Gemini Solutions

AMC L0 | Session 4
Buy Side & Sell Side
 Buy/Sell Side

Buy Side

• This segment deals with purchasing and

investment of large
portions of securities for purposes such
as fund management.​

Sell Side
Source: https://corporatefinanceinstitute.com/

• Segment of the financial market that is

Financial market is very much like a vegetable market. all about creation, promotion, and
Vegetable seller (vendor) = Sell side in the financial market selling traded securities to the public.
• Typically include investment banks,
Vegetable buyer = Buy side in the financial market advisory firms, and corporations​

Farmers (who grow veg.) = Corporations(in the above diagram)

 Roles/Functions

Buy-Side Sell-Side

• Increasing assets under management. • Advertising and selling securities.

• Conducting internal research on potential • Generating liquidity for listed securities.
investment and financing opportunities. • Advising corporate clients on major transactions,
• Identifying investors and recruiting capital to mergers and acquisitions.
manage. • Creating and building relationships with new
• Earning the most favorable return, taking risk into businesses and corporations.
account.
Reputed Firms:
Reputed Firms: • JPMorgan Chase
• BlackRock • Goldman Sachs.
• The Vanguard Group • Bank of America Merrill Lynch
• Fidelity Investments • Morgan Stanley
• Allianz • Citigroup
• J.P. Morgan Asset Management. • Credit Suisse
• BNY Mellon Investment Management • Barclays Investment Bank
• PIMCO
 Difference between Buy-Side/Sell-Side

• Buy side comprises of firms that take an active participation in making decisions pertaining to investment
Decision Making
• Sell side firms or individuals facilitate the buy side entities in their decision making

• Buy side entities make money through commission on buying financial securities at low prices and selling the same at
How do they make high prices
money • Sell side firms or individuals make money by charging commission or fees against creating, promoting, and sale of
stocks, foreign exchange and bonds

• The structure in a buy side is leaner with only three positions. The Portfolio Manager at the lower or subordinate
level, Researcher at the mid-Level and the Marketing Person is placed at the top-most level
Organization
Structure • The structure in a sell side is more hierarchal. The Analysts are placed at a lower or sub-ordinate level, Associates are
placed right above the Analysts, VP which are designated above the Associates while the top most position is secured by
the MDs

• Buy side reports are not publicly available

Reports Availability
• Sell side reports are usually publicly available
 Hedge Funds
What is a Hedge Fund?

• It is a type of actively managed fund that

focuses on high-risk high return
investments. Hedge funds invest very
aggressively and try and increase their
returns.
• Active management of a portfolio or a fund
requires a professional money manager or
team to regularly make buy, hold, and sell
decisions
• Passive management refers to index- and
exchange-traded funds (ETFs) which have
no active manager

Who uses/invests in Hedge Funds? What do they invest in?

• Hedge funds often have high minimum
investments, and therefore they are
usually used by institutions, sophisticated
investors, or people with a very high net
worth
Because hedge funds are regulated much less
than regular Mutual Funds, they can invest in
practically anything, including coins, art,
stamps, or even patents

How do they work?

Global Hedge Fund Firms
Global hedge fund firms include Bridgewater
Associates, Man Group, Renaissance Technologies,
Millennium Management
• A fund manager invests in diff. securities
& equities that match up with the fund's
goals
• They hold both long/short stock positions
& investors could make money regardless
of whether the market went up or down
 Investment Banks
How Investment Banks Work

What is an Investment Bank?

It is a financial services company that
performs large and complex transactions on
behalf of individuals, corporations, or
governments.

Services Provided
How do they differ from Commercial banks?
• Arranging Finance
• Assisting in Mergers & Acquisitions Basis of Comparison Commercial Banks Investment Banks
• Underwriting process Investors, corporations, and
• Private Placement Service provided to Normal public
government.
• Sales & Trading Services provided Deposit, mortgage loans, and lending
Buying and selling of bonds, stocks.
(Primary) loans.
Asset management, raising money,
Overdrafts, promissory notes, locker
Services provided mergers, and acquisition, brokerage
facility, internet banking, mobile banking,
(Secondary) services, underwriting of securities
card facilities, etc.
facilities, advisory services, etc.
Earning interest from loans, service charge
Global Investment Banking Firms How do they earn profit
and fees
Fees charged on different services.

Global investment banks include JPMorgan Chase, Goldman Sachs, Morgan Risk involved Low risk High risk
Stanley, Citigroup, Bank of America, Credit Suisse, and Deutsche Bank. Customer base Very high Low

State Bank of India, HDFC, Indian bank LTD, JP Morgan Chase, Morgan Stanley, Credit
Examples
ICICI, etc. Suisse, Deutsche banks, etc.
 Asset Management Companies
What is an Asset Management Company?
• It invests its clients' funds in equities, commodities, securities,
currencies, etc., to grow these investments.
• It means investing large sums of money on behalf of your clients in
order to get high returns in the long run.
• The asset management companies have professionals called fund
managers who manage the investment and the research team selects
the right securities.
How do they work?
• Individual investors usually rely on asset management companies to
invest capital on their behalf.
• AMCs generally charge a fee to their clients that is equal to a
percentage of total assets under management (AUM). AUM is simply
the total amount of capital provided by investors.
• An asset management fund may charge a 2% fee on AUM. Example: an
asset manager who oversees a $100 million fund. The fees for one year
or another time period will be $2 million ($100 million x 2.0%).

Roles and Responsibilities

• Manage investor money and spend in assets and securities, thereby
maintaining a diversified portfolio on behalf of their clients.
• The money managers carry out the following functions: market
analysis, fund allocation for assets, portfolio creation, and
performance review.

Global Asset Management Companies

PIMCO, State Street Global Advisors, BlackRock
 Business Growth Drivers
Investment Banks Asset Management Companies Hedge Funds
Increase in trend of growing capital Increase
The hedgeinfund
trendindustry
of growing capital
appears to be
requirements and rise in financial challenges in requirements andfund
consolidating and rise in financialaround
managers challenges
the in
business environments, along with the surge in Fintech and Innovation seem to be increasing business
the diversity of financial products, these are world are shifting their strategies to be more in
environments, along with the surge
demand for fundamental advisory from investment opportunities for AMC's clients. defensive.
demand forThis consolidation
fundamental is expected
advisory from to
corporate companies are key drivers for the foster
corporate companies are key driversgrowth
the global hedge fund market for the in
market growth. the coming years.
market growth.

Mergers and Acquisitions keep increasing with
the expansion of the start up space. Given that
IBs build capital through MnAs, growth looks
imminent for them.
The AMCs have started to realize the Along with increased regulatory clarity and
importance of the impact of good customer sound operational practices, hedge funds are
experience on their business, bettering which expected to increase their investment in
certainly provides growth. digital assets

With the ever-increasing startup space, the

success of IPO's should only increase, this gives
a rope of future to grab on for IBs
 IBs, AMCs & Hedge Funds
Investment Banks
Involves raising financial capital for
companies, government, and other
organizations to help them expand their
activities.
It is a financial services company that acts as
an intermediary in large and complex
financial transactions.
IB uses M&A, initial public offerings, stock
purchases, and other methods to build
capital.
Global investment banks include JPMorgan Chase,
Goldman Sachs, Morgan Stanley, Citigroup, Bank of
America, Credit Suisse, and Deutsche Bank.
Asset Management Companies
Asset Management Company invests its clients'
funds in equities, commodities, securities,
currencies, etc., to grow these investments.
Asset Management, is a systematic approach to
managing a client’s investment portfolio in a cost-
effective manner. It means investing large sums of
money on behalf of your clients in order to get high
returns in the long run.
AMCs are compensated via fees, usually a
percentage of a client's assets under
management.
Global asset management companies include PIMCO,
State Street Global Advisors, BlackRock, UBS Group.
Hedge Funds
A hedge fund is a type of asset management firm,
albeit one that is privately owned, relatively
unregulated, and open to only qualified investors.
Literally, hedge means to prepare a strategy and
act accordingly to protect a portfolio free of loss
and deliver the best possible returns.
Two and twenty (or "2 and 20") fee arrangement
"Two" means 2% of assets under management
(AUM) and refers to the annual management fee
charged by the hedge fund for managing assets.
"Twenty" refers to the standard performance or
incentive fee of 20% of profits made by the fund
above a certain predefined benchmark.
Global hedge fund firms include Bridgewater Associates,
Man Group, Renaissance Technologies, Millennium
Management
 Readings
Investment Banks
1) https://www.myaccountingcourse.com/accounting-dictionary/investment-banking
2) https://www.youtube.com/watch?v=YHAR4ggU_S4
3) https://www.youtube.com/watch?v=9_a0zYox_Rk

Asset Management Companies

1) https://www.youtube.com/watch?v=L78yZeJ9vlY
2) https://www.youtube.com/watch?v=t7y7pzQB5qc

Hedge Funds
1) https://www.youtube.com/watch?v=EF_K2ZepV1E
2) https://www.youtube.com/watch?v=BXXTh1Hn8lo
Thank You!
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