Page 59 - Microsoft Word - 00 P1 IW Prelims.docx

Relations with shareholders and disclosure

Institutional investors

1.1 Institutional Investors

Institutional investors manage funds invested by individuals.

In the UK there are four types of institutional investor:

 pension funds

 life assurance companies

 unit trust

 investment trusts.

Importance of institutional investors

 the increasing dominance of this investor class and its

 positive contribution to governance by concentrating power in a few hands.

 fund managers and other professionals working for the institutions have the
skills and expertise to contribute towards the direction and management of a
company.

Potential problems

The separation between ownership and control creates a complex web of agency
relationships – for example

 investor

 pension fund trustee

 pension fund manager

 company.

53