Who qualifies as an institutional investor?

An institutional investor is typically an organization that invests large sums of money on behalf of clients or members. This category includes entities such as pension funds, insurance companies, mutual funds, hedge funds, and endowments. The defining characteristic of institutional investors is their ability to pool money from multiple sources and invest it in various assets, generating returns for those who have entrusted them with capital. This structure allows them to take advantage of economies of scale, access to a wider variety of investment opportunities, and professional management.

None of the other options fit the definition of institutional investors. Individual investors with limited funds do not qualify due to their smaller investment capacity and singular focus. Startups seeking initial funding represent companies looking for capital but are not in the category of entities that invest on behalf of others. Similarly, investors focused on art and collectibles are typically individual collectors or investors dealing in alternative investments rather than financial assets on behalf of others. Thus, the only option that aligns with the standards and functions of institutional investors is the one that highlights organizations investing large sums on behalf of others.