Buy-side is a term used in
investment firms to refer to advising institutions concerned with buying investment services.
Private equity
In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a t ...
funds,
mutual funds
A mutual fund is a professionally managed 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 ...
,
life insurance companies,
unit trusts
A unit trust is a form of collective investment constituted under a trust deed.
A unit trust pools investors' money into a single fund, which is managed by a fund manager. Unit trusts offer access to a wide range of investments, and depending ...
,
hedge funds
A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as sho ...
, and
pension funds 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. The three main markets for this selling are the stock, bond, and foreign exchange market. It is a general term that indicates a firm that sells investment services to asset management fi ...
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. The three main markets for this selling are the stock, bond, and foreign exchange market. It is a general term that indicates a firm that sells investment services to asset management fi ...
brokerages
A stockbroker is a regulated broker, broker-dealer, or registered investment adviser (in the United States) who may provide financial advisory and investment management services and execute transactions such as the purchase or sale of stocks and ...
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
accrual
Accrual (''accumulation'') of something is, in finance, the adding together of interest or different investment
Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment ...
s rather than through
risk management 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
The International Organization of Securities Commissions (IOSCO) is an association of organizations that regulate the world's securities and futures markets. Members are typically primary securities and/or futures regulators in a national jurisdic ...
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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