Investment Opportunities for Institutional Investors
Institutional investors are financial organisations that pool and manage finances on behalf of individuals by investing the funds and yielding profits to be paid periodically to contributors.
When it comes to making decisions using people’s finances, there’s no level playing field – the objective is to earn the maximum return on investors’ monies. This is the role institutional investors play.
Institutional investors are financial organisations that pool and manage finances on behalf of individuals by investing the funds and yielding profits to be paid periodically to contributors.
They are professional investors with the necessary expertise and extensive resources to make analytical investment decisions that individual or Retail investors do not have.
They include Commercial banks, Mutual funds, Hedge funds, Pension funds, Endowment funds, Private Equity firms, and Insurance companies are the various common types of institutional investors.
What are the opportunities?
A lot of the same opportunities are available to both retail and institutional investors; however, due to their size and resources, institutional investors are able to gain access to the opportunities retail investors cannot and also take better advantage of shared opportunities from economies of scale, etc. Some of them include:
Short-term Government Securities
These include debt-investments like Treasury bills and Government Promissory notes. For investors with zero to low risk appetite, short term government securities provide a comfortable balance of comfort and returns with low buy-ins and short maturity cycles.
They are perhaps one of the safest forms of investments, backed up by the government. Returns typically depend on the inflation rate and are mostly guaranteed.
Federal and State Government Bonds
Government bonds are a low to medium risk investment option. Bonds are debt security issued by the government. Maturity cycles range from mid to long term and risk varies with the length of maturity and the credibility of government.
Returns take the form of interests (coupons) which the government has an obligation to pay at stated intervals, as well as yields on traded bonds.
Corporate Bonds
Corporate bonds are a lot like government bonds, except that they are debt-security issued by companies rather than the government and are thus of higher risk and often higher rewards. They are overall still considered medium risk investments.
Real Estate
Real estate investments are considered high risk with long maturity cycles and high buy in rates. Through mutual funds and REITs, investors can also pull funds to manage real estate products and share both the risks and the returns.
Equities
Another great opportunity institutional investors can explore is the Stock Market. Equity investments often yield high returns from both growth in the price of the shares as well as the dividends to be earned.
The advantage of institutional investors playing in the equities market is that they can take on opportunities that would otherwise be unaffordable for individuals.