Investment Banking: What It Is and What Investment Bankers Do

Sell-side analysts produce research reports and recommendations distributed to clients and the public. While accuracy is essential, sell-side analysis often generates trading activity and client interest. Their reports might be more frequent and cover a broader range of securities but may not always be as detailed as buy-side research. buy side vs sell side investment banking On the capital markets’ sell-side, professionals work on behalf of corporations to raise capital through the sales and trading of securities. Meanwhile, sell-side firms earn money from the commissions they get from facilitating deals, and from marketing, selling and trading securities.

Sales & Trading vs Investment Banking: How to Pick the Best Internship or Job

Above, we covered that the terms refer to different types of financial firms (e.g. investors vs. security issuers). These companies invest in securities, usually on behalf of their clients or limited partners. A requirement of higher skill-sets and knowledge for buy-side analysts for the investment decisions makes them fetch higher pay than the sell-side analysts. To learn more about each of these career paths, check out our interactive career map. Get articles like these including investment news and insights uncovered using the Visible Alpha platform delivered to your inbox. https://www.xcritical.com/ When it comes to the $100 trillion-plus investment management industry, the buy side and the sell side are inextricably linked.

Navigating the Sell-Side M&A Process

You see this especially with the large, multi-manager hedge funds and private equity mega-funds, but it happens even at smaller/newer places. In the rest of this article, I’ll focus on the buy-side vs. sell-side and deals vs. public markets differences, but I’ll add a few references to the support roles where appropriate. Equity research and sales & trading are also in the “sell-side” category since they mostly earn money from fees paid for their services (research and market-making).

Buy-Side vs Sell-Side: Exit Opportunities

Buy siders must disclose their holdings in a document called a 13F, and this information is available publicly each quarter. The main one is that you’ll have to use far more critical thinking in buy-side roles because your job is to generate new investment ideas, think through the risks, and develop growth opportunities – even as a junior employee. BlackRock is the largest investment manager in the world, with $8.7 trillion under management. Because BlackRock’s business model consists largely of investing on behalf of its clients, it is considered a buy-side firm. The job of a sell-side analyst is to convince institutional accounts to direct their trading through the trading desk of the analyst’s firm—the job is very much about marketing. In order to capture trading revenue, the analyst must be seen by the buy-side as providing valuable services.

Investment Banking: What It Is and What Investment Bankers Do

The purpose of the law was to separate commercial and investment banking activities. The mixing of commercial and investment banking activities was considered very risky and may have worsened the 1929 crash. In essence, investment bankers are experts who have their fingers on the pulse of the current investment climate. Viewed that way, sales & trading vs investment banking is an easy question to answer.

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Occupying the middle ground between smaller regional investment banking firms and the massive bulge bracket investment banks are middle-market investment banks. Middle-market banks usually work on deals that begin at the regional level and rise to near the bulge bracket level, typically ranging from about $50 million up to about $500 million or more. The bulge bracket firms are the largest in terms of numbers of offices and employees, and also the size of deals and corporate clients they handle. Some of the middle-market banks resemble regional boutiques in that they specialize in offering services to a particular industry or sector. For example, one of the more recognized middle-market investment banking firms is KBW, an investment bank that specializes in working with financial services-sector companies. Their primary goal is to provide recommendations to their clients to help them make informed investment decisions.

Buy-Side Analyst vs. Sell-Side Analyst: An Overview

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. On the other hand, the sell-side refers to the entities that are involved in the process of sale. Sell-side firms work with sellers and try to find a counterparty for a sale of the client’s business—the buyer.

However, smaller firms typically specialize in one area because fewer resources are involved. To complicate matters a bit, the terms “sell side” and “buy side” mean something completely different in the investment banking M&A context. Specifically, sell-side M&A refers to investment bankers working on an engagement where the investment bank’s client is the seller. This definition has nothing to do with the broader sell side/buy side definition described previously.

The sell-side is usually represented by investment banks, commercial banking institutions, advisory firms, and stock market brokerage firms. Sell-side analysts, investment bankers, and stockbrokers assist their clients in raising capital by selling securities. The sell-side is firms that tend to sell, issue, or trade-in financial securities, including corporations, advisory firms, and investment banks. The buy-side can be defined as firms typically buying financial securities, including pension funds, investment managers, and hedge funds. The sell side is comprised largely of the brokerage firms and investment banks that create, promote, research, and sell those securities, including stocks, bonds, alternatives, FX, and other solutions.

They analyze companies and their financial statements to determine their valuation and growth potential. Buy-side analysts also evaluate market trends and economic indicators to help predict the performance of different asset classes. Investment research and analysis are essential components of the finance industry. Two main types of analysts, buy-side and sell-side, work to provide investment recommendations and insights to investors. The buy-side vs. sell-side distinction in M&A refers to firms that sell or purchase products like stocks and bonds. For those on the sell-side, an analyst’s job is to entice investors to purchase these products, while those on the buy-side utilize capital to procure these assets for sale.

Since the repeal, most major banks have resumed combined investment and commercial banking operations. I don’t think sales & trading will go away anytime soon, but it has become more of a specialized opportunity. And the quant hedge fund and quant research routes are still viable, but, again, those are different from traditional trading jobs. You could also argue that if you’re more tech-oriented and you want an engineering, coding, or data science-related job, sales & trading is a good option because of the automation wave. So, yes, you can have more of a normal life in sales & trading, but do not assume that the job is “easier” just because you’re in the office for fewer hours. In an S&T Superday, you’re more likely to get a mix of interviewers from across different desks, and potentially even some who work in middle-office roles like risk management.

• If none of these conditions is true, then I would strongly recommend investment banking instead.
• When it comes to the $100 trillion-plus investment management industry, the buy side and the sell side are inextricably linked.
• On the sell side, companies are looking to create liquidity, build relationships and raise capital.
• The job responsibilities of a buy-side analyst involve conducting extensive research to identify investment opportunities.

Sell-side firms facilitate fundraising, provide liquidity, execute trades, conduct research, and provide advisory services to companies involved in M&A or corporate restructurings. The sell side also makes key contributions to price discovery–the process of determining fair value–by narrowing the bid-ask spreads and the gap between buyers and sellers. They underwrite stock issuance, take proprietary positions, and sell to both institutional and individual investors. One of the most high-profile activities of the sell-side in the stock market is in initial public offerings (IPOs) of stocks. Underwriters are typically brokers, who act as a buffer between companies and the investing public, and who market and sell those initial shares. The sell-side of Wall Street includes investment bankers, who serve as intermediaries between issuers of securities and the investing public, and the market makers who provide liquidity in the public market.

For more, please see our articles on mergers & acquisitions investment banking, fixed income trading, and equity trading. In both investment banking and sales & trading, you act as an intermediary or broker. Buy-side and sell-side players, including investment banks, rely on Venue virtual data room software to organize digital files, securely share information and provide a private repository for M&A due diligence.

After doing research on the company and determining whether it was a wise investment, the PM might purchase shares of that company. Investment banking is a huge source of profit for banks, and if an analyst makes a negative recommendation, then the investment banking side of the business may lose that client. As a side note, investment bankers generally prefer to work on sell-side engagements. That’s because when a seller has retained an investment bank, they usually decide to sell, increasing the likelihood that a deal will happen and that a bank will collect its fees. Meanwhile, investment banks often pitch to buy side clients, which doesn’t always materialize into deals. Some of the biggest and most well-known investment banks include those with easily recognizable names, such as Goldman Sachs (GS), Barclays (BCS), Citigroup (C), Morgan Stanley (MS), and Bank of America Merrill Lynch (BAC).

If you’re in a specialized group, such as the distressed debt desk, well-aligned opportunities like distressed credit funds or direct lending funds might also be options. If there’s a financial crisis or other market disruption, many people in both S&T and IB will lose their jobs. Finally, banks have implemented “protected weekends” and other schemes to give junior bankers more scheduled time off, which has arguably improved the IB lifestyle a bit. This is also true on the sales side – senior salespeople simply sell more and work with more important clients.

You will be busy following companies, updating your models and analysis, reading the news, and generating new ideas constantly. At the junior level, the Deals vs. Public Markets vs. Support distinction is more relevant for the work and skill set. With other topics – such as “target schools” or “elite boutiques” – few people use the terms in-person. According to ZipRecruiter, the average salary for a buy-side analyst is about $108,000 per year, as of August 2021. However, this figure does not account for bonuses or non-salary benefits, which can be considerable.