The Difference Between The Sell Side & The Buy Side in Investment BankingMarch 31, 2017
It is a known fact that, if you are a finance enthusiast or even interested in the industry of Investment Banking, it is essential to know two primary sides in this field. These two are known as the buy side and the sell side and for anyone who is contemplating a career in Investment Banking, it becomes important to know the difference between the two. Studies state that these two sides, make up for both the halves of the Financial Markets. In spite of this, there are a number of professionals who find it very difficult to grasp, the exact meanings of these two concepts. Let’s try and dissect them for our convenience. The sell side is basically associated with all of those entities and processes, that facilitate the decision making of those entities, which are involved in the buy side. While on the other hand, the buy side is basically associated with all of those entities, that are primarily involved in making the investments.
When it comes to the various institutions and firms, that work on the sell side of Investment Banking, these include firms that involve Investment Banking, Commercial Banking, Stock Brokers, Market Makers and other Corporate Finance firms. On the other hand, the buy side is inclusive of Asset Managers, Hedge Funds, Institutional Investors, Retail Investors and so on. The professionals or analysts, who work on the sell side, are usually higher in number than those involved in the buy side, mainly because of the fact, that their work is dedicated to analyzing specific sectors and companies.
The companies, that are involved in sell side are in charge of keeping track of the Stocks, the performance of various companies, as well as projecting the future financial transactions. These companies basically belong to the field of Equity Research and are responsible for ‘selling’ of ideas, and their work involves analyzing a number of quarterly results of all the financial reports of a particular firm. The buy side includes a number of firms, which are involved in deploying their capital, it essentially is a pool of funds, whose primary use is for investing. We can thus infer, that these firms on the sell side are basically involved in providing services to all those firms that are involved in taking investment decisions.
Moving on to the jobs of the professionals, working on these two different but equally important sides, we can conclude that the goal of a sell side is to basically advise on research and close the deal; while on the other hand, the ultimate goal of the buy side is to generate investment returns for their various clients. An analyst, working on the sell side, has to generate independent reports, on the basis of their own research, while an analyst working on the buy side use these very reports, in order to conduct their recommendations on the kind of investment decisions that their client must take. These fields provide a lot of lucrative opportunities, provided a candidate has specialization certificates, from industry-endorsed training institutes like Imarticus Learning.
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