Sunday, November 6, 2011

buy-side/sell-side business units in a bulge bracket

Most "pure-play" investment banks have an asset management arm, often comprising private wealth + private-equity + in-house hedge fund + regular mutual fund management [1]. Crucially, in all of these, the money under management is not [3] primarily house money. House money could be a small part of the money invested in such a fund, but if a fund is entirely made up of house money, then it's like a prop trading desk. In a way, this is also similar to sovereign funds like Singapore's GIC.

This Asset Management business is often largely separated from the main business, and often incorporated into a separate entity. Just how separated? A GS buy-side veteran told me a buy-side trader can bypass the sell-side arm of GS and trade with a Barclays sell-side i.e. a competitor to GS. Doing so is unusual, punishable but allowed.

Within the big investment bank, on the other side of the fence lives a giant cousin -- the sell-side arm. In all investment banks this is a much larger arm. Within the sell side there's a Chinese wall. In practice, it's hard to separate out the individual components therein, but a Chinese-wall is quite common --

- underwriting
- capital restructuring + always some (huge amount of) financing. These deals include M&A, MBO/LBO, privatization, spinoff...

----- Chinese Wall -----

- agency trading
- dealing, usually inventory based
- prime brokerage - extension of "brokerage" business


A few other business units are hard to categorize --
- research,
- clearing service,

Now, a non-pure-play "universal" bank does all of the above + commercial banking --
* retail banking
** credit cards
** mortgage -- Note MBS is strictly in the "dealing" business
** retail loans
* corporate banking

Nowadays, investment banks also operate a private bank. Private bank clients can take loans from the bank, but by and large private banks make money mostly from fee-based business i.e. asset management.

[1] where some big players focus exclusively -- BlackRock, Pimco, Vanguard, Fidelity,
[3] sometimes a little bit

No comments:

Total Pageviews

my favorite topics (labels)

_fuxi (302) _misLabel (13) _orig? (3) _rm (2) _vague (2) clarified (58) cpp (39) cpp_const (22) cpp_real (76) cpp/java/c# (101) cppBig4 (54) cppSmartPtr (35) cppSTL (33) cppSTL_itr (27) cppSTL_real (26) cppTemplate (28) creditMkt (14) db (65) db_sybase (43) deepUnder (31) dotnet (20) ECN (27) econ/bank` (36) fin/sys_misc (43) finGreek (34) finReal (45) finRisk (30) finTechDesign (46) finTechMisc (32) finVol (66) FixedIncom (28) fMath (7) fMathOption (33) fMathStoch (67) forex (39) gr8IV_Q (46) GTD_skill (15) GUI_event (30) inMemDB (42) intuit_math (41) intuitFinance (57) javaMisc (68) javaServerSide (13) lambda/delegate (22) marketData (28) math (10) mathStat (55) memIssue (8) memMgmt (66) metaProgram` (6) OO_Design (84) original_content (749) polymorphic/vptr (40) productive (21) ptr/ref (48) py (28) reflect (8) script`/unix (82) socket/stream (39) subquery/join (30) subvert (13) swing/wpf (9) sysProgram` (16) thread (164) thread_CAS (15) thread_cpp (28) Thread* (22) timeSaver (80) transactional (23) tune (24) tuneDB (40) tuneLatency (30) z_ajax (9) z_algoDataStruct (41) z_arch (26) z_arch_job (27) z_automateTest (17) z_autoTrad` (19) z_bestPractice (39) z_bold (83) z_bondMath (35) z_book (18) z_boost (19) z_byRef^Val (32) z_c#GUI (43) z_c#misc (80) z_cast/convert (28) z_container (67) z_cStr/arr (39) z_Favorite* (8) z_FIX (15) z_forex (48) z_fwd_Deal (18) z_gz=job (33) z_gzBig20 (13) z_gzMgr (13) z_gzPain (20) z_gzThreat (19) z_hib (19) z_IDE (52) z_ikm (5) z_IR_misc (36) z_IRS (26) z_javaWeb (28) z_jdbc (10) z_jobFinTech (46) z_jobHunt (20) z_jobRealXp (10) z_jobStrength (15) z_jobUS^asia (27) z_letter (42) z_linq (10) z_memberHid` (11) z_MOM (54) z_nestedClass (5) z_oq (24) z_PCP (12) z_pearl (1) z_php (20) z_prodSupport (7) z_py (31) z_quant (14) z_regex (8) z_rv (38) z_skillist (48) z_slic`Problem (6) z_SOA (14) z_spring (25) z_src_code (8) z_swingMisc (50) z_swingTable (26) z_unpublish (2) z_VBA/Excel (8) z_windoz (17) z_wpfCommand (9)

About Me

New York (Time Square), NY, United States
http://www.linkedin.com/in/tanbin