The Institutional Investor is an investing entity having a huge disposal of assets for investment. Investment companies, endowment funds, mutual funds, investment banks, brokerages, pension funds and insurance companies are some examples of institutional investors. They face fewer regulations.
More on the Institutional Investor
The Institutional Investor is a force to reckon with in the financial market. Institutional investors exhibit immense proficiency in the financial markets and they are gaining in importance by the day. However they face a relatively relaxed protective regulatory structure. Since they invest in huge amounts, they are considered to be more adept and knowledgeable in these matters.
It is thought that they can protect themselves well from the various risks.
The investment policies and trading strategies followed by the institutional investors affect financial markets and business activities round the globe. The enormity of effects and the huge scale of operations raise a whole lot of regulatory issues.
They are as follows:
the rationale involved in the imposition of investment restrictions
the adequate presence of financial infrastructure in OECD countries as well as in emerging market economies.
the role played by risk-management standards and concerned systems
Some Factors Propelling the Growth of Institutional Investor
One prime factor propelling the growth of the institutional investors is an increased demand for retirement solutions from the OECD member countries. This has resulted due an ageing of the resident population of these countries. OECD refers to the Organization for Economic Co-operation and Development.
The products in demand are:
- mutual-fund products
- guaranteed-equity plans
- equity-indexed annuities
- asset backed securities
The information technology revolution has increased connectivity by leaps and bounds. It has also led to an integration of different sectors of the financial market. As a result demand for risk management services of institutional investors has increased .
The investment products in demand are:
- mutual funds related to money-markets
- credit derivatives
- swaps and
- options and the like
The worldwide movement towards a general deregulation in the banking sector has led to an increased competition among banks and the various financial institutions. Along with this, new international capital benchmarks have been introduced for the banks. So banks too have entered into capital market transactions in a big way. This has blurred the distinction among banks, fund management services and insurance service providers.
Last Updated on : 5th July 2013