Posted in Marketing and Strategy Terms, Total Reads: 365
Definition: Buy Side
Buy side is an investment banking term which refers to institutions like mutual funds, hedge funds, private equity funds, pension funds and insurance firms that buys large quantities of securities for money management purposes. Buy side generally buy assets and securities for their own or for their clients’ accounts.
Normally, the firms on buy side try to create value for their clients by buying assets and securities that are underpriced. Sell side differs from buy side as it sells research, securities and even advice or recommendations for downgrades, upgrades and target prices to its clients which can either be investors or companies. Also, sell side advice are meant for public but buy side recommendations are restricted to the firm and is not available to anyone outside the firm. Buy side often use complicated and sophisticated strategies which they believe give them an edge over their competitors, also if they happen to stumble upon a better approach, they preserve it as a secret. Buy side analysts normally determines how promising an investment seems and how perfectly it matches with the company or firm’s strategy.
For a sell side analyst, it is considered highly unethical to provide advice or opinion on any asset or security in which he himself is interested in. Buy side analysts are also sometimes the clients of sell side analysts. There is also supposed to be a wall present between buy side analysts and sell side analysts but it is not strictly followed by companies and they often tend to make profit by leveraging the information which they possess. Therefore, it is of paramount importance for an investor to keep an eye out for potential conflicts of interests while doing business with any side and should also seek out the opinion of those analysts who are credible enough and meet the highest ethical standards.