Sell-side analysts produce investment research, financial estimates, price targets and recommendations for clients. Buy-side analysts do much the same work but for the purposes of managing money such as mutual funds, pension funds, private equity funds and life insurance companies. Buy-side recommendations are used to direct investment and are not available to the public.
Sell-sideIn many ways, sell-side analysis is a marketing function that provides a value-added service to clients who use a firm's trading desk. They interface to a company's management, develop investment models, valuations and opinions. Such information may be valuable to a firm's clients as analysts typically develop insights not available in the media. Sell-side analysts may try to maintain a good relationship with management in order to seek clarifications on publicly available information. Management may occasionally shut out sell-side analysts who issue negative price targets and recommendations of their firm. Sell-side analysts may also develop a network of contacts that may include experts, industry insiders and customers.When a sell-side analyst is wrong, their firm may see little impact. However, they may loose clients who are disappointed with the bad advice.
Buy-side AnalysisBuy-side analysis is far more critical to the performance of a firm as the firm makes large investments based on their work.In many cases, buy-side analysts develop far more complex strategies than the "buy", "hold", "sell" recommendations that come from the sell-side.
|Definition||Investment analysis for the purposes of investment management.||Investment analysis for clients.|
|Function|| Equity research analysis|| Equity research analysis|
|Associated with||Private equity fundsMutual fundsHedge fundsPension fundsLife insurance companies|| Brokerage firms|
This is the complete list of articles we have written about risks.
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