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While US markets were a little shaken by news of Evergrande, commercial real estate will likely be fine.

By Erik Sherman

September 24th, 2021

By Javacia Harris Bowser
August 20, 2021 

• An institutional investor is a company or organization that invests pooled assets on behalf of its clients.
• Examples of institutional investors include hedge funds, mutual funds, and endowment funds.
• Because institutional investors buy and sell large amounts of securities, they can greatly influence price dynamics in the market.
• Visit Insider’s Investing Reference library for more stories.

All investors are not created equal, and institutional investors are in a league of their own. They’re often called the “whales of Wall Street” because of their influence on the market. There are several different types of institutional investors, and you may be wondering what sets them apart from the average investor.

What is an institutional investor?

An institutional investor is a company or organization that invests pooled assets on behalf of its clients. Institutional investors buy and sell much larger quantities of stocks, bonds, or other securities than the average individual investor. Examples of institutional investors include mutual funds, pensions funds, and insurance companies.

Because institutional investors manage more capital than everyday investors, they often have access to resources the average investor does not.

“Institutional investors have access to a fair amount of databases and analytical tools to help them do their job,” says investment banker James Cassel, chairman and cofounder of Cassel Salpeter & Co. “They also sometimes have access to the management of companies and to individuals with expertise in different fields that can help them in making investment decisions. They try to do proprietary research that individuals may not have access to.”

The access they have to the management of companies helps them to have deeper insight into the businesses, explains Jeremy Cohen, senior vice president of Investor Relations at Edelman.

“Institutional investors have more resources to conduct deeper due diligence, whether that is channel checking or having their analyst call on customers to get a better sense of trends,” Cohen says.

Quick tip: Institutional investors sometimes use program trading, which is the use of computer-powered algorithms to automatically buy or sell stock based on certain momentum in the market. Institutional investors employ teams to examine every aspect of the different markets they buy, sell, and trade in. Individuals on these teams must have extensive knowledge of the markets and money management, and may come from a finance or accounting background.

They may be former investment bankers or stock analysts. Many will have a CFA certification on their resume, but Cohen says a liberal arts degree can be just as valuable if research and critical thinking skills were adopted along the way.

How do institutional investors impact the market?

Institutional investors are sometimes called market makers because they can have such huge influence in the financial industry. This is because of the large amounts they trade and how involved they are in important market events.

• Influence security prices: Institutional investors routinely trade large amounts in the market and are a driving force of supply and demand. In fact, the proportion of US public equities managed by institutions has risen to about 67% in 2010. These large movements cause stock prices to rise and fall depending on their activities. These changes in prices, although typically short-term, do influence how other investors interact with the market and can have a wider effect on the economy.
• Report earnings: Institutional investors are responsible for reporting earnings, usually on a quarterly basis so that clients know how a company is performing financially. This will provide insights into whether investors should buy or sell – which can result in volatility within that quarter.
• Provide liquidity in the market: Because institutional investors are often large funds and financial institutions, they’re able to provide capital to companies when they need it.
• Participate in initial public offerings (IPOs): Institutional investors have the resources to utilize both public and private information to inform how and when to engage in an emerging company IPO. An academic study found that newly public companies with substantial institutional investment significantly outperformed those with less. The same study found that these institutional investors succeeded by making better use of the available public information – focusing on key metrics such as operating history, prior earnings, size, and liquidity.
• Monitor governance issues: Institutional investors play an important role in monitoring corporate governance issues, which has previously included: majority voting, focusing on the quality and diversity of Boards of Directors, as well as compensation structures and concerns about the runaway growth in executive pay.

Types of institutional investors
There are several types of institutional investors, and each type is responsible for managing a large number of assets and investing these funds based on their clients’ goals. Examples of institutional investors include hedge funds, pension funds, endowment funds, and private equity funds.

Let’s break down each type:

• Hedge funds: These are pooled investment funds that aggressively invest in a wide array of assets, with the goal of providing the highest return as quickly as possible.
• Private equity funds: These types of funds gather money to be invested in companies that likely will have a high return rate. Unlike hedge funds, private equity funds are focused on long-term potential and may not seek a return on investment for four to seven years.
• Pension funds: These types of fund accumulates money that will be paid to employees after retirement. These funds gather contributions from employees and employers – or both – to be invested in capital markets such as stock or bond markets. The goal, of course, is to multiply the money for the benefit of retirees.
• Endowment funds: These are investment funds established by a foundation with donations made to the organization. Universities, nonprofit organizations, churches, and hospitals often use endowment funds. The foundation typically makes frequent withdrawals from the endowment fund, within the guidelines of the fund’s established usage policy. A university, for example, may use an endowment fund to award scholarships.
• Commercial banks: These types of financial institutionals invest a portion of the money they hold for customers, but federal regulations restrict how much risk banks can take on to protect your deposits.
• Insurance companies: These types of companies make money in part by investing a portion of the premiums received from their customers.
• Mutual funds: These investing vehicles allow investors to pool their money for investments that are actively managed. Examples include bond funds, money market funds, stock funds, and target-date funds.

Quick tip: Institutional investors oftentimes have experience in specific industries that helps them make their investment decisions.

Retail investors vs. institutional investors

Institutional investors are not to be confused with retail investors. Understanding the difference is important because institutional investors and retail investors have different resources and regulations and even face different fees. “A retail investor is an individual; an institutional investor is an organization,” Cohen explains.

If you’re working with a brokerage firm or robo investing app to invest your own money for your own personal goals – such as planning for retirement, paying for kids’ education, or buying a beach house – you’re a retail investor.

Retail investors are considered less savvy than institutional investors and therefore are subject to more protective regulations from the Securities and Exchange Commission (SEC) to prevent them from making complex, high-risk investments. Retail investors also have considerably smaller purchasing power and thus often pay higher fees.

Institutional investors, on the other hand, invest funds from other entities for the benefit of those clients and on a much larger scale and more frequently. “The biggest difference is size and sophistication,” Cohen says. “An institutional investor will have analysts and portfolio managers and they’ll have the infrastructure to trade more quickly.” Because of their size and sophistication, institutional investors can typically negotiate better fees and are under fewer restrictions. Here’s an overview of the major differences between the two types of investors:

Institutional investor

• Invests and manages the money of other people and organizations
• Trades frequently and works with large amounts of money
• Able to negotiate lower fees
• Has access to specialized knowledge, research, and resources
• Subject to fewer protective regulations

Retail investor

• Invests own money
• Trades infrequently and works with a relatively small amount of money
• Subject to high brokerage fees
• Has limited investing knowledge and resources
• Subject to more protective regulations

Quick tip: Individual investors can get access to professional money management. You could, for example, invest in a mutual fund through Fidelity or Berkshire Hathaway and get institutional management with expertise in investing.

The financial takeaway Institutional investors are companies or organizations that invest on behalf of their clients – usually other companies or organizations. Institutional investors are the big fish of investing because they can greatly impact the market, in part by making much larger and more frequent trades than the average individual investor.

As with nearly all things, when it comes to investing, knowledge is power. Institutional investors have deep pockets and a wealth of information to help them manage the massive amount of funds they’re in charge of. While you may not be able to buy, sell, and trade like the market makers, you can empower yourself with a deeper understanding of investing.

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By WMRE Staff
July 28, 2020

The CDC’s revised guidance on masking has shaken up return-to-office plans for companies. Some are shifting timelines and policies. Other companies are moving towards requiring employees to be vaccinated before they can return. These are among today’s must reads from around the commercial real estate industry.

1. Google delays workers’ return to office, will require COVID vaccinations for employees “In a Wednesday email sent to Google’s more than 130,000 employees, CEO Sundar Pichai said the company is now aiming to have most of its workforce back to its offices beginning Oct. 18 instead of its previous target date of Sept. 1. The decision also affects tens of thousands of contractors who Google intends to continue to pay while access to its campuses remains limited.” (KTLA)
2. Work-from-home threat “overstated,” Boston Properties CEO says “While the continued work-from-home trend will have a long-term impact on the office market, the threat is ‘overstated’ for landlords of Class A office space, Boston Properties CEO Owen Thomas said Wednesday.” (The Real Deal)
3. New C.D.C. mask guidance complicates back-to-office plans. “Companies that have already opened their doors must decide whether to retrench on masking policies. When the C.D.C. lifted its masking guidance in May, many companies issued new guidelines allowing fully vaccinated employees and customers to return without masks. The move served as an important incentive for workers, as well as a signal that the pandemic was winding down. For employees, it provided a sense of safety and normality in returning to offices.” (The New York Times)
4. It really is different this time “When we examine the most-recent recession versus previous recessions, its status as an outlier becomes even more stark and apparent. If we measure duration in months versus severity (as measured by peak unemployment rate) a clear relationship emerges: deeper recessions are also longer recessions, while shallower recessions are shorter recessions. But the 2020 recession breaks that relationship with a deep, short recession, the likes of which we have never observed in the U.S.” (JLL)
5. Beyond Zoom: Can Virtual Reality And Hologram Tech Reinvigorate Remote Work? “These different spins on the sci-fi premise of speaking to holograms at the office share a few things in common, namely a desire by Big Tech to make videoconferencing better and iron out the kinks in personal communication in newly remote and hybrid offices. Gartner research predicts by 2023, more than 40% of workers will work remotely at least one day a week, up from less than 30% before the coronavirus pandemic.” (Bisnow)
6. Private Equity Makes Play for Skilled Nursing “The tragic human effects outweighed others, but there were also economic and business impacts from the pandemic that are currently still affecting the skilled nursing segment. REITs looking for stable income got nervous, according to investment banker James Cassel, chairman & cofounder, Cassel Salpeter & Co.” (GlobeSt.com)
7. Social Clubs Could Be Way To Lure Office Workers Back “As workers trickle back to offices across the U.S., many employers may be seeking ways to encourage in-person interaction among employees who’ve worked remotely for 16 months. They would be interested to know about the forecast recently put forth by architecture, design and strategy firm NELSON Worldwide. Its prediction: The future office will evolve to become more like a social club than workplace.” (Forbes)
8. ‘A Wild 15 Months’: Pandemic Spurs Conversion of Offices to Labs “Across the six largest U.S. life sciences markets, more than 20 percent of the laboratory spaces being built are conversions from offices. In San Francisco, Chicago, Boston and Raleigh, N.C., asking rents for lab space have increased more than 60 percent since the beginning of 2016, while office rents have crept up only 15 to 30 percent.” (The New York Times)
9. Hot Housing Market Lets Banks Sell Mortgage Risk “The transfers are a product of the effort to shield Fannie Mae and Freddie Mac from the risk of a mortgage-market reversal. Banks are now using them to raise capital and otherwise shore up their balance sheets, a process that ultimately adds to their lending capacity, analysts said.” (The Wall Street
   Journal)

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A unit of SoftBank Group Corp. agreed to invest $75 million in Bullish, the sponsor of a not-yet-operational cryptocurrency exchange, as the startup prepares to go public through a merger with a special purpose acquisition company.

SB Northstar LP will acquire 7.5 million Bullish shares for $10 each at the time it combines with Far Peak Acquisition Corp., according to documents filed July 9 with the U.S. Securities and Exchange Commission. It will also buy 3 million warrants to purchase shares of Far Peak, the SPAC taking Bullish public in a move that could value the combined entity at about $9 billion.

The SoftBank unit made the commitment through a $300 million private offering that Bullish held last week, according to the filings, though it was not identified in a subsequent release as one of the buyers. Representatives for SoftBank, Bullish and Far Peak all declined to comment.

By participating in the deal, SB Northstar joins a who’s who of executives involved with Bullish. The crypto company was launched in May by Block.One, a blockchain software company backed by Peter Thiel and hedge fund managers Alan Howard and Louis Bacon. Other investors include Hong Kong tycoon Richard Li and German entrepreneur Christian Angermayer. Meanwhile, upon completion of the SPAC transaction, Far Peak Chief Executive Officer Thomas Farley, a former president of the New York Stock Exchange, will become Bullish’s CEO.

SB Northstar, the asset management arm of Masayoshi Son’s SoftBank, became known as the “Nasdaq whale” after it made multi-billion dollar wagers on publicly traded tech stocks. SoftBank’s bets in crypto have been much smaller so far: It also disclosed this month that its Latin American Fund invested $200 million in Mercado Bitcoin, a Brazilian digital assets platform.

Still, it’s a sign that Son, who reportedly lost $130 million on Bitcoin when he sold in 2018, may be starting to warm to the crypto sector. In May, he said Bitcoin’s popularity has made it into a platform that “can’t be ignored,” though he doesn’t know its true value or if it’s a bubble.

SB Northstar will acquire the Far Peak warrants from either the sponsors of the SPAC or its anchor investors, which include funds managed by BlackRock Inc., according to the filing.

The seller will take a $1.5 million loss by selling the warrants below cost. That’s a step that SPACs may take to attract high-profile investors, said James Cassel, chairman of Cassel Salpeter & Co., a Miami-based investment bank that advises on SPACs.

“SoftBank has said ‘you can use my name and it will validate the deal and make all of the stock worth a lot more,’” Cassel said in a telephone interview.

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We all know that our federal taxes help fund the U.S military, but the ins and outs of this financial relationship and exactly what it all means for the average taxpayer is more esoteric knowledge. To put it very simply: our tax dollars are hard at work, and, to some extent, at war.

How much the U.S. spends on defense fluctuates, but from a big picture spending perspective, we’ve been on a downward slope.

“From a taxpayer’s perspective, the amount of taxpayer dollars that is spent on defense has been generally decreasing for the past 70 years,” said BG Michael J. Meese, USA, Ret., Ph.D, president of The American Armed Forces Mutual Aid Association (AAFMAA). “In 1953, during the Korean War, 69% of federal tax dollars were spent on defense. During Vietnam in 1968, defense represented 46% of federal tax dollars. During the Cold War in the Reagan administration in 1987, 28% of taxes were on defense. In 2010, with a surge of forces in Afghanistan and Iraq, 1 in 5 (20% of) tax dollars were spent on defense. With today’s budget projections — under the budgets of either President Trump or President Biden — taxpayers now have the smallest proportion of federal tax dollars spent on national defense since before World War II (in 1937). Those proportionally smaller federal dollars support American military worldwide with an All-Volunteer Force.”

To get more granular, here’s a look at the Department of Defense’s (DoD) budget each year for the past decade, along with some insights into what was going in the sphere of the military at the time.

Last updated: May 12, 2021

1. 2011

• DoD budget: $687 billion
• Year-over-year difference: -4% or $0.58 billion

The 2011 Budget Control Act (BCA) was signed into law on Aug. 2. A resuscitation of the Gramm-Rudman-Hollings passed in 1985, the (BCA) reinstituted budget caps for defense, amounting in a reduction of some $1 trillion over the next decade.

Read: This Is Where Your Tax Dollars Actually Go

2. 2012

• DoD budget: $645.5 billion
• Year-over-year difference: -6.04% or $41.5 billion

The National Defense Authorization Act for fiscal year 2012 was enacted, which implemented major budgetary reductions. For the first time in over 10 years, the U.S. base and war budget declined.

See: The Most Expensive US Conflicts From 1950-2020

3. 2013

• DoD budget: $577.6 billion
• Year-over-year difference: -10.5% or $67.9 billion

More drastic cuts in baseline military spending occurred under the Obama administration in 2012. These cuts were the most significant in the past decade but progressive economists reasoned that military spending was still untenably high.

Check Out: All You Need To Know About the Economy and Your Money

4. 2014

• DoD budget: $581.4 billion
• Year-over-year difference: +0.66% or $3.8 billion

The U.S’s involvement in the Syrian Civil War kicked off on Sept. 23, when it launched air raids in Syria against ISIS. In this year, Washington deployed 2,000 soldiers to the battle-scarred land.

More: All About the Federal Budget and Its Role in Your Life

5. 2015

• DoD budget: $560.4 billion
• Year-over-year difference: -3.61% or -$21 billion

More troops were sent to fight ISIS in Syria while tension between the U.S. and China heated up. More pleasantly, the Pentagon lifted its ban against women in combat, opening up all jobs to them at long last.

Read: IRS To Send Supplemental Stimulus Payments to 2020 Tax Filers

6. 2016

• DoD budget: $580.3 billion
• Year-over-year difference: +3.55% or $19.9 billion

Donald Trump was elected president of the United States, brewing expectations of significant military buildup and a big boost in spending as anticipated by military members, who largely favored Trump over Clinton.

See: Just How Rich Are Elon Musk, Donald Trump and These Other Big Names?

7. 2017

• DoD budget: $606 billion
• Year-over-year difference: 3.55+% or 19.9 billion

Trump was sworn into office, which triggered the anticipated surge in defense spending. The overseas fight against ISIS intensified. The U.S dropped its largest non-nuclear bomb on an ISIS branch in Afghanistan.

Check Out: National Debt and Deficit — What Is It and How Does It Affect Me?

8. 2018 

• DoD budget: $670.6 billion
• Year-over-year difference: +10.66% or $64.6 billion

Space Force, a new military branch devoted to space, launched in 2020. Toward the end of the year Defense Secretary Jim Mattis resigned, ostensibly because of then-President Trump’s orders to remove troops from Syria.

More: Understanding US Productivity and All the Ways It Affects You

9. 2019

• DoD budget: $687.8 billion
• Year-over-year difference: +2.56% or $17.2 billion

Former President Trump became the first U.S. sitting president to step across the military demarcation line between North and South Korea, doing so with North Korean leader Kim Jong Un. Meanwhile, in the states, the president struggled to erect the wall along the U.S.-Mexico border. In merrier news, more black female cadets graduated from the United States Military Academy than ever before.

Read: What Are the World’s Best Tax Havens?

10. 2020

• DoD budget: $712.6 billion
• Year-over-year difference: +3.61% or $24.8 billion

A war with Iran was suspected to be on the horizon when, on Jan. 3, the U.S. killed Major Gen. Qasem Suleimani, the leader of Iran’s Quds Force. Iran then attacked U.S. military bases in Iraq. COVID-19 came and everything was upended, but the military continued to recruit, train and deploy during the pandemic.

See: Here’s What Men and Women in Uniform Earn

11. 2021

• DoD budget: $705.4 billion
• Year-over-year difference: -1.01% or $7.2 billion

Under the Biden administration, the U.S has begun to pull troops out of Afghanistan. Debris from a Chinese rocket plunged through the atmosphere in May, and the military opted not to attempt to shoot it down. As expected, Biden softened the U.S defense budget.

12. What We Can Expect in 2022

So, what does all of this mean going forward in 2022? That’s a hefty question that has much to be determined, but we can already glean some insights into the year ahead, including a bump in the Pentagon’s budget.

“The good news associated with the Pentagon’s 1.6% increase in the 2022 budget of $715 billion versus 2021, is that non-defense domestic discretionary spending will surge 16%, with education spending rising 41%, health and human services 23% and the Environmental Protection Agency 21%,” said Joseph Smith, director of aviation services at the investment banking firm Cassel Salpeter. “Certain taxpayers may feel good about that reallocation towards more needed domestic spending.”

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Methodology: For this piece, GOBankingRates looked at U.S. Department of Defense budget figures from the office of the Under Secretary of Defense for fiscal years 2001 through 2021. For each year, GOBankingRates found: (1) Department of Defense budget (in billions); (2) Department of Defense budget; (3) year-over-year change in DoD budget; and (4) percent change in year-overyear DoD budget. GOBankingRates also found the (5) total change in DoD budget from 2001 to 2021; as well as (6) percent change in DoD budget from 2001 to 2021. All data was collected on and up to date as of May 3, 2021.

This article originally appeared on GOBankingRates.com: How US Defense Spending Has Changed Over the Past 10 Years