About Institutional Investment
Institutional investment is that type of investment, which is done by an organization, which is a financial services provider. Common examples are an insurance company, a bank, a hedge fund, a retirement fund, or a mutual fund.
Institutional investment is a form of financially advanced investment and it is invested in substantial volumes. Institutional investment portfolios normally have a large number of investments. Due to the advanced characteristics of institutional investment, the institutional investors are frequently involved in private security placements where particular features of the securities regulations are not enforced.
For instance, in the U.S., a private placement according to the Rule 506 of Regulation D can be done with an accredited investor excluding the requirement of enlisting the bidding of securities with the SEC or Securities and Exchange Commission.
In principle of an institutional investor, the definition of an accredited investor in the regulation is as follows:
An insurance company, a bank, a business development company, a small business investment company or a registered investment company (usually, a mutual fund institution)
An employee benefit plan subject to the Employee Retirement Income Security Act, if the investment decisions are taken by an insurance company, a bank, or a registered investment consultant, or in case the overall amount of assets of the plan is more than 5 million U.S. dollars.
A charitable institution, partnership, or business corporation, which has assets of more than 5 million U.S. dollars
An executive officer, a general partner, or a director of the firm trading the securities.
A commercial enterprise where every equity holder is an accredited investor.
A natural individual whose personal net worth or combined net worth with the spouse of that individual is more than 1 million U.S. dollars during the time of buying
A natural individual whose earnings is more than 200,000 U.S. dollars in every single year of the two latest years or combined earnings with a spouse is more than 300,000 U.S. dollars for the same period and a sensible anticipation of similar level of income in the present year.
A trust, which has assets of more than 5 million U.S. dollars, which was not established for purchasing the securities provided, which a sophisticated individual can only buy.
Importance of Institutional Investment
The importance of institutional investment may vary. Sovereign wealth funds in oil-exporting countries are quite significant and on the other hand, pension funds are highly popular in developed economies.
Institutional Investment in Canada
Both government funds and pension funds are holding strong position in the Canadian financial market and form a significant portion of the Canadian economy.
The leading institutional investors in Canada include the following
Canada Pension Plan Investment Board (C$282.6 Billion )
Caisse de dépôt et placement du Québec (C$248 Billion )
Ontario Teachers’ Pension Plan (C$171.4 Billion )
British Columbia Investment Management (C$123.6 Billion [March 31 2015])
Alberta Investment Management (C$83.9 Billion [December 31 2014])
The leading institutional investors United Kingdom
In the UK, institutional investors may play a major role in economic affairs, and are highly concentrated in the City of London’s square mile. Their wealth accounts for around two thirds of the equity in public listed companies. For any given company, the largest 25 investors would have to be able to muster over half of the votes.
The major investor associations are
Investment Management Association.
Association of British Insurers
National Association of Pension Funds
The Association of Investment Trust Companies