Institutional investors are any non-bank organizations or persons that control a collection of share amounts to qualify for special treatment and less regulation. There is an assumption that an institutional investor has more investment knowledge than the average investor, hence the lax regulation of their investments. Examples of these investors are insurance companies and pension fund or retirement investment managers.
Institutional investment can make for an indicator of prudent investments. By no means are institutional investors omniscient, but because they control large amounts of investment capital and have an assumed knowledge of the markets, they can provide a gauge on where your business can invest its capital. In essence, if you follow the institutional investment patterns, your business can collect mirrored returns of these investments. However, if the institutional investor makes incorrect investments your company could suffer. There is also the possibility of hiring an institutional investor to manage business retirement funds. Before you decide to use these investors as an investment blueprint or engage their services, there are few items to consider:
1. Obtain a directory of institutional investors and their ranking.
2. Consult the Council of Institutional Investors or subscribe to an institutional investor publication.
3. Evaluate the financial investment performance of the various institutional investment management companies.
Action Steps
The best contacts and resources to help you get it done
Locate a listing and rankings for institutional investors
Before you can decide to employ the services or mirror the investments of an institutional investor, acquiring an index of these investors and how they perform is a careful course of action.
I recommend: Visit the
Institutional Investor Research Group website, which offers a top 15 ranking of institutional investors. The site also has a worldwide ranking for institutional investors. Additionally, the
European Corporate Governance Institute website offers a detailed list of institutional investors. Both websites require registration and most detailed reports require you pay a fee.
Verify the credentials of the institutional investor's track record
If your business decides to employ or copy the investment pattern of a institutional investor, you should verify their investment history and subscribe to trade publications to corroborate the veracity of investor trading models.
I recommend: Visit the
Council of Institutional Investors website in order to inquire about a particular investor. The
Institutional Investor Magazine has a two-week free trial available that enables your business to get a basic understanding of the industry.
Investigate the performance of the large institutional investment management companies
When trying to determine the best institutional investor to use or mirror, it may be prudent to examine the performance of the large investment companies. These companies have a long history in this investment arena and have the infrastructure to handle any business no matter what the size.
I recommend: Contact each of the
major investment companies to determine which best fits your particular business needs.
Statestreet.com has a yearly listing of the best institutional investors. This can give you another list of institutional investor rankings to evaluate.
Tips & Tactics
Helpful advice for making the most of this Guide
- Despite being educated in the way financial markets work, an institutional investor can fall prey to the vagaries of these investments. Therefore, if you hire or follow the investment patterns of the institutional investor it is imperative that you not follow their advice or performance wearing blinders. Be sure to set up some form of performance measurement and take action if the institutional investor does not achieve these standards.
The official source of Institutional Investors is
the Institutional Investors page at Business.com
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