At the end of June 2026, mutual funds and exchange-traded funds (ETFs) held $31.4 trillion of corporate equities. Security brokers and dealers held $181 billion.
Mutual funds sit on the buy side. They manage money and buy securities. Brokers and dealers sit on the sell side. They create, sell and trade securities.
What is the difference between the buy side and the sell side? The buy side manages money and buys securities, as mutual funds, pension funds, insurers and hedge funds do. The sell side creates, sells and trades securities and publishes research, as brokers, dealers and investment banks do.
Mutual funds and ETFs held 25.4% of corporate equities in June 2026. Security brokers and dealers held 0.15%.
In our worked example, a 0.40% fee on a $2 billion portfolio is $8,000,000 a year. A $0.02-a-share commission on one $20,000,000 order is $8,000.
In 2003, ten investment firms paid about $1.4 billion over conflicts between their research and their investment banking.
What do the buy side and the sell side mean?
The two labels are market shorthand. US law defines firms by what they do.
The Securities Exchange Act of 1934 defines brokers as persons engaged in the business of effecting transactions in securities for the account of others. It defines dealers as persons engaged in the business of buying and selling securities for their own account.
The US Securities and Exchange Commission (SEC) gives both definitions in its guide to registration. Here, brokers and dealers stand for the sell side.
The Investment Advisers Act of 1940 regulates firms paid to manage or advise on other people's money. An SEC staff outline says money managers are regulated as investment advisers. Here, money managers stand for the buy side. Pension funds, insurers and hedge funds are also buy-side holders, because they invest money.
Who holds corporate equities?
Corporate equities are shares in companies. The Federal Reserve's Financial Accounts of the United States, known as the Z.1 release, list who holds them. The release of 11 September 2026 puts the total at $123.7 trillion for June 2026.
Source: Federal Reserve Financial Accounts of the United States (Z.1), 11 September 2026
Chart 1 colours the buy-side holders blue and the dealers orange. Households, the rest of the world and other holders belong to neither side, so they appear in grey.
Mutual funds hold $18.6 trillion and ETFs $12.8 trillion, together 25.4% of the total.
Pension funds hold $10.2 trillion across private plans, federal plans and state and local defined benefit plans. Insurers hold $1.5 trillion. Domestic hedge funds hold $906 billion. The Fed reports hedge funds and dealers net of short positions, which are shares the holder has sold after borrowing them.
The five buy-side groups hold $44.0 trillion, which is 35.6% of the total. Security brokers and dealers hold $181 billion, which is 0.15%. Mutual funds and ETFs hold 173 times as much as the dealers do.
Dealers trade for their own account.
How has the split changed since 2000?
Chart 2 compares each group's share of all corporate equities at the end of 2000 and the end of June 2026. The Fed's hedge fund line starts in the fourth quarter of 2012, so Chart 2 leaves hedge funds out.
Source: Federal Reserve Financial Accounts of the United States (Z.1), 11 September 2026
Mutual funds and ETFs rose from 21.8% to 25.4%. Pension funds fell from 17.4% to 8.2%. Insurers fell from 3.0% to 1.2%.
The dealers' share was 0.09% in 2000 and 0.15% in June 2026. Both are tiny.
What does the sell side do?
Rule 2241 of the Financial Industry Regulatory Authority (FINRA) names three functions inside a member firm: sales and trading, research and investment banking. A member firm is a brokerage firm that belongs to FINRA.
The rule says investment banking services include acting as an underwriter, acting as a financial adviser in a merger or acquisition, or serving as placement agent for a private offering. An underwriter buys a company's new shares in order to sell them to investors. A placement agent finds buyers for shares sold privately.
Our explainer on what a market maker does covers the dealing side.
How does money pass from the buy side to the sell side?
A pension fund pays an outside manager 0.40% a year on a $2 billion portfolio. The manager's fee is $8,000,000 a year.
The manager buys 400,000 shares at $50, an order worth $20,000,000. A brokerage firm executes it and charges $0.02 a share, which is $8,000. The commission is 0.04% of the order.
Item | Calculation | Result |
|---|---|---|
Portfolio | Input | $2,000,000,000 |
Annual fee to the manager (buy side) | 0.40% of $2,000,000,000 | $8,000,000 |
One order | 400,000 shares at $50 | $20,000,000 |
Commission to the brokerage firm (sell side) | 400,000 shares at $0.02 | $8,000 |
Commission as a share of the order | $8,000 divided by $20,000,000 | 0.04% |
Orders whose commissions equal one year of the fee | $8,000,000 divided by $8,000 | 1,000 |
The rates are round numbers chosen for the arithmetic. Source: YX Insights worked example
The table shows the fee and the commission side by side. The manager's annual fee equals the commission on 1,000 such orders. The rates are round numbers chosen for the arithmetic.
Section 28(e) of the Exchange Act lets a money manager pay more than the lowest commission rate for brokerage and research services. The manager must decide in good faith that the commission is reasonable in relation to the value of the services. A commission can therefore pay for research as well as execution.
How do rules manage conflicts between research and investment banking?
A sell-side firm can advise a company on a deal and publish research on the same company. FINRA Rule 2241 requires member firms to write policies that identify and manage conflicts of interest in research.
The policies must prohibit pay based on specific investment banking deals. They must prohibit people in investment banking from reviewing research before publication.
They must set a quiet period, a window after a share sale in which the firm may not publish research on the company.
It lasts at least 10 days after an initial public offering that the firm underwrote. After a secondary offering, a later sale of shares by a company already listed, it lasts at least three days when the firm managed the sale.
The SEC's Regulation Analyst Certification (Regulation AC) adds a certification. Each research report must state that the views in it are the analyst's own. It must also state whether any of the analyst's pay related to the recommendations.
A 2003 enforcement round addressed the same conflict. On 28 April 2003, regulators announced actions against ten investment firms over conflicts between research and investment banking. The payments totalled roughly $1.4 billion, including $432.5 million to fund independent research.
The firms neither admitted nor denied the allegations. They agreed to separate research from investment banking.
How many large managers file holdings reports?
Large buy-side managers report their holdings to the SEC on Form 13F. A manager files it with investment discretion, the power to decide what to buy and sell, over at least $100,000,000 of listed securities.
In the SEC's data set of filings made from 1 June to 31 August 2026, 8,857 managers filed a 13F holdings report for the quarter ended 30 June 2026. Of those, 8,751 show a value above zero. The median of those reports is $378 million.
Source: SEC Form 13F data sets
Chart 3 counts the 8,751 reports by the value of holdings shown. The largest group, 5,548 reports, sits between $100 million and $1 billion. The rule tests the threshold at any month-end of the previous calendar year. That is why 775 reports show less than $100 million at the end of June.
What does the split leave out?
Households hold $52.1 trillion, which is 42.1% of corporate equities. They sit outside both sides in Chart 1.
Our explainer on what a hedge fund is covers one buy-side type in depth. Our explainer on real-money investors covers pensions, insurers and long-only funds.
The buy side manages money and buys securities. The sell side sells, trades and researches them. In June 2026, the five buy-side groups in Chart 1 held 35.6% of corporate equities, while security brokers and dealers held 0.15%. The buy side pays the sell side commissions on each trade.
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Common questions about the buy side and the sell side
What is the difference between buy-side and sell-side analysts?
A buy-side analyst researches securities for a fund that invests money, such as a mutual fund or pension fund. A sell-side analyst works at a brokerage or investment bank and publishes research reports for clients. FINRA Rule 2241 governs the sell-side reports and their conflicts of interest.
Which firms are on the sell side?
The sell side is the part of finance that creates, sells and trades securities and publishes research. It centres on brokers, dealers and investment banks. Brokers act for the account of others, while dealers trade for their own account. In June 2026, security brokers and dealers held 0.15% of corporate equities.
Is a hedge fund buy side or sell side?
A hedge fund is on the buy side. It invests money for its investors and does not underwrite or make markets in securities. The Fed's Financial Accounts show domestic hedge funds holding $906 billion of corporate equities, net of short sales, in June 2026. That is 0.73% of the total, against 0.15% for security brokers and dealers.
What does a sell-side analyst do?
A sell-side analyst prepares the substance of research reports at a member brokerage firm, meaning a brokerage firm that belongs to FINRA. FINRA Rule 2241 defines a research report as an analysis of equity securities that gives information reasonably sufficient to base an investment decision on. SEC Regulation AC requires each report to carry the analyst's certification.
DISCLAIMER: This article is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.
