Who are considered institutional investors?

• A. Individual retail investors
• B. Organizations investing on behalf of clients
• C. Only government entities
• D. Small business owners

Answer: (B)

The correct answer identifies institutional investors as organizations that invest on behalf of clients. This category includes entities like pension funds, insurance companies, mutual funds, and endowments, which manage large amounts of capital pooled from individual investors or policyholders. These organizations typically seek to achieve long-term investment goals and often have more resources, analytical tools, and expertise than individual investors.

In contrast, individual retail investors are typically private individuals who buy and sell securities for their personal accounts, rather than on behalf of a larger entity. Government entities may sometimes be considered institutional investors, but the term primarily encompasses a wider range of organizations beyond just governmental bodies. Similarly, small business owners do not fit the definition of institutional investors, as they typically manage investments for their own enterprises rather than for clients. This context clarifies that the term "institutional investors" inherently involves a collective or organizational capacity to make investment decisions, distinguishing them from private or individual investors.