Buy-Side

What is Buy-Side?

Buy-Side is the block of finance activities that invest capital to accrue returns. Other associated entities include mutual funds, hedge funds, private equity firms, pension funds, and insurance companies. Most of these entities invest on behalf of the client to accrue returns for them whether as individuals or organizations.

Key Functions of Buy-Side

• Asset Management: It involves the investment of the clients' funds into various investment instruments, either equities, bonds, or real estate.
• Research and Analysis: Involved deeply to assess the financial markets and assets about possible investment opportunities.
• Portfolio Management: Designing and managing diversified portfolios based on risk and return objectives.
• Risk Management: Identification and mitigation of risks associated with investments.
• Client Advisory: Provides advice on investments to the clients based on their individual needs.

Buy-Side vs. Sell-Side

• Buy-Side: They invest money on behalf of the customers and earn revenues as returns of investments.
• Sell-Side: The Sell-Side actually sells financial products and services; it usually acts as intermediary for all trades.

Examples of Indian Buy-Side Firms

• Mutual Funds: Example: HDFC Asset Management, SBI Mutual Fund.
• Hedge Funds: Alternative investment firm that caters to high net individual and institutional customers.
• Private Equity: Such type of organizations Sequoia Capital, KKR invests in private companies.
• Pension Funds: EPFO is an organization that manages the retirement fund of the employees.

Buy-Side Relevance

• Capital Deployment: It ensures efficient deployment of resources in the economy.
• Market Stability: It provides long-term capital which is friendly to market stability.
• Economic Growth: It provides capital for innovation and growth through investment in businesses and infrastructure.

Role of the Buy-Side in Financial Markets

Market and price movements are the functions of the buy-side. Hence, it decides how and when to deploy the capital. Thus, capital deployment hugely affects the financial ecosystem.

Robust Buy-Side helps to work efficiently of the markets. Additionally, it builds confidence of the retail as well as the institutional investors.