Large institutions both national and international are always on the lookout for institutional grade real properties. Since their investments are always backed by extensive research, they tend to invest in properties worth millions on behalf of their members. Due to the size of their investments and the direct access to investment opportunities that the general public does not have, their investments are often studied by retail investors.
Institutional investors are often large companies or organisations that invest money on behalf of their members, shareholders, clients and customers. There are six major types of institutional investors:
Mutual funds
Pension funds
Insurance agencies
Endowment funds
Commercial banks
Hedge funds
Since they are run by people who have immense knowledge, expertise and resources in dealing with securities they are bound by fewer regulations and restrictions. It is because, with their knowledge and experience, they are assumed to be better able to protect their money than a retail investor.
Because they invest in a substantial percentage of shares or bonds in the securities market, they are often also referred to as ‘Whales on the wall street.’
Institutional real estate investors deal in properties that are institutional real estate grade. This means properties that are either owned or financed by institutional investors. Examples of such investments include offices, hospitals, retail industrial and residential apartments.
Institutional investors are the biggest players in the securities market. They deal with a large percentage of securities at once which in return is a major factor in the chain of demand and supply.
There every transaction has the potential of making the prices of the securities change in minutes.
They have access to resources and knowledge that is not always available to retail investors.
The institutional real estate investment grade properties are said to be Class A or Class A+ properties. They are brand new properties and have a very chance of deteriorating or getting obsolete for the tenure of the investment.
Since they involve in transactions of higher values, institutional investors often refrain from trading in shares of small companies. The first reason is the volume price of the shares and the second is that their involvement in shares of small companies can create a demand and supply imbalance in the market.
The money that institutional investors use is not their own money. It is the money that they invest on behalf of their clients who are often the general public.
