Institutional Investor

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Definition of 'Institutional Investor'

An institutional investor is a financial entity that pools money from many investors to invest in securities. Institutional investors include pension funds, insurance companies, mutual funds, and hedge funds.

Institutional investors are important to the financial markets because they provide liquidity and stability. They can also help to promote efficient pricing of securities.

Pension funds are a type of institutional investor that pool money from employees to provide retirement benefits. Pension funds are typically managed by a board of trustees, who are responsible for investing the funds in a way that will maximize returns while minimizing risk.

Insurance companies are another type of institutional investor. Insurance companies pool money from policyholders to pay for claims. Insurance companies invest the premiums they receive in a variety of securities, including stocks, bonds, and real estate.

Mutual funds are a type of investment vehicle that allows investors to pool their money together to purchase a portfolio of securities. Mutual funds are typically managed by a professional investment manager, who is responsible for selecting the securities that make up the fund's portfolio.

Hedge funds are a type of private investment fund that is not regulated by the Securities and Exchange Commission (SEC). Hedge funds typically use a variety of investment strategies, including leverage, short selling, and derivatives, to generate high returns.

Institutional investors play an important role in the financial markets. They provide liquidity and stability, and they can help to promote efficient pricing of securities.

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