Institutional Investor An institutional investor is a non-bank body or organization that trades securities in large dollar amounts or share quantities, qualifying for lower commissions and preferential treatment. These institutions can pool large sums of money to invest in real estates, securities, and other assets. It is assumed that institutional investors are more knowledgeable and better suited to protect themselves. For these reasons, they are not faced with the same protective regulations as other investors. There are various types of investors such as mutual funds, investment advisors, pension funds, hedge funds, investment companies, and naturally, banks and insurance companies. In terms of their economic role, these entities function as specialized investors, making investment decisions on behalf of others. For example, the majority of people are entitled to having pensions from their employers. The latter make pensions’ contributions to a fund. Pension funds buy financial products such as shares in different companies. They are beneficial financial instruments in holding diverse portfolios of investments. If some of the businesses fails, the risk is spread and only a small fraction of the fund’s money is lost. In general, institutional investors have a say in the management of corporations, being entitled to voting rights in them. It can be said that they are engaged in corporate governance. And because they sell and buy shares, institutional investors have the freedom to determine which companies will go under and which will stay solvent. They provide capital to listed companies, at the same time influencing their behavior on the market. Institutional investors are known as smart money, and they account for some 70 percent of the trading activities. This professional type of buying stocks is referred to as institutional sponsorship. Many stock watchers believe that it sends strong messages about the financial future and strength of different companies. Big institutions make profits by selling and buying asset classes such as stocks. They buy undervalued stocks by employing researchers, analysts, and other experts who can get valuable information about companies. Institutional investors meet with SEOs on a regular basis as to evaluate the state of different industries. They study the prospects of all companies in which they plan to invest. There are many other types of institutional investors such as partnerships, charitable organizations, and businesses where the equity owners are the actual accredited investors. Executive officers, directors, and general partners in companies that sell securities are also considered institutional investors. Natural persons who have individual or joint net worth with their spouses are yet another type of institutional investors. Real estate investment trusts are corporate entities that invest in real estate properties, thus eliminating or reducing the corporate income taxes. In exchange, trusts have to distribute as much as 90 percent of the income, including the taxable one, to investors. Real estate investment trusts are similar to mutual funds and can be privately or publicly held. Public entities can be listed on the stock exchanges and are classified as mortgage, equity, and hybrid. The key traits to look at are cash available for distribution, adjusted funds from operations, and net asset value. Many real estate investment trusts in Canada have limited liability. As such, these trusts were established in 1993. If REITs distribute the taxable income among the shareholders, they are not taxed. When the 2007 budget was passed, REITs were not included in the income trust tax legislation. In addition, qualifying REITs were made exempt from the so called specified investment flow-through tax. Subject to the later are all publicly traded income trusts.