An institutional investor is a company or organization that invests money on behalf of other people. In addition, an institutional investor buys, sells, and manages stocks, bonds, and other investment securities on behalf of its clients, customers, members, or shareholders.

Broadly speaking, there are six types of institutional investors: endowment funds, institutional commercial banking, institutional mutual funds, hedge funds, pension funds, and insurance companies. Institutional investors face fewer protective regulations compared to average investors because it is assumed the institutional crowd is more knowledgeable and better able to protect themselves.

Takeaways

Institutional investors control a significant amount of all financial assets in the United States, and therefore have a significant influence on all financial markets — an influence that has only grown over time.

Institutional investors have more government regulations based on their influence over the markets.

As these institutions continue to grow, so will their holdings and influence.

Institutional investors remain an important part of the investment world despite a flatshare of all financial assets over the last decade and still have a considerable impact on all markets and asset classes.