Canary Wharfian
Administrator
- Jul
- 49
- 1
Staff member
The financial services industry is split into two types of companies: the sell-side and the buy-side. While both are essential to capital markets and deal-making, they operate very differently. Let’s break it down from the perspective of both trading/markets and investment banking/deal-making.
In simple terms, the sell-side’s job is to facilitate transactions, offer advice, and earn fees or spreads from doing so. Their clients are typically the buy-side (e.g., hedge funds, asset managers, private equity firms), corporations, or governments.
On the banking side, sell-side investment bankers advise clients (corporates, governments, private equity firms) on mergers and acquisitions (M&A), capital raising, restructurings, and other strategic transactions.
Core Activities
Fee-based. Banks earn advisory fees or underwriting fees based on the size of the transaction.
Clients
Corporates, financial sponsors (PE firms), governments.
Career Path
Core Activities
Hedge funds, mutual funds, insurance firms, pension funds
Career Path
Buy-side roles are more about strategy, investing, and decision-making, as they control real money.
Core Activities
Core Activities
Both have their advantages and drawbacks. The right fit depends on whether you prefer servicing clients or managing capital, whether you're drawn to transactional pace or strategic ownership, and how you value work-life balance vs compensation vs intellectual stimulation.
If you’re early in your career, it’s not uncommon to start on the sell-side (especially in banking or trading) and then transition to the buy-side once you’ve built up technical skills and deal experience.
In the end, both paths can lead to exceptional careers—just choose based on who you are, not what sounds impressive on paper.
The Sell-Side
The sell-side comprises investment banks, brokerages, and market makers. These institutions create, promote, and sell financial products and services to investors (the buy-side).In simple terms, the sell-side’s job is to facilitate transactions, offer advice, and earn fees or spreads from doing so. Their clients are typically the buy-side (e.g., hedge funds, asset managers, private equity firms), corporations, or governments.
On the banking side, sell-side investment bankers advise clients (corporates, governments, private equity firms) on mergers and acquisitions (M&A), capital raising, restructurings, and other strategic transactions.
Core Activities
- Pitching deals
- Financial modelling and valuation
- Writing pitch books and info memoranda
- Coordinating due diligence and deal execution
- Managing capital markets processes (IPOs, bond issuances)
Fee-based. Banks earn advisory fees or underwriting fees based on the size of the transaction.
Clients
Corporates, financial sponsors (PE firms), governments.
Career Path
- Analyst → Associate → VP → Director → MD
- Exit routes include private equity, corporate development, hedge funds (for ECM), or corporate strategy
- Exposure to high-profile deals and C-suite decision-making
- Technical skill-building (valuation, modeling, capital markets)
- Prestige and strong exit opportunities
- Brutal hours, especially at junior levels
- You don’t “own” the deal – you advise
- Process-driven, often reactive to clients’ timelines
Sell-Side: Sales & Trading
The sell-side trading function connects buyers and sellers of securities. Traders either take risk themselves (proprietary trading) or act as market makers facilitating trades for clients. Salespeople maintain relationships with institutional investors and offer trade ideas or market access.Core Activities
- Executing trades (equities, fixed income, derivatives, FX)
- Quoting prices and managing risk (traders)
- Client coverage and relationship management (sales)
- Research and market commentary (research)
- Bid-ask spread, commissions, and fees
- Less reliant on performance; more about volume and flow
Hedge funds, mutual funds, insurance firms, pension funds
Career Path
- Analyst → Associate → VP → Director → MD
- Exit routes include hedge funds, asset management, FinTech, or sometimes internal risk/treasury roles
- Fast-paced, intellectually stimulating
- Market-focused, often less hierarchical than banking
- Fixed hours (market open to close) in most trading roles
- Less long-term client interaction
- Limited “ownership” of trades
- Diminishing headcount due to automation & electronification
The Buy-Side
The buy-side includes institutional investors who allocate capital to generate returns. These firms “buy” the products, securities, or advice that the sell-side offers. They don’t sell advice or trade execution—they manage capital.Buy-side roles are more about strategy, investing, and decision-making, as they control real money.
Buy-Side: Private Equity & Investment Funds
PE professionals raise capital from Limited Partners (LPs) and use it to invest in or acquire companies. They’re responsible for the entire lifecycle of the investment: sourcing deals, executing them, improving the company, and exiting with a return.Core Activities
- Screening investment opportunities
- Financial modelling and due diligence
- Negotiating terms and structuring deals
- Working with portfolio companies post-acquisition
- Planning exits (sale, IPO, recap)
- Management fees (2%) + Performance fees (carry, ~20%)
- Greater control and ownership of deals
- Real decision-making power
- Higher long-term comp via carry
- Fewer roles, very competitive
- Slow deal pace, less variety
- Pressure to deliver strong returns
Buy-Side: Hedge Funds & Asset Management
Hedge funds and asset managers aim to generate alpha (returns above benchmarks) by making investment decisions across asset classes—equities, credit, commodities, macro, etc. They are evaluated on performance, often month-to-month or quarter-to-quarter.Core Activities
- Building investment theses and models
- Monitoring market trends and catalysts
- Risk management and portfolio construction
- Engaging with companies (activist investing, research)
- Hedge funds: 2/20 (management + performance fees)
- Asset managers: Fee based on AUM (Assets Under Management)
- Pure investing – you own the outcome
- High autonomy, especially at smaller funds
- Strong performance = strong comp
- High pressure, constant performance evaluation
- Less structured career progression
- Unstable job security during downturns
- Sell-Side Banking: Great for high-performers who can handle pressure, have strong interpersonal skills, and want prestige + exit options.
- Sell-Side Trading: Ideal for those with strong market intuition, fast decision-making, and comfort with risk.
- Buy-Side PE: Best for those who love deal-making, strategy, and long-term ownership.
- Buy-Side Hedge Funds: For independent thinkers who love markets, data, and can manage psychological pressure.
- Asset Management: Perfect for those who want stability, structure, and a long-term investment lens.
Both have their advantages and drawbacks. The right fit depends on whether you prefer servicing clients or managing capital, whether you're drawn to transactional pace or strategic ownership, and how you value work-life balance vs compensation vs intellectual stimulation.
If you’re early in your career, it’s not uncommon to start on the sell-side (especially in banking or trading) and then transition to the buy-side once you’ve built up technical skills and deal experience.
In the end, both paths can lead to exceptional careers—just choose based on who you are, not what sounds impressive on paper.