An institutional investor is an entity that manages their clients’ investments. Investment banks, insurance companies, and mutual funds are examples of institutional investors.
Institutional investors may be able to purchase securities in private placements not available to the public because they are considered sophisticated and not in need of the same protection as most public investors. Under Regulation D, institutional investors may be able to purchase securities in a private placement. Under Rule 144A, qualified institutional buyers may purchase securities from a person or entity who purchased securities in a private placement, even though the resale of securities purchased in a private placement is generally restricted.
[Last updated in January of 2022 by the Wex Definitions Team]