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What are institutional investors?

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27th Nov 2009 by Ellen Silverman

Institutional Investors are large organizations which have significant cash reserves that need to be invested. Examples of institutional investors include: banks, investment banks
commercial trusts, endowment funds, hedge funds, insurance companies, labor union funds, mutual funds, unit trusts, pension funds or money managers.

Institutional investors account for half of the trading volume on the New York Stock Exchange. Institutional investors move large blocks of shares and have tremendous influence on stock market movements. Because they are considered to be knowledgeable and therefore less likely to make uneducated investments, institutional investors are subject to fewer regulations that the Securities and Exchange Commission enforces on the everyday investor. Moreover, the money that institutional investors use is not actually money that the institutions have raised for themselves, as they generally invest for other people.

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2nd Nov 2009 by Michael Haltman

Institutional investors are to some extent the exact opposite from the small investor. These can be banks, corporations, endowments and others that have very large sums of money to deploy. Mutual funds, the very vehicle that a small investor will use for diversification, are in their own right institutional. When Fidelity or Vanguard enters the market to place an order for a stock, it will typically be a large, institutional size block of 10,000 shares or more. These investors will not only buy stocks and bonds, but real estate, futures, currencies and others. By virtue of their size, they will generally have transaction costs lower on a per share basis than that of an individual investor. Institutional investors can also, depending on the way a company is going, exert influence of the management of that company.

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