ANÁLISIS DE CORRELACIONES

This section identifies the main varieties of institutional investors. These investors may operate

in the form of pension funds, mutual funds, insurance companies, hedge funds, private equity

firms or sovereign wealth funds.

Pension Funds

Pension funds are a major player in the world of institutional investment, and such funds have

a legal obligation to provide retirement income to participants. Pension funds are typically

associated with a long-term perspective, as they hold their portfolios within their investee firms

(Tilba and McNulty, 2013). The assets of pension funds operating in OECD countries have

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of 2008–2009 (OECD, 2015). Since the end of 2008, these funds have grown by 8.1% annually,

ultimately reaching a total of 25.2 trillion dollars by the end of 2014. To exercise influence

over their investee firms, pension funds may utilise various representative bodies that act as

professional groups (Mallin, 2016). For instance, in the UK, large pension funds typically

belong to the National Association of Pension Funds (NAPF).

Mutual Funds

Mutual funds are common investment vehicles designed for investors who seek to enter and

exit a market or company within a short period; these investors are entitled to withdraw their

investments at any time (Monks and Minow, 2011). In many countries, mutual funds are

considered to be one of the primary investment vehicles. In 2012, for instance, roughly 46% of

American households invested in a mutual funds scheme; as such, this industry is worth

approximately $13 billion in the US (Brown and Wu, 2016).

Insurance Companies

The core objective of insurance companies is to eliminate the financial risk associated with a

customer (a business or individual); this is accomplished by transferring that risk from the

customer to the insurance company (Newton, 2015). Insurance companies manage complex

portfolios involving a variety of risks and finance their operations using several methods,

including the issuance of underwritten premiums that are paid by policyholders, the collection

of subordinated debts from debt holders and the gathering of equity capital from shareholders

(Milidonis and Stathopoulos, 2011). Insurance companies are largely governed by the

regulations of a particular country; as such, they are required to comply with the regulations of

the country in which they operate (Newton, 2015). As with listed firms, insurance companies

are likely to adopt investment strategies that enable them to maintain growth and profitability

in order to maximise the surpluses of their policyholders (Newton, 2015). Similar to pension

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in the marketplace. In the UK, for example, the Association of British Insurers (ABI) was

formed in 1985 and now counts approximately 250 companies as members, which represents

90% of the British insurance market (ABI, 2017).

Hedge Funds

Unlike pension funds and mutual funds, hedge funds have the ability to exert significant

pressure over the boards of directors and management teams of their investee firms due to the

key differences that arise as a result of their unique organisational form and the distinct stresses

that they encounter (Brav et al., 2008). Hedge funds employ highly skilled managers to handle

a large and unregulated pool of money. As hedge funds are not governed by the same

regulations as are pension funds and mutual funds, they can concentrate their shareholdings in

a small number of firms, and they can exercise control over those firms via the use of leveraging

and derivatives. In sum, hedge funds are better qualified to act as informed monitors of their

investee firms than are other types of institutional investors.

Private Equity Firms

Private equity firms invest large amounts of money in the acquisition of limited liability

companies, to include listed firms (Mallin, 2016). Furthermore, these funds may also contribute

venture capital in order to expand existing businesses or to kick-start new start-up companies;

some even seek out unique investment opportunities and choose to buy distressed companies

(Tricker, 2015). The investment choices of private equity firms are mainly associated with high

levels of risk and the expectation of high returns. Private equity firms obtain their funds mainly

via institutional investors or from wealthy individuals (Tricker, 2015). Private equity funds

typically operate in a secretive environment and are required to disclose little about their

activities; thus, information on their ownership, investment strategy and partners is often

difficult to come by (see Tricker, 2015). For this reason, several guidelines have been published

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disclosure of their activities within investee firms. Among these recommendations are the

Walker Guidelines for Disclosure and Transparency in Private Equity, which were drawn up

by the British Private Equity and Venture Capital Association (Mallin, 2016). These guidelines

highlight the necessity for private equity firms to provide financial performance information

on the companies that they have acquired (Mallin, 2016). Furthermore, the guidelines also

argue that private equity firms should be required to disclose the accounts of the large

companies that they control within six months of the close of the financial year (Mallin, 2016).

Sovereign Wealth Funds

Sovereign wealth funds are government-owned funds that are influential and very large in size25

(Mallin, 2016). As with private equity firms, the corporate governance systems of sovereign

wealth funds are often criticised for their secrecy and lack of transparency; such funds neither

issue their objectives nor publish information on their portfolio allocations (Mallin, 2016;

Tricker, 2015). To this end, an international working group of sovereign wealth funds26

published a list of generally accepted principles and practices, titled the Santiago Principles

and Practices, in 2008. The purpose of these principles was to identify frameworks for

sovereign wealth funds that would reflect their objectives and investment practices (Mallin,

2016). Additionally, as one of the largest sovereign wealth funds in the world, Norway’s oil fund has approved efforts aimed at encouraging the fund to play a greater role in the corporate

governance of its investee firms; one such effort involves the ability of the fund to exercise

influence over the appointment of directors (Tricker, 2015).