Institutional Investors

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Description of Institutional Investors. Explanation.

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Definition Institutional Investors. Description.

Institutional Investors are large, professional participants to the financial markets, such as:

Pension funds
Investment banks
Fund-management companies
Insurance companies
Hedge funds
Mutual funds
Trusts (charity, religion, education, endowment)

These organizations hold somewhere between 40% to 75% of all equities in most capital markets. Typically they invest with a (very) long-term perspective (10-50 years), based on a previously crafted formalized strategy, such as maintaining a certain portfolio / composition of shares. See rebalancing. Because they are believed to be more knowledgeable and better able to protect themselves using portfolio insurance, they face less protective regulations. Because they trade securities in large volumes, they often get preferential treatments (lower commission fees) from investment banks and from the capital markets, which they often own as well. As a result they clearly have a competitive advantage when it comes to buying and selling securities.

Under normal circumstances, they are believed to have a stabilizing effect on the capital markets and on the economy as a whole.

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End of description Institutional Investors. An explanation.