Institutional Trading

What Is an Institutional Investor?

An institutional investor can be a company or organization that invests money on behalf of other people. Prime examples of such are pensions, mutual funds and insurance companies. Usually considered as the whales of Wall Street, institutional investors often buy and sell substantial blocks of not only stocks but also bonds or other securities, hence the nickname.

As opposed to your average retail investor, the group is also viewed as more sophisticated and in many instances, they are subject to far less restrictive regulations.

Institutional Investors.

Understanding Institutional Investors.

An institutional investor buys, sells and manages not only stocks but also bonds and other investment securities on behalf of their clients. Generally speaking, when it comes to institutional investors there are six types of institutional investors:
  • Endowment Funds
  • Commercial Banks
  • Mutual Funds
  • Hedge Funds
  • Pension Funds
  • Insurance Companies
Statistically it is proven that when dealing with institutional investors, they are met with fewer protective regulations compared to your average investor, the reason being is because the institutional crowd is assumed to be more knowledgeable and in a better position to be able to protect themselves. Institutional investors have the resources and specialized knowledge in order to do extensive research on a variety of investment opportunities that are not open to individual or non-professional investors. Today, more than 90% of all stock trading is comprised of institutional investors, the reason being is that institutions are moving the biggest positions which naturally makes them the biggest driving force behind supply and demand in securities markets. This is evident when they are able to perform a high percentage of transactions on major exchanges and greatly influence the prices of securities.


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