{"id":6201,"date":"2022-11-10T08:40:37","date_gmt":"2022-11-10T08:40:37","guid":{"rendered":"https:\/\/commerceiets.com\/?p=6201"},"modified":"2022-11-10T08:40:37","modified_gmt":"2022-11-10T08:40:37","slug":"role-of-institutional-investors-in-financial-markets","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/role-of-institutional-investors-in-financial-markets\/","title":{"rendered":"ROLE OF INSTITUTIONAL INVESTORS IN FINANCIAL MARKETS"},"content":{"rendered":"\n

ROLE OF INSTITUTIONAL INVESTORS IN FINANCIAL MARKETS: Meaning of institutional investors, features of institutional investors, Types of institutional investors and role of institutional investors in financial markets.<\/h4>\n\n\n\n

INSTITUTIONAL INVESTORS<\/span><\/u><\/h2>\n\n\n\n

Institutional investors are legal entities that participate in trading in the financial markets .<\/p>\n\n\n\n

These constitute a segment of investors who are capable of buying or selling on a large scale in the stock exchange market. They buy and sell through brokers, sub-brokers, portfolio consultants etc.<\/p>\n\n\n\n

In India, major institutional investors include life insurance corporation of India, General Insurance Corporation, Unit Trust of India, Building Societies, Charitable Trusts and Religious Organizations.<\/p>\n\n\n\n

\u201cThe institutional investors have emerged as the most important group of investors in corporate securities\u201d I agree with this statement.<\/p>\n\n\n\n

Institutional investors exert a significant influence on the market in a both positive and negative way.<\/p>\n\n\n\n

Often known as market makers, institutional investors exert a large influence on the price dynamics of different financial instruments.<\/p>\n\n\n\n

The presence of large financial groups in the market creates a positive effect on overall economic conditions. The institutional investors activism as the shareholders is thought to improve corporate governance because of the monitoring of financial markets benefits all shareholders.<\/p>\n\n\n\n

FEATURES OF INSTITUTIONAL INVESTORS<\/h2>\n\n\n\n
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  1. It is always a legal entity and it is important to understand that an institutional investor is an enterprise managing a fund, but not a mutual fund itself.<\/li>\n\n\n\n
  2. The basis of institutional investor\u2019s activity is professional, and it manages assets based on the interests and goals of its clients.<\/li>\n\n\n\n
  3. An institutional investor always manages a significant number of funds<\/li>\n<\/ol>\n\n\n\n

    TYPES OF INSTITUTIONAL INVESTORS<\/h2>\n\n\n\n

    There are several types of institutional investors:<\/p>\n\n\n\n

    \"ROLE
    ROLE OF INSTITUTIONAL INVESTORS IN FINANCIAL MARKETS<\/figcaption><\/figure>\n\n\n\n

    Some of them are explained as follows:<\/p>\n\n\n\n

      \n
    1. MUTUAL FUNDS: <\/strong>It is the most popular institutional investor. Mutual funds are vehicles facilitating investment in a variety of securities with capital commitment from several investors, both individual and otherwise.<\/li>\n<\/ol>\n\n\n\n

      In other words, numerous entities invest their capital, which is pooled and in turn, invested in a bag of securities called mutual funds. Thus, individuals with understanding of stock market dynamics can rely on this instrument to mobilise their disposable income. MF is designed to minimize the risk of capital loss, wherein the gain from one dilute loss in another security kind.<\/p>\n\n\n\n

      2. HEDGE FUNDS: <\/strong>Hedge funds are investment partnership where money is collected from members is pooled to invest in securities. Fund manager of hedge funds is called General partner and group of investors is called limited partners. These funds are designed to reduce risk and enhance returns via a diverse portfolio.<\/p>\n\n\n\n

      3. INSURANCE COMPANIES: <\/strong>Insurance companies are heavy weight institutional investors. These institutions employ the premium they receive from policyholders into securities. Since the aggregate of premiums is considerable, their investments are also sizable. The returns insurance companies receive from trading are deployed to pay for claims.<\/p>\n\n\n\n

      4. ENDOWMENT FUNDS:<\/strong> Endowment funds are set up by foundations, where the administrative entity utilizes the funds for its cause. Typically, schools, universities, hospitals, charitable organizations etc. establish these funds. Here, the investment usually acts as a deductible for the investor. These funds are so designed that the principal remains intact, and the controlling organization uses the investment income to finance its activities.<\/p>\n\n\n\n

      5. PENSION FUNDS: <\/strong>Here, both employer and an employee can invest in pension funds. The accumulated capital goes toward the purchase of different kinds of securities.<\/p>\n\n\n\n

      There are two kinds of pension funds:<\/p>\n\n\n\n