Institutional Investor

Institutional investors manage money collected from many individuals or held for specific purposes. A pension fund invests contributions to pay future retirement benefits; an insurer invests premiums to pay future claims; a university endowment invests donations to support its activities.

Because of their size, institutional investors own a large share of the shares and bonds traded in major markets. Their decisions can significantly influence prices, and their votes at shareholder meetings can shape company policies.

For example, a large pension fund might hold shares in thousands of companies worldwide, with a single holding worth hundreds of millions.

Institutional investors often have advantages over individual investors, including access to professional research, lower trading costs, the ability to invest in private markets and greater bargaining power with fund managers and companies.

They are usually subject to regulation and are often treated as sophisticated investors, meaning some consumer protection rules designed for individuals do not apply to them. Many institutional investors also have long investment horizons, which allows them to hold less liquid assets, such as infrastructure and private equity.