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Definition of 'Buy-Side'

The buy-side of the financial industry is the group of investors who purchase securities, such as stocks, bonds, and derivatives. This group includes institutional investors, such as pension funds, mutual funds, and hedge funds, as well as individual investors.

The buy-side is responsible for generating demand for securities in the market. They do this by purchasing securities from the sell-side, which is the group of financial institutions that sell securities to investors. The sell-side includes investment banks, brokerage firms, and trading firms.

The buy-side and sell-side are interdependent. The buy-side needs the sell-side to provide them with securities to purchase, and the sell-side needs the buy-side to generate demand for their securities.

The buy-side is a complex and competitive industry. Institutional investors have large amounts of money to invest, and they are constantly looking for new ways to generate alpha. This has led to the development of a variety of investment strategies, such as active management, passive management, and quantitative investing.

Active management is a strategy in which the buy-side manager actively selects individual securities to purchase. This is in contrast to passive management, which is a strategy in which the buy-side manager simply invests in an index fund or other passive investment vehicle.

Quantitative investing is a strategy that uses mathematical models and algorithms to select securities to purchase. This is in contrast to both active and passive management, which are based on human judgment.

The buy-side is a critical part of the financial system. They provide liquidity to the market and help to ensure that investors have access to a wide variety of securities.

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