Buy Side
Firms that manage and invest money on behalf of clients, including asset managers, hedge funds, pension funds, and insurance companies.
What is Buy Side?
The buy side refers to the segment of the financial industry that manages and deploys investment capital on behalf of clients. Buy-side firms include mutual funds, hedge funds, pension funds, sovereign wealth funds, endowments, and insurance companies. They are called 'buy side' because they are primarily buyers of securities and investment research. Buy-side analysts and portfolio managers conduct research to make investment decisions and are paid by their clients' assets under management, not by transaction commissions. This is in contrast to the sell side, which generates revenue by facilitating transactions, underwriting securities, and selling research and trading services to buy-side clients.
Example
BlackRock, Vanguard, and Fidelity are prominent buy-side firms managing trillions of dollars in assets. When a sell-side bank (such as Goldman Sachs) underwrites a new stock offering, buy-side institutions review the prospectus, conduct their own analysis, and decide whether to allocate client capital to the IPO — they are the ultimate buyers in the transaction.