InvestorQ : Do you think institutional investors always remain profitable?
Anjali Desai made post

Do you think institutional investors always remain profitable?

5 months ago
An institutional investor is a company or organization that invests money on behalf of other people. These investors buy and sell substantial blocks of stocks, bonds, or other securities and, for that reason, are considered to be the whales of Wall Street. This group is also viewed as far better than the average retail investor and, in some instances, is subject to less restrictive regulations.

There are six types of institutional investors: commercial banks, endowment funds, mutual funds, pension funds, hedge funds, and insurance companies. Institutional investors have less restrictive regulations as compared to other average investors. It is assumed that institutional investors have better knowledge and can protect themselves.

Since institutional investors invest for other people, their profit is the margin they charge from the customer, which is in the form of expense ratio for the investors. So, generally, the only profit that institutional investors receive is from upfront commission/management charges they receive from the customer. In short, they charge these expenses from the customer even when the funds do not go into profit. Hence, they will mostly be in profit, no matter where the actual return of the portfolio is headed.