Institutional investors include pension funds, mutual funds, insurance companies, endowments, and investment firms. They often buy or sell assets in much larger amounts than individual investors and may participate in private funding rounds before a company becomes public.
When a private company enters the public market, institutions can be important buyers of its shares. The financial outcome for earlier stakeholders depends partly on the price and demand these and other investors support.
ELI5
An institutional investor is a large organization that invests money for many people at once. Instead of one person buying a few shares, the organization may manage a very large fund.
For example, a pension fund can invest some of the retirement savings it manages in company shares, with the goal of supporting future payments to its members.
How is an institutional investor different from an individual investor?
An institution manages pooled money and usually trades at a much larger scale, while an individual invests their own funds.
Do institutional investors only buy public shares?
No. Depending on their mandate, they may invest in private companies, bonds, property, commodities, funds, and other assets.
