Buy-side is a term used in
investment banking
Investment banking is an advisory-based financial service for institutional investors, corporations, governments, and similar clients. Traditionally associated with corporate finance, such a bank might assist in raising financial capital by und ...
to refer to advising institutions concerned with buying investment services.
Private equity
Private equity (PE) is stock in a private company that does not offer stock to the general public; instead it is offered to specialized investment funds and limited partnerships that take an active role in the management and structuring of the co ...
funds,
mutual funds
A mutual fund is an investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe ('investmen ...
,
life insurance companies,
unit trusts,
hedge funds, and
pension fund
A pension fund, also known as a superannuation fund in some countries, is any program, fund, or scheme which provides pension, retirement income. The U.S. Government's Social Security Trust Fund, which oversees $2.57 trillion in assets, is the ...
s are the most common types of buy side entities.
In sales and trading, the split between the buy side and
sell side
Sell side is a term used in the financial services industry to mean providing services to sell securities. Firms or institutions on this side include investment banks, brokerages and market makers, who facilitate offering securities to investors, ...
should be viewed from the perspective of securities exchange services. The investing community must use those services to trade securities. The "Buy Side" are the buyers of those services; the "Sell Side", also called "prime brokers", are the sellers of those services.
Sell side
Sell side is a term used in the financial services industry to mean providing services to sell securities. Firms or institutions on this side include investment banks, brokerages and market makers, who facilitate offering securities to investors, ...
brokerages are registered members of a stock exchange, and are required to be
market makers in a given security. Buy side firms usually take speculative positions or make
relative value trades. Buy side firms participate in a smaller number of overall transactions, and aim to profit from market movements and
accruals rather than through
risk management
Risk management is the identification, evaluation, and prioritization of risks, followed by the minimization, monitoring, and control of the impact or probability of those risks occurring. Risks can come from various sources (i.e, Threat (sec ...
and the
bid–offer spread. The 2010 Thomson Reuters Extel/UKSIF Survey shows that buy-side firms are placing more emphasis on sustainability issues in the research and advisory services they receive from brokers.
Typically buy side firms do not provide
custody services.
Buy side can also refer to real estate. There is a sell side and a buy side in every transaction. While most
real estate technology currently focuses on the sell side, there are a few companies that are developing tools for the buy-side.
Challenges facing buy-side
Globally buy-side asset managers are looking at increased regulation in regards to their use of
financial index and benchmark data, including adhering to
IOSCO Principles. This is expected to increase cost and time for the buy-side in managing their data.
'2013 Buy-Side Survey'
RIMES
References
Stock market
Investment funds
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