Capital Markets 3.0: The Hybrid Era Begins

David Bellaiche, head of buy-side business line, Murex

What if the most important question facing asset managers today isn’t about ESG, private markets or digital assets?

These topics dominate headlines and conference panels, sure. But starting there might mean missing the deeper shift reshaping the buy-side industry. Over the past few years, I’ve watched a quiet yet powerful transformation unfold across buy-side capital markets participants. It’s not about new products or regulatory shifts. It’s something more fundamental: a redefinition of roles and the traditional boundaries that once defined how these buy-side institutions analyze opportunities, decide investments, hedge risk, trade and manage liquidity.

While many investment firms continue to outsource trading to industrialized service providers, a growing number of influential players—who are no longer content staying in their traditional lane—are building sophisticated in-house trading desks. They aim to gain control over advanced strategies involving liquidity metrics, algorithmic execution and risk frameworks—areas once dominated by the sell-side.

The lines between buy side and sell side are blurring, and fast. We’re entering the era of convergence. If you are designing system architecture for a major investment firm like an asset manager, insurance or pension fund, today, this concept of convergence is where the conversation should begin.

Traditional labels are disappearing.

In the past, roles in the financial ecosystem were clearly defined and the rules were simpler. Buy-side investors focused on investing, while sell-side banks acted as intermediaries. The two sides operated as mirror images, each executing distinct functions within a well-structured system. Investors relied on the sell side to access financial products. The sell side, in turn, held a near monopoly, not only in designing and creating financial instruments, but in pricing them. The sell side was the price maker; the buy side, the price taker.

Today, that distinction has disappeared: The world’s largest institutions operate with hybrid DNA. On one side, the most advanced asset managers are internalizing their stock lending desks and building collateral optimization engines to support their OTC activities. Pension funds are emerging as mid-market lenders, capitalizing on the rapid growth of private debt markets. Private banks are implementing complex hedging overlays on discretionary mandate, while life insurers are managing long-term liabilities with sophisticated OTC strategies, mirroring the risk management practices of bank derivatives desks.

On the other side, bank treasurers are evolving as well, investing long-term capital reserves and allocating risk similarly to multi-asset fund managers.

This hybrid operating model represents a structural shift that’s been quietly reshaping the competitive landscape. All signs point to the acceleration of this hybrid model in the decade ahead. At Murex, we’ve seen this evolution firsthand among some of our largest buy-side clients in the Americas. These institutions are no longer just exploring sell-side capabilities: They’re embedding them deeply into their operating models. Capabilities once reserved for banks—like advanced analytics, risk management, securities lending and repo functionalities, and structured products—are now being adopted by these non-bank institutions. This isn’t just about keeping up. It’s about gaining an edge.

That’s why Murex has always built its platform around business processes, not institutional labels. In today’s markets, the boundaries between buy-side and sell-side are not just blurred—they’re being redrawn.

Analytics move from a supporting role to strategic core.

Buy-side institutions are investing heavily in analytical capabilities once exclusive to trading floors of corporate and investment banks. Their goal is clear: to operate on a level playing field with their sell-side counterparts. How are they doing it? By turning analytics into a competitive edge, running portfolio construction scenarios and pre-trade simulations, performing integrated stress testing and risk decomposition and monitoring potential future exposure (PFE), greeks, and liquidity metrics in real-time.

In a world where investment firms’ margins are shrinking, and where every basis point counts, analytical precision is power. These pricing capabilities now give buy-side institutions a decisive edge in negotiations with sell-side counterparts. They are no longer optional. They have become critical for success. What once lived in the back office or was even outsourced is now a front-line differentiator for the buy side.

Private credit and structured investment vehicles represent a front line of convergence.

One of the most striking areas of convergence is happening today in private markets. Asset managers and asset owners are no longer just allocating capital—they’re originating deals and structuring investment vehicles. Buy-side direct lending activity now resembles a bank syndication desk. SPVs, evergreen funds and other hybrid instruments are increasingly built in-house. In short, buy-side institutions are no longer passive consumers of structured products. They’ve become creators.

This shift demands a new level of sophistication to model non-linear cash flows and simulate complex life cycle events. Supporting these capabilities requires platforms that can model, monitor and manage bespoke structures across asset classes, jurisdictions and risk dimensions. Traditional buy-side systems, retrofitted for alternatives, simply won’t cut it.

Liquidity has gone from constraint to competitive lever.

In parallel to their primary investment strategies, the most sophisticated buy-side institutions are now using their cash and securities holdings to generate extra revenues by running internal repo desk across bilateral, cleared and triparty venues; internalizing securities lending programs either in principal or agency modes; centralizing their global inventories; and trading with liquidity pools connected to sell-side players.

This shift demands more than just operational tweaks or siloed specialized systems. It calls for comprehensive investment solutions that bring together treasury, trading, risk and collateral functions into a single, cohesive technology environment.

The rise of the hybrid institution means the obsolescence of the traditional technology divide.

As financial institutions redefine themselves, their technology must follow. The next-generation architecture will not be judged by whether it serves the buy side or the sell side. It will be judged by whether it can:
• Span front to back, without assumptions about business models.
• Support structuring, funding, investing and trading, all in one system.
• Deliver consistent analytics, from pre-trade simulations to regulatory reporting.
• Offer the flexibility to build proprietary business logic and the intelligence to guide it.
• Leverage AI for predictive risk and opportunity analysis.

In this new world, your true competitive edge lies in how well your systems reflect and support your unique business model. Flexibility and extensibility aren’t just technical features—they’re strategic enablers of transformation. Platforms still built around rigid, binary distinctions—buy side vs. sell side, portfolio management vs. trading, risk engine vs. liquidity buffer—will eventually fall short of meeting the innovation pace.

To stay ahead, technology must evolve from categorization to customization. Financial institutions should ask themselves: “As our operating models change rapidly, are we limiting ourselves by continuing to think in terms of buy-side versus sell-side platforms—or should we be seeking platforms that can adapt just as quickly?”

Convergence is the market’s new operating system. 

While the convergence of hybrid models is gaining momentum, it’s important to recognize that this shift is not yet universal. It’s most visible today among the largest buy-side institutions, those with the scale, complexity and ambition to blur the lines between investment and intermediation. Elsewhere, the buy-side remains a diverse and versatile ecosystem, where different strategies, structures and vendor models continue to coexist and thrive.

Still, the institutions best-positioned for long-term success may not be those that fit neatly into traditional labels, but those bold enough to rethink them. The future belongs to those who design their architectures not just for today’s needs, but for tomorrow’s possibilities—platforms built to adapt, integrate and evolve. Those who embrace convergence with intention and clarity will be the ones to shape the next generation of financial institutions.