How the Industry Fits Together

If you're new to finance, the job titles alone are confusing — "S&T," "IBD," "buy-side," "sell-side," "the Street." This chapter is the map: what each major seat actually does, who it serves, and how it makes money. Nothing here requires prior knowledge — that's the point of starting here.

The one distinction that organizes everything else: buy-side vs. sell-side

Sell-side firms sell something to clients — advice, market access, research, capital-raising services. Investment banks are the classic sell-side example: they don't (mostly) invest their own money for their own account; they serve other people's money and other companies' needs, and get paid fees or spread for doing it.

Buy-side firms manage actual pools of money and invest it directly — asset managers, hedge funds, private equity firms, pension funds. They're the sell-side's clients. When you hear "the buy-side," think: the people actually deciding what to buy and sell with real capital.

Almost every seat in finance is one or the other. Keep this framing in your head through the rest of this course.

Investment Banking (IBD) — sell-side

Investment bankers advise companies on two things: raising capital (helping a company sell new stock via an IPO — Equity Capital Markets, ECM — or issue new bonds — Debt Capital Markets, DCM) and M&A advisory (advising a company that's buying or selling another company). Banks get paid a fee, often a percentage of the deal or capital raised — which is why bankers are motivated to get deals done, not just to give good advice in the abstract.

Sales & Trading (S&T) — sell-side

S&T sits between the bank's clients (asset managers, hedge funds, corporations) and the market. Sales maintains the client relationships and takes their orders; trading executes those orders and manages the resulting risk, often by making markets — quoting both a buy and sell price and profiting from the spread between them. S&T doesn't (mostly) make big directional bets on where markets are going; it makes money on client flow and the spread, at scale.

Equity Research — sell-side

Research analysts publish opinions (buy/hold/sell ratings, price targets) and detailed models on public companies, mostly to support the bank's S&T and banking clients — genuinely useful, independent-seeming analysis, though always worth reading with the awareness that the bank issuing it often also wants that company's future banking business.

Asset Management (AM) — buy-side

Asset managers invest money on behalf of clients — pension funds, insurance companies, mutual fund investors, wealthy individuals — and charge a management fee, typically a small percentage of assets under management (AUM) per year, regardless of performance. The core job: build and manage a portfolio that matches a stated mandate (growth, income, a specific benchmark) as well as possible.

Hedge Funds — buy-side

Similar to asset management in that they invest pooled capital, but with far more flexible mandates — they can short stocks, use leverage, trade derivatives, and pursue strategies public mutual funds usually can't. The classic fee structure, "2 and 20," means a 2% annual management fee plus 20% of profits — which is why hedge funds are far more performance-incentivized than a typical asset manager.

Private Equity (PE) — buy-side

PE firms buy entire companies (often using significant borrowed money — a leveraged buyout, or LBO), try to improve them operationally over a multi-year hold period, and sell them for a profit. Different time horizon and skill set from public-markets investing — PE is closer to operating a business than trading a security.

Where this course is going

This course doesn't assume you already know which of these seats you want — most first-years don't. It's built to give you a real, working knowledge of all the major asset classes (equities, fixed income, commodities, FX) and both sides of the business (the deal-making side and the markets side), with hands-on exercises using this site's own live tools, so you can actually figure out what pulls you in rather than guessing from a job title.