The Wall Street Journal "broke" the news this weekend that Rick Sherlund is leaving Goldman Sachs to pursue opportunities on the buy-side.
"I'm really focused on managing money," he said. "As an analyst it's terrifically rewarding but you're very narrowly focused. I'd like to focus more broadly and have the ability to make some real stock calls."
Mr. Sherlund, 52 years old, is considering starting his own fund but said "most likely I'll go work with someone else to gain some experience in the money-management side."
As a former sell-side analyst who joined the buy-side back in 2000, I can understand Rick's perspective here. If anything, I'm just surprised it took him as long as it did (and I'm not the only one). One of the things I disliked about the sell-side was that you weren't judged on your ability to properly predict investments; far from it. Being a successful sell-side analyst was as much, if not more, about client relations, cow-towing to banking (at least until the Bubble burst), and navigating the bureaucracy of having many different masters. On the buy-side, your financial success and reputation hinge directly on whether or not you can synthesize your knowledge base in to actionable results.
Sherlund's departure is illustrative of the transition both the software industry and the investment community are going through:
- Sherlund will always been associated with Microsoft, which he has covered since its IPO and has always been considered the axe; fitting that he's leaving in the same year that Bill Gates stepped away from day-to-day operational duties
- Sherlund was both the most successful and longest tenured software analyst on the Street. His departure is symbolic of just how much the industry has changed. When he started at Goldman, being a research analyst was neither a glorified position nor particularly lucrative. He experienced (and in many ways drove) the entire rise and fall of the position, whereby analysts became highly compensated stars during the investment banking boom, and have since become marginalized again as their roles in banking transactions have been legally prohibited
- The hedge fund world has exploded over the last decade, and while Rick has been extremely well compensated as a partner at Goldman, it's impossible not to cast an eye toward the successes of the buy-side. Hedge funds now manage $2 trillion in assets and men half Rick's age are making billions [before anyone asks, I'm not one of them!] While Institutional Investor has been busy naming Rick the #1 software analyst for 10+ years running, it's also reporting that the AVERAGE compensation of the top 25 hedge fund managers was $363 million last year
So with Chuck Phillips helping Oracle buy its way back to prominence, Tom Berquist helping fight the open source fight as CFO of Ingres and now Sherlund switching over to the buy-side, who, if any, sell-side analysts are left worth listening to? I'll highlight three analysts that I think are doing differentiated work...
- Brent Thill, Citigroup
- Jason Maynard, CSFB
- Heather Bellini, UBS
Best of luck Rick, we didn't get to spend much time together at Enterprise 2006 but the next time we meet it will be interesting to know that, for once, I'm going to have more experience in my field than you do. :)