What does a Buy-Side Analyst do?

Research is a vital component for investors both large and small to make educated investment decisions. A buy-side analyst is hired to evaluate investment opportunities within an investment firm, such as an institutional mutual fund or a large hedge fund. This professional assists with buy and sell decisions in the financial markets. Based in part on research from a buy-side analyst, an investment adviser decides where to put large sums of his or her clients' money.

The alternative to a buy-side analyst is a sell-side analyst, which is a financial professional responsible for producing market research to external clients, or investors, about companies, sectors and regional economies. Research generated by a analyst on the buy side, however, typically remains within a firm and is not intended for external clients. Both types of analysts are vital to the financial community, and one side might incorporate or base research from the other side to add value and create a more comprehensive perspective.

Although investment advisers are certified to make key investment decisions on behalf of a firm and other investors, they often do not make judgment calls based solely on their own work. Instead, these money managers hire a team of buy-side research analysts to uncover trends and point to buying or selling opportunities in the broader markets. Although an investment adviser makes the ultimate decision about an investment, it often is a group effort that requires the input from a buy-side analyst to make these decisions informed.

There are different types of financial analysts. For instance, a buy-side analyst might focus on the equity or debt capital markets. Small investment firms might employ analysts only on the equity side of the financial markets.

A buy-side equity analyst is responsible for making assessments about the stock market. This professional will make recommendations to an investment adviser on individual stocks or sectors and will evaluate regional opportunities. He or she evaluates a company's profitability in relation to its debt and makes judgment calls on financial initiatives. Typically, this analyst will be assigned to a particular sector, such as telecommunications or lodging, and will compare stock performance within that group.

The other side of the financial markets is debt, which is categorized as the fixed-income markets. This is because debt investors receive fixed earnings over the life of an investment. A fixed-income buy-side analyst evaluates investment grade or high-yield bonds and often assigns a rating to these financial instruments. Ratings reflect the likelihood that a bond issuer will make good on its income payments. An investment-grade bond is rated higher and is a less-risky investment than high-yield bonds.