institutional investors

Institutional investors

Organizations that invest, including insurance companies, depository institutions, pension funds, investment companies, mutual funds, and endowment funds.

Institutional Investor

A business devoted to holding and managing assets, either for clients or for itself. Examples include mutual funds, banks, holding companies, and brokerages. Institutional investors are important to placing new issues of stocks and bonds, as they can afford to buy more of an issue than individual investors.

institutional investors

the financial institutions that collect savings and other deposits and invest long-term in corporate STOCKS and SHARES, government fixed interest securities (BONDS), property and overseas securities. In the UK, PENSION FUNDS, INSURANCE COMPANIES, UNIT TRUSTS and INVESTMENT TRUST COMPANIES, together with the SAVINGS BANKS, INVESTMENT BANKS and specialized VENTURE CAPITAL agencies such as the 3i's (formerly Investors in Industry), constitute the main investing institutions. In many other countries the COMMERCIAL BANKS are major long-term investors. (In most of these countries the lack of any established STOCK MARKET and the availability of private capital from individuals was the main historical reason for their closer tie-in with industrial companies.)

Institutional investors have grown rapidly in the UK since the 1950s, encouraged in particular by tax concessions on contractual pension and life insurance schemes, and they now constitute the primary means of channelling personal savings into corporate investment. In 2004, pension funds, insurance companies, unit trusts and investment trust companies collectively owned around 64% of UK ordinary shares, compared with around 18% held by private individuals.

In the UK, the pensions funds, insurance companies, unit trusts and investment trust companies are represented collectively by the Institutional Investors Committee, which acts on their behalf in dealings with other institutional bodies such as the FINANCIAL SERVICES AUTHORITY. (See FINANCIAL SERVICES ACT 1986) and the government. See FINANCIAL SYSTEM.

institutional investors

the financial institutions that collect SAVINGS and other deposits and invest (see INVESTMENT) long-term in company STOCKS and SHARES, government BONDS, property and overseas securities. In Britain, the main investing institutions are the INSURANCE COMPANIES, PENSION FUNDS, INVESTMENT TRUST COMPANIES and UNIT TRUSTS. In many other countries, the commercial banks are also major long-term investors. In most of these countries, the lack of an established STOCK EXCHANGE and the availability of private capital from individuals were the main historical reasons for their close tie-in with industrial companies.

Institutional investors have grown rapidly in Britain and elsewhere since the 1950s, encouraged both by the favourable tax concessions granted by the government to contractual pension and life insurance schemes, and the opportunities that financial institutions provide to pool risks by investing in a variety of financial securities.

Institutional investors now occupy a prominent position in the FINANCIAL SYSTEM and form the primary conduit for channelling personal savings into industrial and commercial investment, displacing direct investment by individual savers. In Britain, institutional investors now own around 60% of the ordinary SHARE CAPITAL of British companies. The collective interests of the institutional investors are represented by the Institutional Investors Committee, which provides a forum for discussion of matters of mutual concern to members and acts on behalf of members in dealings with other bodies and the government. See PORTFOLIO, INDIVIDUAL SAVINGS ACCOUNT.