The term ‘institutional investors’ usually refers refers to large professional companies and financial institutions that invest in a wide range of financial securities.
- Insurance companies
- Pension funds
- Mutual funds
- Money managers
The IRO generally meets with the portfolio or fund manager and the buy-side analyst:
A portfolio manager has responsibility for its own portfolio or fund of selected securities, often specialised in a certain type of securities, a specific industry and/or a specific geographical area.The portfolio manager is frequently supported by an in-house research analyst, referred to as the ‘buy-side’ analyst, in order to give the fund manager an integral assessment and valuation of a specific security or industry.
Institutional investors are organisations that hold and manage large amounts of money, frequently pension money or the collected insurance premiums. Institutional investors focus on maximising expected returns whilst minimising risks, as do many investors. Institutional investors, however, are held by certain rules and regulations (i.e. ‘mandates’) that serve to ‘protect’ the entrusted funds. For instance, besides the obvious financial investment criteria, other aspects could be influential / crucial in the investment decision, such as:
- Sustainability/ Economic Social Governance (ESG) / Corporate Social Responsibility (CSR)
- Size and market cap
Investment styles and portfolios
Each institutional investor has its own ‘mandate’ according to which their portfolio is invested. The mandate may require a certain allocation between asset classes, and may also determine a focus on certain types of securities.
The investment horizon of an institutional investor can be anything between very long term to short term, mainly depending on the objective and strategy of the investor. Investors with a long(er) term focus generally have a strategic view on a company and its markets and will require regular meetings with management for strategic and market updates, next to the market updates provided by brokers. Investors with a short(er) term focus may not want to be as involved in the strategic direction of a company, but will still require information from various sources (i.e. management, brokers, analysts) to make their investment decisions.