What Is An Investment Bank?
An investment bank is very different from a traditional retail bank, although retail banks have lately started to offer more of the services traditionally offered by an investment bank.
An investment bank does two primary things. It manages funds and securities for private investors based on investor specific management criteria and goals, and it raise money for private clients through the management and administration of a limited securities sale.
Selling securities has been a way for corporations to raise the money needed to finance projects for many years. An investment bank will analyze both the corporation and the market desirable assets from within this corporation, and develop a tailor made securities sale with the aim of selling these securities to raise money. This money is usually either raised to pay off corporate debt loads, or to finance expensive growth related strategies. Investment banks and bankers have been specializing in this type of securities sales for hundreds of years, and it only more recently that other more traditional banks have also entered the securities sale market.
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Investment banks also manage the private investments of corporations or individual investors. Investment banks will administer the purchase and sale of stocks, bonds and real estate, based on the pre specified criteria of the investor. These two services are known as the sell and buy sides of an investment bank. The investment bank personnel that raise money for corporations or investors through private securities releases are considered to be on the sell side of the business. These investment bank workers will try to sell the securities offered by their client's at the most attractive terms possible. This has been the more traditional role of the investment bank. The other side of the equation is filled by investment bank personnel that buy. These investment bank workers are responsible for buying appropriate investment opportunities on behalf of their clients. The clients will usually specify to the investment bank personal the types of risk profiles that they are adverse to. An investment bank can both raise necessary funds for corporations and can manage and administrate the assets of both private individuals and corporations. |
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