It is important to know what percentage of a company is owned by the institutional investor as this is a key part of the learn trading and investing course.
Institutional investor refers to the ownership stake in a company that is held by the large financial institutions such as the civil service pension fund, the school teachers pension fund, insurance companies such as the Prudential and the large commercial banks such as Barclay’s Bank.
Institutional investors have large portfolios of investments and own large blocks of a company’s shares and can exert considerable influence upon the company’s directors.
The actual names of the institutional investor can be found along with a list of a company’s largest shareholders in The Financial Times (FT) newspaper or at Yahoo Finance and other online financial sources. In addition, in the USA any institutional investor or owner who establishes a position exceeding 5% of the outstanding shares of any stock must disclose to the Stock Exchange Commission.
Institutional investors have large amounts of money to invest, have great resources and often meet with the company’s CEO and other directors – so we can rest assured that they have performed a considerable amount of research and analysis before investing in a company.
To summarise a little of institutional investor is a good thing as it shows that the company has been checked out before we invest our money.
We don’t want the institutional investor percentage too high as this may mean the price is expensive. But we don’t want it to low and be investing in a company that no one has heard of, we want institutional investor percentage in the middle, say between 25% – 55%.