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Simple English definitions for legal terms
institutional investor
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A quick definition of institutional investor:
An institutional investor is a group of people who manage other people's money. They work for big companies like banks, insurance companies, and mutual funds. These investors can buy special investments that regular people can't buy because they are very smart and don't need as much protection. They can also buy investments that other people can't sell.
A more thorough explanation:
An institutional investor is a type of organization that manages investments on behalf of their clients. Examples of institutional investors include investment banks, insurance companies, and mutual funds. These entities are considered sophisticated investors and may have access to investment opportunities not available to the general public.
- An investment bank manages investments for wealthy individuals and corporations.
- An insurance company invests premiums collected from policyholders.
- A mutual fund pools money from multiple investors to invest in a diversified portfolio of securities.
These examples illustrate how institutional investors manage investments on behalf of others. They have the expertise and resources to make informed investment decisions and may have access to investment opportunities that are not available to individual investors.
Under certain regulations, institutional investors may be able to purchase securities in private placements, which are not available to the general public. This is because they are considered sophisticated investors and do not require the same level of protection as individual investors.