Investment banks (securities firms) are a particular type of financial institution, a particularity largely determined by their functional orientation and corresponding business activities. Historically, this particularity determined the specific initial organization and management, or partnership. Along with the changing internal and external climate in the economy and in banking, the organization and management of investment banks has been one of the most frequently discussed topics in financial theory around the world over the past 30 years.

Investment Banks in the Financial System: Definition and Functional Orientation

Investment Banks: A Brief Survey from the Perspective of Separation of Activities

From the perspective of separation of activities, investment banks are financial intermediaries that use the financial market as a business platform and specialize in securities services. From a realistic perspective, today's investment banking can be divided into the following three categories:

1. Investment banking (conventional): Investment banking includes services for corporate and government financing activities (e.g., equity issuance and issuance of bonds, debentures, or convertible bonds) as well as M&A advisory services.

2. Trading (including client trading and proprietary trading): Client trading refers to securities brokerage services (including research reports and investment advice) offered by an investment bank as an intermediary to its clients and also includes equity, fixed-income, commodity, and currency trading. Proprietary trading refers to an investment bank's investment activities that have a bearing on its own balance sheet. Such activities exclude the investment on behalf of clients. They largely occur in equity (including public offering and private placement), bonds and debentures, convertible bonds, derivatives, private equity funds, and hedge funds, among others.

3. Asset management: Asset management refers to a range of investment products an investment bank offers retail or institutional clients, such as equity investment, fixed income investment, alternative investment and money market investment products. Generally, investment banks and their clients invest in alternative investments such as hedge funds, private equity funds and other marketable fund products.

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