Topic hub
Institutional investors
An institutional investor is an organisation that invests a large pool of capital under a formal mandate for others, such as pension members, policyholders, a charitable mission or a state. In private markets, institutional investors commit capital to funds as limited partners. This hub covers the main types of institutional allocator, the advisers and intermediaries that work for them, and the governance and rules that shape how they invest.
Allocator types come first: pension funds, endowments, foundations and sovereign wealth funds. Advisers include the investment consultant, the outsourced CIO and the registered investment adviser. Governance covers the investment committee. Regulation covers ERISA and the plan asset rules, whose scope is set out in their own entries.
Not in this hub: Family offices have their own hub. Placement agents, which work for fund managers rather than investors, are in Fundraising.
Reference index
Definition:
Institutional Investor — An institutional investor is an organisation that invests a large pool of capital under a formal mandate for others (pension members, policyholders, a charitable mission or a state), such as a pension fund, endowment, foundation, insurer or sovereign wealth fund.
Allocator types
4 concepts- Pension Fund
A pension fund is the pool of assets, usually held in trust, from which a pension plan pays retirement benefits; in private markets the term mostly means defined benefit plans, which commit to private funds to help meet long-dated liabilities.
- Endowment
An endowment is a pool of assets held by a nonprofit institution, most often a university, school, hospital or cultural body, and invested for the long term so that a regular withdrawal under a spending policy supports the institution's mission.
- Foundation (Charitable Foundation)
A foundation is a nonprofit entity, usually endowed by one donor, family or company, that invests its assets and spends the returns on charitable grants or programmes; in US tax law many are private foundations, and a private non-operating foundation is subject to a minimum payout.
- Sovereign Wealth Fund (SWF)
A sovereign wealth fund (SWF) is a special-purpose investment fund or arrangement owned by a government and created for macroeconomic purposes, which manages public assets to meet financial objectives and invests at least partly in foreign financial assets.
Advisers and intermediaries
3 concepts- Investment Consultant
An investment consultant is a firm that advises institutional investors on investment policy, asset allocation, manager selection and performance monitoring, while the client keeps the final investment decision.
- Outsourced Chief Investment Officer (OCIO)
An outsourced chief investment officer (OCIO) is a firm an institution appoints to run its investment portfolio with delegated discretion, implementing asset allocation, hiring and replacing managers and rebalancing, under policies the institution's board still sets.
- Registered Investment Adviser (RIA)
A registered investment adviser (RIA) is a firm registered as an investment adviser with the Securities and Exchange Commission (SEC) or a US state; the status covers private fund managers as well as wealth-management firms.
Investing and governance
2 concepts- Limited Partner (LP)
A limited partner (LP) is a member of a limited partnership whose liability is limited to its agreed contribution and who does not manage the partnership; in private markets the term is used for any investor in a private fund.
- Investment Committee
Regulation
2 concepts- Employee Retirement Income Security Act of 1974 (ERISA)
The Employee Retirement Income Security Act of 1974 (ERISA) is the US federal law governing private-sector employee benefit plans; for private funds it matters mainly because a fund holding plan assets makes its manager an ERISA fiduciary.
- Plan Assets
Plan assets are assets treated as belonging to employee benefit plans under the Employee Retirement Income Security Act (ERISA); a fund's holdings become plan assets when benefit plan investors hold 25% or more of an equity class, absent an exception.