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Who are Institutional investors?

Institutional investors are non-bank persons or organizations involved in the collection of significant amounts of money for trading in securities, real estate and other investment assets.

April 25, 2011 10:59 IST | India Infoline News Service

Who are Institutional investors? 

Institutional investors are non-bank persons or organizations involved in the collection of significant amounts of money for trading in securities, real estate and other investment assets. Operating companies who invest some of their profits in these types of assets also come under this definition.

What are the Types of Institutional investors

Banks, insurance companies, retirement/pension funds, hedge funds, investment advisors and mutual funds comprise some types of institutional investors. They function as highly specialized investors on behalf of others. To cite an example, the pension that an employee is entitled to receive from his employer is invested by the latter into a fund. The fund, in turn, can be used to buy shares in a company or other financial products. Such funds are useful as they hold a broad portfolio of investments in many companies. This means that the risk is spread and if any one company were to fail, only a small portion of the whole fund's investment will be affected.

What clout do institutional investors hold?

Institutional investors have to deal with fewer protective regulations as they are considered to be more knowledgeable about market operations and hence better able to protect themselves. Furthermore, they can yield significant influence in the management of corporations as they are usually entitled to exercise the voting rights in a company. As institutional investors have the freedom to buy and sell shares, their actions can also play a huge role in determining whether companies remain solvent or end up bankrupt.

What is the Work module of institutional investors?

The principal objective of institutional investors is to buy and sell stocks. They strive hard to buy undervalued stocks and offer good prospects. For this, they employ specialists such as analysts and researchers to get the best information about companies. The institutions have regular meetings with company CEOs, assess industry conditions and study in depth the prospects for every company they intend investing in. Besides, institutional investors with large stakes have a vested interest in increasing the value of their shareholdings.


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