Buy side investment banking

KJ November 10, Is this entirely true? Thanks so much for the advice!

Much has been made of the «Wall Street analyst,» as though it were a uniform job description. In reality, there are significant differences between sell-side buy side investment banking buy-side analysts. True, both spend much of their bankong researching companies and industries in an effort to handicap the winners or losers. On many fundamental levels, however, the jobs are quite different. If you have ever watched a financial news program, you have probably heard the reporter reference «analysts. Simply put, the job of a sell-side research analyst is to follow a list of companies, all typically in the same industry, and provide regular research reports to the firm’s clients.

Buy-side is a term used in investment firms to refer to advising institutions concerned with buying investment services. Private equity funds, mutual funds , life insurance companies , unit trusts , hedge funds , 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 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.

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Ah, yes: that classic debate about the buy-side vs sell-side. Although the conversation above is fictional, similar exchanges are taking place in cubicles across the world as you read. You hear about the buy-side vs sell-side distinction everywhere, whether you search online, browse through you message boards, or even gasp talk to people in real life.

On the buy-side, you raise capital from investors and then make your own decisions on where to invest it and what to buy. If Ari Gold is the sell-sideDana Gordon is the buy-side. To an outsider, this seems like a logical way to divide the industry: you earn money either via commissions on sales or by investing your own money and getting a return on that investment.

Rather than this buy-side vs sell-side dichotomy, we should be talking about whether you work on deals or in the public markets. And when your work is finished, you go home. That may sound like a small deal, but in investment banking and private equity you often get pulled into work on weekends and late at night when major deals are happening. That issue with market hours vs unpredictable hours also means that the stress in each role is much different as.

Traders, for example, need to watch their positions every second of the day and must find someone else to cover them if they leave for even a few minutes to run to the bathroom. People like to claim that much of the work you do on Deals is mindless grunt work — which is not untrue — but you could say the same thing about a Public Markets role. This one is more about what you personally find interesting : do you actively follow the stock market and invest your own portfolio?

The average pay on the buy-side vs sell-side is not that much different, but the ceiling on the buy-side is much higher. For example, top hedge fund managers could make hundreds of millions or even billions in a great year. On the sell-side, meanwhile, the ceiling is much lower for Partners and Managing Directors. No matter how good you are, you have a limited amount of time and you can only do so many deals or sell so many stocks in a day.

You can see typical investment banker salary figures here ; private equity is not much different, and even in something less hierarchal such as trading, you see a similar progression from bottom to top. This is another one where the buy-side vs sell-side distinction seems sort of true at first… until you look at it in more.

So once again, the Deals vs Public Markets distinction is the best lens through which to view the hierarchies. You need more headcount on Deals because more work needs to get done and more people need to be managed: lawyers, accountants, financing teams from other banks, and even the occasional clueless consultant.

That difference in hierarchy also means that advancement differs in Deals roles and in Public Markets roles. But in Public Markets roles, advancement is more linked to your own performance, external factors like whether your Research Analyst is leavingyour reputation, and luck of the draw.

So you could advance very quickly if you perform well and get lucky, or very slowly if you never do anything to set yourself apart. But your exit opportunities depend on whether your a Deals person or Public Markets person, for the most. You knew we had to arrive at my favorite topic in the world ok, maybe ranking the banks is still 1 at some point, right?

The main flaw with this Deals vs Public Markets distinction is that the pay differences are more strongly linked to the buy-side vs sell-side. But other than that, the key issues such as predictability of hours, the work itself and associated stress, and advancement all have less to do with buy-side vs sell-side and more to do with Deals vs Public Markets.

The next time you hear people debating the buy-side vs sell-side or hyping up the buy-side, please punch them in the face and deliver a drop-kick or two. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron. Free Exclusive Report: page guide with the action plan you need to break into investment banking — how to tell your story, network, craft a winning resume, and dominate your interviews.

Great post!!! Great article as usual. I was wondering if you thought it may actually be easier to move from being a trader at a bank to working at a hedge fund either being a trader or analyst.

Also, considering that many hedge fund managers started out as traders, I wonder if they might like traders better. Yes many traders from banks move to HFs. Some HF managers may prefer traders, and this is also based on performance.

Hi, what is the difference between buy-side research and working as an analyst at an asset management firm or hedge fund? In the article above, under the buy-side, buy-side research, asset management and hedge funds were all listed separately.

Hi Brian, Very insightful article thank you for sharing and posting I found it interesting! Keep posting! Deals vs. Thank you for this article. I have an interview with an alternative investment management firm for the position of a trader in the investment team Fixed Income Emerging Markets. I had two questions:. How do I tackle questions related to this during the interview?

May I ask you a question? I have the CFA. Within the next 2 years I am going to need to switch to another geographical market, leaving all my clients behind, for family reasons. Any idea if this would be possible — or advisable? There is a lot of insight and truth regarding the myths and realities of the tenor of the buy and sell sides.

But buy side and sell side terminology is vital for keeping us sane if we view it in the following way — this perspective was sort of overlooked here :. So how can you trade? You pay a firm who CAN get on the floor because they own a seat. Or they take your fee for the service of walking onto the floor selling your security, and returning, hopefully, with a fist full of your investment dollars.

The sell side trader is selling you access to the floor, you are buying access to the floor he is sell side, you are buy. It has nothing to do with someone pitching a particular stock. It has to do with buying the service he provides — access. Electronic trading can be considered the sell side, because you are paying for the same access to the trading floor.

Investors either pay money for their presumed expertise or it is given away as a freebie if the volume of your trading activity is sufficiently exciting to the firm as a revenue stream in and of.

Imagine you are a private company and you want to go public. Not only that, but you have no idea how to connect with investors who would buy it out of the gate or even down the road. Securities are not just structured and left at that — someone has to distribute it for you. You are the buy side because you are essentially renting the expertise of investment bankers.

They will tell you all about the docs, they will tell you how to structure shares, and THEN they will walk over to their capital markets people, sales, traders. The Fundamentals course will still be helpful and specifically the Bonus Case Studies included within not yet even mentioned on the promotional pages will be helpful. We give an exact template for a detailed stock pitch plus cover how to project revenue and expenses for different companies, which is what you do in ER.

If so, are there any asset classes where agency trading is still done by humans instead of computers? How easy will it be for me to move to a hedge fund as a prop trader after few yrs? Most 3.

Depends on how good you are. Harder to obtain that in PE firms esp cause they are small and expect candidates to be up and running ASAP Depends on what kind of person you are — if you can be up and running when they hire you and have a genuine passion in PE, I think going straight into it is a more direct way.

Thanks so much for the advice! Just to follow through, would 1 year in I-banking be enough to enter PE? Or do I have to do 2 or 3 years?

Just to add here, many people at top banks actually interview for PE and land offers before year 1 ends, and then start after 2 years.

Probably gets more important as you advance. Even if they keep records, they might not remember. Just apply now and see where it leads you. I know that finance certainly does the first one. However, is there any room to do the second? In the end, does corporate finance really add value in the majority of cases? Money can do society good; it depends on how you use it 2. Yes, corporate finance, like any other business, can add or not add value depending on how you see it and who is doing the deal.

You have to look at the context before you make a statement. What are the exit opps for Public Markets? In deals it seems pretty clear that you go into corporate development or business development. What do you do then? IMO comps with 1 or 2 yr forecasted 3-statements is the most accurate. How many hours each week are required in order to do the job? I met a PhD student buy side investment banking campus randomly, she happens to know a few quite established bankers for some reason.

How should I follow up on her? Should I send her an email and directly ask for referrals? A bit unrelated, but would an internship with a tax accounting firm that does tax returns and other accounting work for PE firms look good on a resume for investment banking? Once again, another great article that structures knowledge of what one doing.

Yeah in general it is more difficult because most people only do the reverse. This is arguably more important than the work you do in preparation for an investment.

Buy Side vs Sell Side — Top 7 Differences — Compensation

Investors either pay money for their presumed expertise or it is given away as a freebie if the volume of your trading activity is sufficiently exciting to the firm as a revenue stream in and of. Just to add here, many people at top banks actually interview for PE and land offers before year 1 ends, and then start after 2 years. They underwrite stock issuance, take proprietary positions, and sell to both institutional and individual investors. Bank Panic of Definition The Bank Buy side investment banking of was a set of bank runs and bankruptcies that led industry leaders to draft the first version of the Federal Reserve System. Private equity funds, mutual fundslife insurance companiesunit trustshedge fundsand pension funds are the most common types of buy side entities. Jason August 25, From Wikipedia, the free encyclopedia. That issue with market hours vs unpredictable hours also means that the stress in each role is much different as. Great article as usual. John August 24, Not only that, but you have no idea how to connect with investors who would buy it out of the gate or even down the road. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron. 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 and the bid-offer spread. Your categorization is wayy more intuitive for me. Thanks for visiting! The sell-side tries to get the highest price possible for each financial instrument while providing insight and analysis on each of these financial assets. In the end, does corporate finance really add value in the majority of cases?