Understanding Asset Allocators/Managers vs. Sell Side: The Industry's Essential Distinction

Have you been curious about how the market world really operates behind the scenes? Below is a comprehensive breakdown of one of the industry's most important distinctions: The Asset Allocators/Managers versus the Sell Side.

What You Need to Know About Asset Allocators/Managers & Sell Side

At their core:

• Asset Allocators/Managers firms allocate capital to generate value for their clients

• Sell Side firms facilitate transactions and deliver advisory services

This distinction shapes career paths, compensation structures, and daily responsibilities in profound ways.

The Asset Allocators/Managers: Capital Deployment Specialists

The Asset Allocators/Managers includes organizations that acquire securities, assets, or entire companies with the goal of generating value. Key players include:

• Asset Managers: Private Equity / Venture Capital Firms - Invest in and Restructure businesses and exit via IPOs or strategic exits

• Asset Managers: Hedge Funds - Utilize various strategies to achieve above-market outcomes

• Asset Oversight Firms - Manage resources for institutions and individuals

• Pension Funds - Distribute retirement savings across asset classes

• Single Family Offices - wealthy families who setup an capital arm

• Sovereign Wealth Funds - A government’s capital arm

Their revenue typically comes from:

• Management feea (percentage of assets under administration)

• Incentive compensation/ carry (share of results)

• Growth (capital appreciation)

The Sell Side: Transaction Facilitators

The Sell Side consists of firms that help execute transactions and deliver market intelligence:

• Advisory Banks - Consult on M&A and underwrite securities

• Brokerage Firms - Execute trades and suggest opportunities

• Research Firms - Analyze companies and suggest stock possibilities

• Market Makers - Create liquidity by quoting entry/exit values.

They generate revenue through:

• Advisory fees from M&A transactions

• Commissions from executing trades

• Underwriting fees from capital raising

How These Worlds Intersect

Despite their differences, these two sides work together constantly:

Real-world example: When a private equity firm (Asset Allocators/Managers) wants to acquire a company, they often engage an advisory institution (Sell Side) to help structure and arrange the transaction. Similarly, when hedge funds need to execute complex trades, they rely on brokers (Sell Side) for efficient execution.

Career Path Insights: Which Side Might Suit You Best?

Many professionals begin on the Sell Side (particularly in banking / advisory) and later transition to the Asset Allocators/Managers as they gain experience. Why?

• Sell Side positions present exposure to multiple industries and transactions, developing crucial skills in modeling and client relationships.

• Asset Allocators/Managers roles often allow deeper analytical work, greater autonomy in decision-making, and potentially higher compensation structures (particularly with incentive compensation).

However we do also see many switch to directly the Asset Allocators/Managers or pivot their career from non traditional backgrounds. It’s about finding the right path, mentors, and setting a plan for your goals.

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Best regards,
The Sutton Capital Team

P.S. Understanding the dynamics between Asset Allocators/Managers and Sell Side is just the beginning. Sutton Capital's program enables you to apply this knowledge to advance your career path with proven strategies and expert guidance.