What is the definition of an institutional investor?

An institutional investor is defined as a firm that pools money from various sources to invest in securities or assets. This category includes entities like pension funds, mutual funds, insurance companies, and hedge funds. These investors typically have significant capital and resources at their disposal, allowing them to influence the markets in ways that individual investors cannot.

Institutional investors often have access to better information and investment opportunities compared to retail investors. They operate with a professional approach to the investment process and usually have teams of analysts and professionals who conduct in-depth market research and analysis.

The other choices present definitions that do not capture the broader and more professional nature of institutional investors. For instance, an individual investor with personal accounts does not fit the definition since institutional investors operate through organizations, not as individuals. Additionally, defining an investor by a net worth below a certain threshold excludes many entities that would count as institutional investors, which can include organizations regardless of net worth. Lastly, an organization that invests only in government securities is too narrow and does not reflect the diverse investment strategies of institutional investors who may invest across various asset classes.