overall strategy.

Finding new growth opportunities for businesses is one of the biggest advantages of using worldwide market research services. Companies can create goods and services that are more likely to be successful in the market by taking into account the preferences and requirements of the target market. Additionally, market research can assist businesses in identifying market voids that they can close with fresh goods or services.

Global market research services can also help businesses remain one step ahead of their rivals. Companies can create more efficient marketing and sales strategies that help them beat rivals by examining the tactics of rivals and keeping an eye on market trends.

Services for international market research are also essential for businesses that operate internationally. These offerings help businesses tailor their goods and services to suit regional demands and legal requirements by offering insightful information on cultural variances, customer preferences, and regulatory frameworks in various markets.

Overall, international market research services are essential to assisting businesses to thrive in the modern world market. These services assist businesses in creating more effective strategies and making knowledgeable choices about their goods and services by offering insightful information on customer behavior, market trends, and competition.

Challenges in Global Market Research

Companies that want to thrive in the current global marketplace must conduct global market research. On the other hand, performing market research on a global scale has its own special set of difficulties. We’ll look at a few of the difficulties businesses encounter when conducting international market research in this piece.

Challenges in Global Market Research

Challenges in Global Market Research

Cultural Differences:

One of the most significant challenges in global market research is the difference in cultures. Consumer behavior, preferences, and attitudes can vary greatly between different cultures, making it essential for companies to understand these differences to effectively conduct market research. Companies must consider the impact of cultural norms on the questions they ask and the methods they use to gather data. For instance, certain topics may be taboo in some cultures, and companies must avoid asking sensitive questions that may offend participants.

Language Barriers in Global Market Research Services:

Another challenge in global market research is the language barrier. Companies must be able to communicate effectively with participants in different regions and countries, which may require translation services. Additionally, companies must ensure that translated questions and responses accurately capture the intended meaning. Failure to accurately translate survey questions can lead to misleading results and flawed conclusions.

Regulations and Laws:

Different regulations and laws in different countries can also pose a challenge to global market research. Companies must ensure that they comply with all applicable laws and regulations while conducting research in different countries.

Data Security and Privacy Laws:

Laws about data privacy and security vary in severeness across various nations and are governed by a variety of different statutes. When gathering and using data across borders, businesses must abide by these rules. If you don’t, you risk fines or civil repercussions. Therefore, companies must be aware of the rules and limitations set forth by the law in each nation where they conduct business.

Restrictions on Goods and Services:

Some countries have restrictions on the types of goods and services that can be marketed, which can limit the scope of the research. For instance, certain types of products or services may be prohibited or heavily regulated in some countries, and companies may have to exclude them from their research. Companies must be aware of the regulations and restrictions on marketing different types of products and services in different countries.

Intellectual Property Laws:

Intellectual property laws also vary between different countries, which can pose a challenge for companies conducting research. For instance, some countries may have more lenient intellectual property laws, which can lead to issues such as counterfeiting or piracy. Companies must ensure that they comply with all applicable intellectual property laws to protect their assets and maintain their competitive advantage.

Language Barriers in Global Market Research Services:

Language differences can pose a significant challenge for international market research. Companies must ensure that they can communicate effectively with participants in different regions and countries. They may require translation services to overcome this barrier.

Local Culture:

Different cultures have different norms and values that can affect the research process. Companies must consider cultural differences when designing research questions and methods. They should be careful not to ask questions that may be inappropriate or offensive in a particular culture.

Data Quality of Global Market Research Services:

Data integrity is another problem in international market research. Accuracy, completeness, and regularity of data collection may differ between nations. To ensure that the data gathered is accurate and representative of the target community, businesses must ensure that they have strict quality control procedures in place. To ensure that the data gathered is impartial and representative, businesses must make sure they use the proper sampling methods.

Data Availability and Accessibility:

Finally, another significant challenge in global market research services is the availability and accessibility of data. In some countries, there may be limited access to certain types of data or limited infrastructure for conducting research. Companies must consider these factors when planning their research and be prepared to adapt their methods to local conditions. Companies must also be prepared to use alternative sources of data if the data they need is not available.

Magistral’s Services on Global Market Research

We provide the following Global Market Research Services for businesses:

Magistral’s Services on Global Market Research

Magistral’s Services on Global Market Research

Market Size and Forecasting:

This service helps businesses to estimate the size of their target market and forecast the future demand for their products or services. It includes research on consumer demographics, purchasing patterns, and market trends.

Competitive Analysis of Global Market Research Services:

This service provides businesses with a comprehensive overview of their competitors, including their strengths, weaknesses, market share, and pricing strategies. This can help businesses to identify opportunities for growth and improve their competitive position.

Brand Perception and Awareness:

This service helps businesses to understand how their brand is perceived by consumers and to measure their brand awareness. This can help businesses to identify areas for improvement and develop effective branding strategies.

Customer Satisfaction and Loyalty:

This service provides businesses with insights into how satisfied their customers are with their products or services and how likely they are to remain loyal. This can help businesses to identify areas for improvement and develop effective customer retention strategies. Our strict NDAs ensure confidentiality, fostering smooth and secure operations.

Solve Language Barriers:

We assist in bridging language barriers to ensure outsourced work remains unhindered, fostering effective cross-cultural communication and maintaining work quality.

Market Entry Strategy:

This service helps businesses to identify the best way to enter new markets. It includes research on local laws and regulations, consumer behavior, and competition. This can help businesses to develop effective market entry strategies and minimize risks.

About Magistral Consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates, and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modelling, Portfolio Management, and Equity Research.

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to  prabhash.choudhary@magistralconsulting.com

Magistral Consulting

Introduction

Private equity has evolved as a trusted and prominent force in the global financial scene, attracting both high-yielding investors and growing enterprises. Private equity investments have become a crucial route for driving innovation, fueling development, and maximizing shareholder value in a period of rapidly changing markets and disruptive technologies. As the economic climate evolves, new private equity trends shape the industries, impacting investment strategies and offering value creation opportunities.

Private equity trends involve the practice of investing in privately held companies to acquire either a majority or a significant stake in the company. In line with current private equity trends, firms in this sector typically adopt a longer investment horizon compared to public markets. This approach facilitates patient funding and a strong focus on growth. Consequently, by aligning with the evolving private equity trends, investors can engage deeply in active management, driving operational enhancements, implementing growth strategies, and ultimately realizing a company’s full potential.

Benefits of Private Equity Investments

Private equity investments have several specific features that make them an appealing alternative for both investors and businesses:

Benefits of Private Equity Investments

Benefits of Private Equity Investments

Capital Injection and Growth:

Amidst current private equity trends, private equity provides companies with access to substantial capital resources, empowering them to embark on expansion projects, finance strategic acquisitions, and invest in research and development (R&D). This injection of capital, in accordance with prevailing private equity trends, can serve as a significant catalyst for companies, enabling them to not only scale their operations but also venture into new markets. As a result, this expedites their growth trajectories.

Active Management and Operational Expertise:

Unlike traditional investors, private equity firms often play an active role in managing their portfolio companies. They provide extensive industry knowledge, operational skills, and access to a network of resources to these organizations, guiding them towards achieving operational efficiencies, improved financial performance, and a stronger market position. This collaborative approach helps portfolio companies overcome various challenges.

Long-Term Horizon and Strategic Focus:

Compared to public markets, private equity investors benefit from a longer investment horizon. Rather than being influenced by short-term market pressures, portfolio companies can concentrate on strategic objectives and sustained growth, thanks to this longer-term commitment. Furthermore, private equity firms assist companies in implementing innovative ideas, making substantial investments, and establishing strong foundations for long-term success.

Interest Alignment: 

Private equity companies frequently co-invest with management teams in order to align their interests and promote a partnership-based strategy. Given that all parties involved remain focused on maximizing the value and profitability of the company, this alignment fosters collaboration, accountability, and strategic decision-making. As a result, this convergence of interests establishes a solid base for promoting long-term value development and sustainable growth.

Techniques for Private Equity Trends

Analysts can use a number of strategies to analyze and pinpoint private equity trends. These methods assist businesses and investors in gaining understanding of market dynamics, new opportunities, and potential threats. Here are a few methods that are frequently used to monitor private equity trends:

Research and Data Analysis:

In-depth data analysis and research are essential for comprehending private equity trends. Analyzing macroeconomic statistics, assessing industry-specific data, and reviewing previous investment trends are all necessary for this. Investors can spot new trends and decide wisely by looking at investment data, deal flow, exit activity, and sector performance.

Sector and Industry Analysis:

In-depth analysis enables investors to pinpoint potential hotspots for development and innovation. It entails assessing consumer behaviour, technical improvements, legislative changes, competitive environments, and market dynamics. Investors might have a deeper understanding of the potential and problems within particular businesses by concentrating on those areas.

Peer Group Analysis:

Assessing the performance of portfolio companies and investment targets against that of similar businesses in the same sector might reveal important information. Investors can evaluate financial measures, operational effectiveness, and growth rates through peer group analysis. It enables a thorough assessment of a company’s competitive position and opportunity to create value within a particular industry.

Market Research and Surveys:

These activities might offer qualitative insights into private equity trends. It entails getting input from important stakeholders, market players, and industry experts. Consumer trends, technology disruptions, new markets, and legislative changes can all be from surveys and market research studies.

Collaboration with Consultants and Advisors:

Consulting and advisory firms with private equity experience may be able to offer specialized analyses and insights. These experts can provide market information, assistance with due diligence, and strategic advice. Utilizing their expertise and experience can assist in spotting and taking advantage of private equity trends.

Challenges in the Private Equity Landscape

Many advantages come with private equity investments, but one should also carefully consider their drawbacks:

Challenges in the Private Equity Landscape

Challenges in the Private Equity Landscape

Due Diligence and Risk Management:

Effective risk management relies heavily on thorough due diligence when assessing potential investment opportunities. To make wise investment selections, private equity investors must undertake thorough analysis, review financials, assess market dynamics, and pinpoint potential dangers. Thorough due diligence increases the likelihood of success by reducing potential risks.

Capital Intensity and Financial Leverage: 

Certain industries demand significant capital investments and exhibit high levels of financial leverage. While capital-intensive strategies can drive growth, they also expose portfolio companies to financial risks. Thus, private equity firms must carefully balance their expansion ambitions with prudent debt management to ensure long-term financial sustainability and stability.

Exit Plans and Liquidity: 

Since private equity investments are inherently illiquid, well-structured exit strategies are often essential to realizing returns. These could be secondary buyouts, trade sales, or initial public offerings (IPOs). To maximize profits and obtain the correct exit multiples, exit timing and execution are essential. To take advantage of exit possibilities and produce favourable returns for their investors, private equity firms must carefully plan and monitor market conditions.

Magistral’s Services for Private Equity

As a trusted outsourcing partner for research and analytics services, we play a vital role in supporting private equity firms and businesses throughout their investment journey.

Investment Research: 

The team of skilled analysts at Magistral is capable of conducting in-depth investment research and carrying out thorough due diligence on possible targets. They analyse market trends, review prior performance, examine financial documents, and spot potential dangers. With the help of Magistral’s research, private equity companies can make well-informed investment choices that are in line with their investing philosophies and risk tolerance.

Impact Investing and ESG Considerations:

ESG factors are increasingly being integrated into private equity investment strategies. Magistral assists in evaluating the ESG performance of potential investments by analyzing corporate governance, social impact, and sustainability practices.

By incorporating ESG considerations, private equity firms can align their investments with ethical and sustainable principles while responding to the growing demand for socially responsible investing.

Technology & Innovation:

Technological advancements and disruptive innovations are reshaping industries worldwide. Private equity firms can leverage Magistral’s research and analytics services to identify technology-driven investment opportunities, assess market potential, and evaluate the impact of emerging technologies on portfolio companies. This enables private equity firms to drive digital transformation within their investments.

Industry-Specific Insights:

Private equity investments are made across many different industries, each with its own dynamics and difficulties. Magistral can offer industry-specific insights and analysis according to their sector-specific experience. Magistral’s research services can be used to assess market trends, competitive landscapes, regulatory frameworks, and growth possibilities within particular industries, including healthcare, technology, consumer products, and energy. This specialized knowledge promotes value development initiatives and improves decision-making.

About Magistral Consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modeling, Portfolio Management and Equity Research.

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

 

 

 

Magistral Consulting

.Introduction

Equity Research of listed stocks forms a major part of operations in Hedge Funds, Investment Banks, and many Asset Management firms.

Analysts use different methods to conduct equity research, but they primarily aim to determine a stock’s intrinsic value and assess whether it is overvalued or undervalued. Based on this analysis, they issue buy, sell, or hold recommendations to asset managers or their clients.

What makes an equity research exercise comprehensive?

Though equity research exercise could potentially be a theoretical exercise where an Equity Research analyst puts in a few hours’ of efforts, crunch numbers, and comes up with a recommendation.  Analysts almost always prepare these models and simply feed in the P&L, Balance Sheet, and Cash Flow numbers—readily available in the public domain for listed stocks—to determine the valuation and recommendation for the stock.

It is however the further details that determine the quality of the research. These are a variety of sources, qualitative inputs and their quantification, Evaluation of the ongoing news and buzz related to the stock, social media activity, rumors, and the subjective calls of analyst that makes the difference. It’s amazing that some analysts even track the brand of the watch that the CEO wears to the analyst conferences. They make subjective calls on the stock on an information point as minute as that or say body language of the management in a conference call.

If a stock is to watched as closely as needed to take calls worth millions, it’s not possible for an equity research analyst to proceed in a templated way for all the stocks she needs to track. It needs to go much beyond that.

Equity Research Inputs

Parts of a comprehensive Equity Research exercise

Here is what differentiates a comprehensive analysis from a basic one

Sources of Information: Sources of information if more the merrier. Sources of information if diverse allows us to analyze the stock closely. For example, a database that carries information about all the legal cases pending against a company would add color to the analysis that will have a material impact on the overall recommendation for the stock. Usual sources of information are P&L, Balance sheet, and cash flow statements, all of which are publicly available for a listed stock apart from news about the stock, regulatory filings, 10Ks, conference calls, and ESG related compliance documents.

Forecast and Assumptions: A financial forecast is often oversimplified by merely projecting past growth into the future, but that approach is rarely accurate. The core of any robust forecast lies in its assumptions, which must be reasonable and ideally validated by industry experts. Companies may be optimistic about new strategies, but such expectations should be evaluated against industry benchmarks. If a company’s forecast outpaces industry projections, one must examine whether it has outperformed the industry before. For example, if a healthcare firm claims it will lead the market in five years, has it achieved similar milestones in the past? The strength of any financial model depends on the depth and validity of its assumptions—verified by data and historical performance.

Company Valuation Analysis

Equity Quantitative Research focuses on valuing a company using multiple methods to ensure consistency across different approaches. When there’s a significant difference in valuations, the analyst must determine the most suitable value with strong justification. Analysts commonly apply valuation models such as Discounted Cash Flow (DCF) to project future cash flows and discount them to present value. They use Relative Valuation to benchmark the company against its peers and determine whether it’s undervalued or overvalued. They also employ the Sum of the Parts method to break down a diversified business into individual components and evaluate each separately. Risk Assessment is also critical—it identifies potential risks and quantifies their impact on the company’s valuation. Together, these methods help analysts build a more balanced and defensible view of a company’s worth.

Qualitative Assessment

Numbers do tell the story but miss while indicating the future, which is unknown. That is where the qualitative inputs come into play. An experienced analyst can convert these qualitative inputs into quantitative ones that impact the valuation. Some of these qualitative inputs are quality of management, Competitive intensity in the industry, ESG initiatives and risks, and analyzing Porter’s 5 forces. It’s to be noted that Porter’s 5 forces is a highly qualitative model and needs to be put on a quantification scale.

Different institutions approach equity research differently depending on their business and operational needs. Here is how Equity Research differs across institutions

Equity Research for Investment Banks

Equity Research at Investment Banks is as much as a Marketing exercise as it is operational. Usually, an Investment Bank would send stock recommendations to all its current and potential clients. Analysts sometimes avoid detailing these recommendations, as they reserve in-depth research for high-paying clients. They prepare an equity research report for every stock, using a template with similar content across all stocks the bank tracks. It also suggests the buy, sell, or hold recommendations along with the price range to expect for each stock. Detailed equity research is also done for the buy-side. There are multiple research report templates that are available with an Investment Bank.

Earlier the research cost was added to the brokerage cost for an investment bank. Now a regulatory notification in Europe bars Investment Banks from clubbing brokerage and research costs together. This means now research needs to be high quality and needs to be provided only when the client demands. It’s just a matter of time that these regulations catch hold in the United States and other financial markets across the world.

Equity Research for Hedge Funds

Equity Research for hedge funds is done towards the aim of portfolio management and taking long and short positions regarding listed stocks

Hedge Funds are quite secretive about the methodology they follow while picking up stocks. Sometimes firms justify secrecy. As they truly have something unique, but most of the time they use it as a marketing gimmick to avoid further questions about their methodology. Many claim to use Machine Learning and Artificial Intelligence to pick up the stocks. Equity Research in Hedge Fund parlance is the most critical part of Operations. There is also a huge reliance on Technology with trades mostly intraday and sometimes in milliseconds!! But there is nothing that has replaced the good old fundamental analysis.

Hedge Funds also specialize in technical analysis apart from fundamental analysis. Technical analysis uses mathematical formulas to project trends and thus the future stock price for short term trades.

Equity Research for Private Equity

Private Equity usually deals in Private stocks but sometimes they do pick up stake in listed companies as well. Private Equity firms conduct equity research differently from Hedge Funds and Investment Banks. They usually aim to buy a significant stake and therefore access much more information and management bandwidth. It uses that leverage to get and analyze information that is usually not available in the public domain.

Equity Research for Asset Managers

All other forms of Equity Research vary in complexity and methodology. But mostly sticking to finding the intrinsic value of the stock with the aim of finding undervalued stocks for investments. Some Asset Managers specifically perform equity research for retail investors.

Magistral’s Approach for Equity Research

Magistral is an equity research firm that focuses on Fundamental Research to find out the intrinsic value of a stock using multiple sources. We start with multiple sources in our methodology and continually refresh those sources to update the model with the latest intelligence. We also prepare customized Equity Research report. Here is how our Equity Research Process looks like

Magistral' Equity Research Approach

Magistral’s Equity Research Methodology

Our equity research services are customizable and scalable as per clients’ requirements. Magistral has delivered multiple Equity Research projects in the past

About Magistral

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modeling, Portfolio Management and Equity Research

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The Author, Prabhash Choudhary is the CEO of Magistral Consulting and can be reached at Prabhash.choudhary@magistralconsutling.com for any queries or business inquiries.

 

Magistral Consulting