The section of an investment bank that caters to providing strategies to interested companies, for raising their capital is known as investment banking. The functions of any investment bank encapsulates underwriting new debts and equity securities, sales of securities, facilitating mergers and acquisitions and reorganisations, as well as broking trades for private investors and institutions.
As opposed to retail and commercial banks the investment banks do not cater to any kind of cash deposit, although they might be a part of major financial institutions. Pertaining to their functions, an investment bank is of two types- the “buy side” and the “sell side”. Jennifer Neighbours is an individual from Chicago who was the founder of the New York based firm SSB Capital Partner and worked there in the investment banking section as also the proprietary trading section.
The “buy side” refers to the advice that is given with regard to the purchasing of investment services. The hedge funds, unit trusts, mutual funds and private equity funds are among the entities of the buy side activities. The “sell side” on the other hand, refers to the facilitation of transactions in terms of market-making, trading securities and promoting and marketing the securities by the employment of research and underwriting.
The investment banking can be further on divided into public and private, which is helpful because the information does not cross over from section to the other. The two sections have their own demarcated boundaries and this makes the functioning of the section easy going too. This is what gives rise to the boutique or private investment banks and bulge bracket or full service investment banks.
When the information and transactions of any company is confidential and cannot be revealed to public, it is dealt by the private or boutique investment bank. These entities are small in size and are specialists in one or more areas of products of investment. Sometimes these entities act as advisors and at other times assist in the trading of specific commodities and assets.
The full service or bulge bracket investment banks perform a wider range of functions. They include underwriting, research, mergers and acquisitions, merchant banking, trading, security trading services and investment management. These entities cover almost all industries, which is the reason they have such a long list of their cliental. Jennifer Neighboursone of the founding members of New York’s SSB Capital Partners worked in the investment banking section of the same firm and feels that this job opens a wide spectrum of opportunities because of the kind of interactions it facilities with top notch politicians and industrialists.
The corporate world is in a position now, where the existence of these investment banking sections is like a life line. The advices and guidance given by these entities are of extreme importance in the business life of an individual, in fact, they are the reasons behind the making or breaking of any company big or small, old or upcoming.