what is an institutional investor 
an institutional investor is a company or organization that invests money on behalf of other people mutual funds pensions and insurance companies are examples institutional investors often buy and sell substantial blocks of stocks bonds or other securities and for that reason are considered to be the whales on wall street the group is also viewed as more sophisticated than the average retail investor and in some instances they are subject to less restrictive regulations investopedia michela buttignolthe role of institutional investorsan institutional investor buys sells and manages stocks bonds and other investment securities on behalf of its clients customers members or shareholders broadly speaking there are six types of institutional investors endowment funds commercial banks mutual funds hedge funds pension funds and insurance companies institutional investors face fewer protective regulations compared to average investors because it is assumed the institutional crowd is more knowledgeable and better able to protect themselves institutional investors have the resources and specialized knowledge for extensively researching a variety of investment opportunities not open to retail investors because institutions are moving the biggest positions and are the largest force behind supply and demand in securities markets they perform a high percentage of transactions on major exchanges and greatly influence the prices of securities in fact institutional investors today make up more than 90 of all stock trading activity 1institutional investors account for about 80 of the s p 500 total market capitalization according to data from pensions investment online 2since institutional investors can move markets retail investors often research institutional investors regulatory filings with the securities and exchange commission sec to determine which securities the retail investors should buy personally in other words some investors attempt to mimic the buying of the institutional crowd by taking the same positions as the so called smart money retail investors vs institutional investorsretail and institutional investors are active in a variety of markets like bonds options commodities forex futures contracts and stocks however because of the nature of the securities and the manner in which transactions occur some markets are primarily for institutional investors rather than retail investors examples of markets primarily for institutional investors include the swaps and forward markets retail investors typically buy and sell stocks in round lots of 100 shares or more institutional investors are known to buy and sell in block trades of 10 000 shares or more 3 because of the larger trade volumes and sizes institutional investors sometimes avoid buying stocks of smaller companies for two reasons first the act of buying or selling large blocks of a small thinly traded stock can create sudden supply and demand imbalances that move share prices higher and lower in addition institutional investors typically avoid acquiring a high percentage of company ownership because performing such an act may violate securities laws for example mutual funds closed end funds and exchange traded funds etfs that are registered as diversified funds are restricted as to the percentage of a company s voting securities that the funds can own 