Institutional Markets : Institutional Investors

The fraction of corporate equity owned by institutional investors has grown considerably in the past several decades; institutional holding of shares in U.S. equities has increased from approximately 16% in 1965 to over 50% in 2010 (Federal Reserve Board, 2011). The fact that institutional investors are managing such a sizable wealth invested in U.S. equity market has potential important role in term of setting market prices. The growing impact of institutional investors on capital markets has induced to increased research on the behavior of this group of investors both by academics and policy makers, who tend to believe that institutional investor follow momentum based strategies, and often are alleged to herdinglike behavior and following destabilizing trading strategies.

The report presents a case about AMB, which is a leading pension real estate advisory firm that has recently proposed to turn itself into a publicly traded Real Estate Investment Trust (REITs) and is planning to persuade its client to contribute their real estate assets to create a new REIT. Furthermore, the report also includes considerations of Anne Shea, who is the Assistant Vice President at Curator’s Fund; which is considering exchanging her shares in the commingled fund for the shares in the REIT.

Activist investing is the attempt of an individual or group to purchase a large number of company shares with the goal of implementing change within that company. Activist Investors can be anyone with enough capital to buy enough shares of a company to become a major stakeholder, such as a wealthy individual or a private equity firm. A company can become a target of activist investing for several reasons, such as: the company is being mismanaged, has excessive cost, the activist believe they can make the company more valuable or even the activist is just generally dissatisfied with the company. An indication that a company has become the target of activist investing is the filing of SEC Form 13D, which

The idea of institutional herding has a striking implication for security price volatility. Estimations from the essay ‘Sending the Herd Off the Cliff Edge’suggests that the predominance of herding behavior may explain why the financial system in 1990s had been in crisis for 40 out of the 120 months or 33% of the time (Persaud, 2000). These concerns, along with the increasing stock market ownership of institution investor in comparison to individual investors, is often used as a basis for advocating for an increase in monitoring institutional trading in equity markets in hopes that it that would lead to a reduction in the dominance of institutional investors in the financial market. However such claims are not fully supported by empirical research in the literature. Two schools of thoughts emerge the first being that herding enhances pricing efficiency, and second ascertains that herding initiates short-term trend reversals.

This chapter gives a brief introduction to hedge funds and hedge fund data. Hedge funds are generally considered as private investment vehicles for wealthy individual and institutional investors. According to the National Securities Markets Improvement Act of 1996, participators are limited to at most 500 ‘qualified investors’, individuals who have at least $5 Million to invest in hedge funds and institutional investors with capital of at least $25 Million (Brown and Goetzmann, 2001). Normally, hedge funds are organized as limited partnerships, in which individual and institutional investors are limited partners and the hedge fund managers are general partners (Fung and Hsieh, 1999). To ensure the common economic benefit for investors and managers, hedge fund managers usually take a portion of their own wealth to invest in the funds. The fees charged by the investors consist of the fixed management fee and performance-based fee. The performance-based fee, which is significantly higher than fixed management fee, is paid to successful hedge fund managers. Although hedge funds influence the market dramatically, little about what they really do is understood publicly. Brown and Goetzmann (2001) state that the term ‘hedge fund’ seems to imply market neutral and low risk trading strategies, whereas hedge funds appear to have a high level of risk because of the extensive use of leverage.

3. A __________ is a private investment pool open only to wealthy or institutional investors that is exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds.

The Flow of Fund- the financial system allows the flow of funds from surplus spending units (SSU’s) to deficit spending units (DSU’s). Providers of funds (SSU) receive a financial instrument (which stipulates the terms of the deal – i.e. amount lent, stream of future income, maturity date, etc.) issued either by the receiver of the funds (DSU) or by a financial intermediary.

Investment banks are used as business middlemen and underwriters. Investment banks will calculate the risk of an action that a company wants to perform, underwrites it, and sells the safety. Indeed, investment banks are useful, but they have many other uses. Investment banks can also be used as M&A advisors, helping the buyer find an ideal company to merge with. Investment banks also sale security and investors such as mutual funds use investment banks to trade security. People can now open checking accounts with investment banks. JP Morgan offers checking accounts, something that wasn’t possible 20 years ago. Finally, the investment bank industry took a big hit in 2008, and the industry hasn’t really recovered

This paper will encompass the importance of the U.S stock market/stock exchange versus the Chinese stock market/ stock exchange, with a brief introduction about how each stock market/stock exchange came into existence, the importance of each stock market/stock exchange, how the U.S and Chinese manage their stock markets/stock exchange, how corporations are appointed plus the rules and regulations. This will also entail random facts about each stock market/stock exchange. Stock markets are like hitting a royal flush, if the price of your stocks goes up, you win; if it drops, you lose! The stock market, also known as the fairness market, is one in which shares are owned by companies and their shareholders. The companies that are on the stock market, its stocks are issued and traded publicly, through either exchanges or over-the-counter markets. The stock market is considered to be one of the most critical components of a gratuitous-market economy that provides companies with access to dominance in exchange for giving investor’s the opportunity to have some type of possession of the company. The stock market gives those the power to invest monies, and to capitalize on their gains. This in return can bring about wealth to some without having to take a financial risk in starting up a new business.

tariffs. This result appears to contradict pre-existing research that argues that short-term investors influence managers to pursue corporate policies that are sub-optimal. However, Giannetti and Yu argue their results are consistent with the prior research, which implicitly assume a static environment, as it is only under negative shocks that companies benefit from short-term institutional ownership. That is, short-term investors motivate companies to react much faster to adverse shocks leading to better performance in this environment. However, one limitation from their results is the focus on the proportion of short-term investors and the proportion of institutional investors in aggregate. That is, they do not explicitly consider the

Also known as the equity market, the stock market is one of the most vital components of a free-market economy, as it provides companies with access to capital in exchange for giving investors a slice of ownership. Private investments, due to the nature of these investment companies, their member investors generally have significant personal wealth and are considered sophisticated enough to not require the same level of regulatory protection accorded to small investors by law. This designation provides added flexibility for private investment funds. (may be better off people)

First of all, investment banks are competent in evaluating the risk related to the seeker of funds that reduces adverse selection and moral hazard, as they have access to various databases in order to do conduct their research and monitoring. Consequently, they are able to give recommendations to investors on whether to buy or sell stock from a given corporation. On the issuer side, they will suggest the best way to raise funds, whether through stock offering or bond issue, and by taking in account various factors such as earnings potential for the former and prevailing interest rates for the latter, they will help determine how to price these financial instruments. In their model, Boot and Thakor (1997) identified three types of information problem: first, there is incomplete

Private equity is usually medium to long-term finance provided in return for an equity stake in potential high growth unquoted companies. These equity investments include securities that are not listed on a public exchange and are not easily accessible to most individuals [1]. There are usually available only to high net worth individual 's, corporation 's, institutional clients etc. These investments range from initial capital in start-up enterprises to leveraged buyouts of fully grown-up corporations. Mostly Private Equity funds are structured as closed-end funds with a finite life span of 10 or 12 years, which may be extended with the consent of the majority of the shareholders (Gompers and Lerner, 1999). Although they are illiquid and

Self regulation may also create some problems of the financial and securities market (Peter & Keith, 2007). Nowadays, financial markets are more complexity, interrelated, and cross-cutting global that let the SROs faced more challenge (CFA Institute, 2013). Under some circumstances, self regulation might not have enough ability to protect securities market safe and efficient (Larry & Biagio, 2000). There were some brokers doubted that self regulation has adequate resources and capacity to surveillance of those activities, such as asymmetry of information, unnecessary conflict of interest and insider trading, that may harm the securities market and reduce investors confident (Carlos M & Carlos A, 2009).

Protection of the Issuers, Investors and Minor Shareholders: The investors and backers of securities are ensured by the strict controls of an exchanging. In the light of the continuous request and also supply of the securities, they can be settle on choices for interests in that sort of the security. It may value delicate data, which affects the costs, which must be distributed and also accessible to the general population. All the minor shareholders, which through the straightforward posting and also exchanging the principles, which are in the position to be refreshed frequently and each day on the occasions occurring at the organization. The financial specialists in this setting are