Buy-side Firms are companies that provide advice on buying stocks and securities for use within their own organizations.
Examples of buy-side firms are mutual funds, pension funds and hedge funds. These firms provide recommendations about upgrades, downgrades, target prices and opinions within the company itself. These firms which are also called non-brokerage firms, work exclusively for the company’s own money and not for outside investors. Buy Side firms are not to be confused with Sell-Side firms.
Analysts in buy side firm are independent with little or no conflicts of interest due mainly to the Chinese wall.
Roles and Responsibilities of Buy Side Firms
- Buy side firms, do their own research and buy securities for the company’s own projects
- Buy-side analysts work with portfolio managers within their organization which makes it easy to explain their analysis
- fixed-income buy-side analysts grade high yield bonds used for their company’s review and benefit
Limitations of Buy Side Firms
- Buy side firms can not involve external investors in trading based on their research
- They are restricted from brokerage activities for investors and earning transaction costs and brokerage commissions
- Buy-side analysts are prohibited from releasing any private recommendations
- Investment costs and losses while buying securities are covered by the buy-side firm and cannot be outsourced.
Examples of Buy-Side Firms
Some examples of Buy-Side Firms are:
- Fidelity Funds
- Putnam Funds
- Vanguard Funds
- T Rowe Funds
Buy side firms typically engage in trading investments and generating profits/losses using only their own resources.
These firms do not buy and sell investments for public traders.