Institutional shareholder

economic-dictionary

The institutional shareholder is an investor profile. This is characterized by having a professional management, which directs the investment decisions to be made.

Institutional shareholder groups often invest together, with the goal of making a profit for the participants. This, thanks to the management work of one or more professionals.

That is, by definition, the institutional shareholder allocates funds collected by its various participants, to securities that it chooses in the financial markets. This concept is known by its Anglo-Saxon name, as "institutional investor". Usually, they set themselves up as professional shareholders, groups, or groups of legal persons.

On the other hand, when joining a group of this type, the investor must take into consideration, among other points:

  • Mechanisms to defend your interests in the market and / or against bad practices.
  • Access to a more prepared academic and professional direction.
  • Frequently, the volume reached by operations derived from the work of the institutional shareholder is large in the economy or in the particular sector we are talking about.

Main actors who exercise the work of institutional shareholder

The role of institutional shareholder can be exercised by different institutions, companies or organizations. In this way, it is common to see credit institutions, insurers, managers or various investment funds developing this activity. They can become a fundamental part of the shareholding of a company.

The administrative role is undertaken by intermediaries or managers. They bring their knowledge and experience to manage the capital raised by the participants. On the other hand, which seek to obtain benefits in the markets.

Control and governance of an institutional shareholder group

Often, this type of group responds to practices very similar to those of an ordinary commercial company. In this sense, managing its control through departments or management teams, such as boards of directors or shareholders' meetings.

At the same time, the participating shareholders are concerned with having the ability to monitor and understand the group's drift in the stock market and the investment decisions that are made.

Common investment sectors

With regard to the nature of the shares held by institutional shareholders in their portfolio, it is common for these to be of a very varied type. Precisely, thanks to the fact that they are medium and large investment volumes, they can afford to undertake larger projects.

Currently, it is common for the most popular stocks to be related to the real estate market or public debt securities, as examples of higher and lower volatility, respectively.

On the other hand, it is common for this institutional investment to be focused more on the long term than that of the individual or standard investor.

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